Lidl SNC v Vierzon Distribution SA, Case C-159/09 Court of Justice of the European Union (Fourth Chamber), 18 November 2010
Journal of Intellectual Property Law & Practice, first published online February 11, 2011
This judgment will cause consternation to companies embarking on comparative advertising in Europe as the Court has raised the bar for verifiability, holding that the description of competing products should be sufficiently clear to enable consumers to identify them in order to test the accuracy of the prices shown in the advertisement.
This ruling deals with the interpretation of Article 3a of Council Directive 84/450/EEC on Misleading and Comparative Advertising as amended by Directive 97/55/EC.
The two supermarkets battling it out in this case are Lidl and Vierzon Distribution (which sells everyday consumer goods under the name ‘Leclerc’). The battleground was an advertisement circulated by the latter in 2006 which reproduced till receipts listing, by means of general descriptions, accompanied by their weight or volume, 34 products, in the main foodstuffs, purchased from Vierzon and Lidl respectively. It compared a total cost of EUR 46.30 for Vierzon products as against EUR 51.40 for those of Lidl. It also included the 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”.’
In 2007 Lidl brought an action before the Bourges Commercial Court seeking damages on the ground of unfair competition and publication of extracts from this judgment in the press and on posters in its store. It contended that the advertisement deceived and/or misled consumers on three counts:
* Reproduction alone of till receipts showing the list of the products compared did not enable consumers to perceive the specific characteristics of those products or understand the reasons for the differences in prices since the advertisement was based on a selection of a limited number of foodstuffs marketed by Lidl and Vierzon which were identified by generic names.The Bourges Commercial Court decided to stay the proceedings and refer the following question to the Court of Justice for a preliminary ruling:
* Vierzon selected only products which placed it in an advantageous position after aligning its prices with those of Lidl.
* The products were not comparable, since their qualitative and quantitative differences meant that they did not meet the same needs.
Is Article 3a of Directive 84/450 to be interpreted as meaning that it is unlawful to engage in comparative advertising on the basis of the price of products meeting the same needs or intended for the same purpose, that is to say, products which are sufficiently interchangeable, on the sole ground that, in regard to food products, the extent to which consumers would like to eat those products or, in any case, the pleasure of consuming them, is completely different according to the conditions and the place of production, the ingredients used and the experience of the producer?Analysis
Referring to its recent L'Oréal v Bellure judgment, the Court reiterated that the purpose of the various conditions listed in Article 3a(1) is to achieve a balance between the different interests which may be affected by allowing comparative advertising. It is apparent from a reading of Recitals 2, 7 and 9 in the preamble to Directive 97/55 that the aim of Article 3a is to stimulate competition between suppliers of goods and services to the consumer's advantage, by allowing competitors to highlight objectively the merits of various comparable products, while prohibiting practices which may distort competition, be detrimental to competitors and have an adverse effect on consumer choice.
Thereafter, the court drew up a taxonomy of the different subsections of this Article, interpretation of which were critical for this case.
Citing heavily from Lidl Belgium, the Court held that it is for the national courts to ascertain whether the advertisement may be misleading by taking into account the perception of an average consumer of the products who is reasonably well informed, observant and circumspect, as the impugned advertisement was not addressed to a specialist public but to end consumers who purchase their basic consumables in a chain of stores.
Expounding further, the Court held that an advertisement could first be misleading, if the national Court were to find that the decision to buy on the part of a significant number of consumers may be made in the mistaken belief that the selection of goods made by the advertiser is representative of the general level of his prices as compared with those charged by his competitor and that they will therefore make savings of the kind claimed by the advertisement by buying their goods from the advertiser rather than from the competitor, or in the mistaken belief that all of the advertiser's products are cheaper than those of his competitor.
Second, if it is found that, for the purposes of the price based comparison in the advertisement, food products were selected which are in fact objectively different and the differences are capable of significantly affecting the buyer's choice. If such differences are not disclosed, such advertising, may be perceived by the average consumer as claiming, by implication, that the other characteristics of the products in question, which may also have a significant effect on the choices made by such a consumer, are equivalent. The Court has already held that, where the brand name of the products may significantly affect the buyer's choice and the comparison concerns rival products whose respective brand names differ considerably, omission of the better-known brand name goes against Article 3a(1)(a). The same may be true, with regard to other features of the products compared, such as their composition or the method or place of production, where it is apparent that such features may, by their nature, have a significant effect on the buyer's choice. In such cases the consumer may be under the impression that he will obtain an economic advantage because of the competitive nature of the advertiser's offer and not because of objective differences between the products being compared.
The Court stated that it is for the national Court to verify whether the description of the products compared, is sufficiently clear to enable the consumer to identify the products so as to check the accuracy of the prices shown in the advertisement. That objective would be thwarted if the stores referred to in the advertisement marketed a number of food products which might tally with the descriptions given on the till receipts reproduced on that advertisement, so that it is not possible to identify precisely the goods thus compared.
This was a much awaited decision of this Court, which had received so much flak for its earlier judgment of L'Oréal v Bellure on the issue of comparative advertising. However, this case yet again makes it difficult for companies to comparatively advertise while being on the right side of law. Although at one end, the court's ambition is to promote an interpretation in favour of the promotion of comparative advertising, its hair-splitting interpretation (raising the condition of verifiability) serves little purpose because the till receipts usually have an itemized description of the store's products. In my opinion, the courts should either be a little indulgent in cases such as this or develop a range of legal standards that can be applied to lend greater certainty for companies indulging in comparative advertising. Until then, companies across the European Community should either aim at giving the consumers the unvarnished truth while comparatively advertising or tumble into the litigation abyss.