According to HM Govt., implementing the EU Unfair Commercial Practices Directive in April 2008 could mean the scrapping of detailed laws governing B2C comparative advertising. But can this be right? asks Stephen Groom.
Who: The Department for Business, Enterprise and Regulatory Reform and the Office of Fair Trading
When: August 2007
Law stated as at: 31 August 2007
21 August 2007 was the final deadline for responses to two consultations held in respect of the UK implementation of the EU Unfair Business to Consumer Commercial Practices Directive ("UCPD").
One related to the DBERR's proposed Consumer Protection from Unfair Trading Regulations 2007 ("CPRs"), the primary measure due to give the UCPD the force of law in the UK come April 2008. http://www.dti.gov.uk/consultations/page39674.html
In the other consultation the DBERR and the OFT sought views on "Draft Guidance on the UK implementation of the Unfair Commercial Practices Directive." http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft931con.pdf
The OFT submitted its own response to the DBERR consultation. This deals with the proposed CPRs and the proposed Business Protection from Misleading Marketing Regulations 2007 ("BPRs"). This is at http://www.oft.gov.uk/shared_oft/reports/oft_response_to_consultations/oft950.pdf
All of these are a cracking read of course, but they all leave open to question an issue of potentially crucial importance to UK advertisers.
The issue is whether, come the arrival of the CPRs and BPRs in spring 2008, business to consumer comparative advertisers will no longer have to ensure that they comply with all eight of the detailed legal requirements for comparative advertising (the "Eight Rules") currently contained in the Control of Misleading Advertisements Regulations 1988 as amended by the Control of Misleading Advertisements (Amendment) Regulations 2000 ("CMARs").
Two reasons why B2C applicability of comparative ad rules is key
The question is key, not only to advertisers looking to be sure their advertising does not expose them to enforcement action under the CPRs or BPRs by, for example, trading standards or the Office of Fair Trading.
It is also important from the point of view of whether knocking copy in a comparative ad might infringe an identified competitor's registered trade mark.
Why? Because as a result of recent judicial pronouncements in cases such as O2 versus Hutchison Telecom/3, it has become clear that there can be no trade mark infringement committed by a comparative advertisement if the advertising complies with the Eight Rules. If those Eight Rules are to be scrapped in the context of business to consumer comparative advertising (and the vast majority of comparative advertising disputes are likely to be B2C), then this defence will presumably fall away.
So given the importance of knowing whether the Eight Rules will still apply to B2C comparative advertising come April 2008, how have we got to a situation where this is now uncertain?
Consumer focus of UCPD
This has arisen because the impact of the UCPD is so radical and wide ranging that its implementation in the UK will involve the scrapping of a slew of statutes and regulations.
So far so good, but a lot of the statutes and regulations facing repeal/revocation protect both consumers and businesses, whilst the UCPD protects only consumers. Examples are the Trade Descriptions Act 1968 and the CMARs.
So that businesses and traders will not be deprived of protection at a stroke in April 2008, HM Govt is plugging the gap by introducing, alongside the CPRs, the "Business Protection from Misleading Marketing Regulations 2007." ("BPRs").
Eight rules only in the BPRs
The trouble is that the Eight Rules only survive in the BPRs, not the CPRs, so does this mean that the Eight Rules only now apply to B2B comparative advertising, and if so how do we identify a B2B advertisement?
Important questions, you might think, that we can be confident will have been addressed by the draftsmen and covered in the consultation papers. Er….no.
In its consultation on the draft CPRs, the DBERR explains why the BPRs have come about. It states:
"These draft regulations implement the MCAD [marketinglaw comment: this is the codifed version of the misleading and comparative advertising directives signed off on 12 December 2006 and designated Directive 2006/114/EC], the original Directive's scope has been narrowed to cover only business to business relationships. As the change of title indicates, they are intended to ensure that there is no reduction in business protections following the Government's decision to repeal the Trade Descriptions Act 1968…"
That's clear then, apart from the strange syntax, but the MCAD itself is not as clear on the point as the DBERR suggests. Article 1 states that (the underlining is marketinglaw's):
"The purpose of the Directive is to protect traders against misleading advertising and the unfair consequences thereof and to lay down the conditions under which comparative advertising is permitted"
Two flaws in DBERR reasoning
Two points arise here which cast doubt on the DBERR's analysis.
Firstly, since comparative advertising is by definition likely to be tough on competitors, laws controlling comparative advertising are inevitably going to protect traders from being abused in their competitors' ads, whether or not the ad itself is targeted at businesses or consumers. So stating that the Directive is to protect traders would not seem on its face to restrict the applicability of the Directive to B2B comparative advertising only.
Secondly the Article says the purpose of the Directive is to protect traders against misleading advertising…. AND [marketinglaw's capitals] to lay down the conditions under which comparative advertising is permitted."
The AND suggests the passages before and after it should be read disjunctively, thus giving the Directive two separate purposes: purpose #1 is to protect traders form misleading advertising and purpose #2 is to lay down conditions for comparative advertising, with no qualification here as to whether this is to protect traders or consumers.
Directive's Eight Rules changed in just two ways
The comparative advertising provisions themselves at Article 4 of the MCAD contain the Eight Rules. There are only two differences between the Eight Rules here and as they appeared in the original comparative advertising directive.
The first change is to tweak the requirement that the ad must not create confusion "in the marketplace between the advertiser and a competitor" to a requirement that there must be "no confusion amongst traders…". A change that is significant from our point of view as no equivalent changes are made to any of the other Eight Rules so as to arguably reduce their ambit to B2B communications.
The second change is to extend the meaning of "misleading" by incorporating by reference the UCPD "misleading action" and "misleading omission" provisions. But this amendment is again significant because under the definitions of misleading actions and omissions in the UCPD, these can only occur if a prescribed impact on consumers occurs or is likely to occur. Hardly consistent with a measure focusing 100% on B2B advertising.
Looking at the rest of Article 4, there is no other provision or defined term used, which suggests it is not applicable to B2C advertising.
This approach continues in the BPRs as Regulation 4 tracks Article 4, with again no provision or definition that would appear to exclude the Eight Rules' applicability to B2C advertising.
Why this matters:
So from where we are sitting, there is no justification for stating as the DBERR does, twice in its consultation paper: "the MCAD's scope has been narrowed to cover only business to business relationships" and no justification for regarding Regulation 4 of the BPRs as only applying to B2B advertising.
If this is right, then it would be good to have more clarity on this from the Guidance to be published with the final CPRs and BPRs. It would also be something of a relief for those worrying as to whether Spring 2008 would see an early and premature end to the newly arrived "O2/3" trade mark infringement defence of compliance with the Eight Rules.
The title of the BPRs also needs radical surgery. How about the "Comparative Marketing and Business Protection from Misleading Marketing Regulations"?