The European Court of Justice has finally given judgment in the long running case of Lidl v Colruyt. Can retailers make general claims about their pricing levels and stay within Europe’s comparative advertising rules? Simon Maughan investigates.
Topic: Comparative Advertising
Who: Lidl and Colruyt
Where: The European Court of First Instance ("CFI"): Judgment of the Court
When: 19 September 2006
In June last year we reported on the decision of the Advocate-General in this case. This report follows up on the Court judgment, which was handed down in September.
It will be recalled that the Belgian court had referred a number of questions to the European Court on the interpretation of the Comparative Advertising Directive. This followed a complaint by Lidl that one of its competitors in the discount supermarket field, namely Colruyt, had put out some unfair comparative advertising, which Lidl alleged made rather broad generalisations as to the level of pricing in Colruyt stores versus that in Lidl stores (among others).
The Court reminded itself in opening that comparative advertising "helps to demonstrate objectively the merits of the various comparable products and thus stimulate competition between suppliers of goods and services to the consumer's advantage". Accordingly, it was, so said the Court, necessary that the conditions required of comparative advertising should be interpreted in light of this.
The Court then went on to consider the questions raised by the Belgian court and reached the following conclusions (broadly in line with those of the Advocate-General):
1. Comparing the price of a selection or "shopping basket" of goods in two different stores is permitted so long as the products in the basket display a sufficient degree of interchangeability for consumers, i.e. they meet the same needs or are intended for the same purpose. In some sectors, such as the supermarket sector, it may be more appropriate to compare a selection of goods than some particular product or other because consumers are more likely to be making multiple purchases to meet their everyday needs.
2. It is not necessary for the purposes of satisfying the requirement for an objective comparison to exhaustively list in the ad each of the products and prices compared in the selection. Indeed, this may be undesirable and could affect the very practicability of the ads. However, see para 4 below!
3. The general level of prices charged by chains of stores in respect of their selections of comparable products (or indeed the level of savings that consumers could make as a result of buying the selection from one rather than another store) is a verifiable feature of those selections of products in exactly the same way as the price of a particular product is a verifiable feature of that product.
4. In cases where the price of goods in a comparable selection is not expressly stated in the ad, the ad must indicate where and how the consumer can readily find the prices so that he or she can verify the claimed benefit made by the comparison.
5. Comparative price level advertising which causes the consumer to believe that the price differences cited in the selection apply to all the products sold by the advertiser, irrespective of the type or quality of the goods purchased, would be misleading where the ad:
(a) does not make clear that the comparison relates only to that selection and not to the full range of the advertiser's products;
(b) does not give either proper details of the comparison or inform the consumer of where that information can be obtained; or
(c) refers collectively to the amounts that may be saved by purchasing from the advertiser rather than its competitors without specifying individually the general level of the prices charged by each of the competitors and how much consumers could save by making their purchases from the advertiser rather than its competitors.
Why this matters:
The Court followed the Advocate General's lead in confirming that ads which make sweeping generalisations about a competitor's general level of pricing, based only on a selection of comparable products, risk falling foul of the Comparative Advertising Directive. However, there are some positives to take out of this judgment for advertisers. First, it is refreshing that the Court recognises both the immediate consumer benefit as well as the wider economic benefits (namely open competition to drive down prices generally) that can be derived from fair comparative advertising. Secondly, the Court has acknowledged that it could be deeply unsatisfactory to require advertisers to spell out in an ad the name and price of every product being compared; that fair comparative advertising can be effected just as easily by simply giving the consumer an external source for the information needed to verify the claims in the ad.