Court of Justice gives guidance on comparative advertising for foodstuffs

This article was included in the spring 2011 issue of snIPpets - the intellectual property newsletter.

The Court of Justice of the European Union ("CJEU") has confirmed in a case referred by a French court (Lidl SNC v Vierzon Distribution - Case C-159/09) that advertisements comparing food prices may fall foul of the Misleading and Comparative Advertising Directive 84/450 ("the Directive"). Whilst it is up to the national courts to decide whether the advertisement fulfils the conditions of the Directive and is thus permissible based on the individual facts of the case, the CJEU has given some guidelines on factors which should be taken into account when considering this issue.

Lidl, the operator of a chain of supermarkets, brought an action for unfair competition in the French court against Vierzon Distribution, the operator of Leclerc supermarkets. Vierzon had placed an advertisement in a local newspaper which reproduced till receipts listing 34 products, by means of general descriptions including, where appropriate, the weight or volume which had been purchased from Leclerc and Lidl. The advertisement showed that the total cost for these items was over five Euros cheaper in Leclerc than Lidl, and included slogans "Not everybody can be E. Leclerc! Low prices - And the proof is E. Leclerc is still the cheapest" and "In English, they say "hard discount" - in French they say "E. Leclerc".

The French court decided to stay the proceedings and refer a question to the CJEU on the interpretation of provisions in the Directive when applied to advertisements for food stuffs. The French court wanted to know whether Article 3a of the Directive precludes comparative advertising on the price of food products, bearing in mind the many differences there can be between food products which may impact on the consumer's decision to buy a product, such as the method and place of production, the ingredients used and who produces them. The provisions of the Directive have been implemented into the French Consumer Code. In England, the Directive is implemented by the Business Protection from Misleading Advertising Regulations 2008 and The Consumer Protection from Unfair Trading Regulations 2008.

Before considering the provisions of Article 3a in detail, the CJEU commented that the purpose is to achieve a balance between the different interests which may be affected by allowing comparative advertising. This means that the advertisement should be interpreted in a way that is most favourable to permitting advertisements which objectively compare the characteristics of products or services, while ensuring that such advertisements are not anti-competitive, unfair, or do not affect the interests of consumers.

The court then considered three conditions in the Directive relevant to the case which must be met for comparative advertising to be allowed. It is a question for the national court to decide whether the comparison meets each of the conditions based on the circumstances of each case. However, the CJEU has given guidelines for national courts to consider when making their decision.

1. The advertisement must compare goods or services meeting the same needs or intended for the same purpose (Art 3a(1)(b))

The CJEU ruled that the fact that foodstuffs vary in relation to the method and place of production, the ingredients and who produces them does not mean that they cannot be legitimately compared. The national court must consider whether there is a real possibility of substitution between the goods compared in the advertisement, having conducted an individual and specific assessment of the products which are the subject of comparison.

2. The advertisement must not be misleading (Art 3a(1)(a))

The CJEU's ruling gives some examples of circumstances in which an advertisement could be misleading. These include if:

• The advertisement contains (or omits) information which leads to a significant number of target consumers deciding to buy from the advertiser in the mistaken belief that either (i) the advertiser has selected goods which are representative of the general level of its prices compared with those charged by its competitor so that consumers will make savings of the kind claimed in the advertisement by regularly buying their everyday consumer goods from the advertiser rather than the competitor; or (ii) all of the advertiser's products are cheaper than those of its competitor.
• Where the comparison is based solely on price, food products are selected which have different features capable of significantly affecting the average consumer's choice if no mention is made in the advertisement. For example, an advertisement is likely to fall foul of this condition if a comparison is made between the prices of the advertiser's basic range and the competitor's premium brand.

3. The advertisement must objectively compare one or more material, relevant, verifiable and representative feature of the goods and services (Article 3a(1)(c))

The CJEU has ruled that this condition of verifiability means that it must be possible to identify the products being compared on the basis of information in the advertisement. The CJEU noted that this condition would not be met if the stores marketed a number of food products which might tally with the descriptions given on till receipts reproduced on the advertisement, so that it is not possible to identify compared foods precisely.

When the French court applies this ruling to the facts of the case, it may well decide that Vierzon's advertisement does not comply with the requirements of the Directive, particularly if the advertisement does not give the consumer sufficient details about the products being compared and is thus misleading and/or the facts it contains cannot be verified.