CJEU: Comparative Advertising Lawful Only if it Compares Goods from Stores of Similar Sizes

By Marie-Andrée Weiss

On 8 February 2017, the Court of Justice of the European Union (CJEU) held that an advertisement   comparing prices of goods sold in shops of different sizes and formats is liable to be  unlawful as the advertisement does not clearly inform consumers of these differences in sthe stores’ sizes and formats. The case is Carrefour Hypermarchés SAS v. ITM Alimentaire International SASU, C-562/15.

ITM is responsible for the strategy and commercial policy Intermarché, the retail chain, which owns supermarkets and hypermarkets, the largest of stores in the EU (Intermarché). Carrefour Hypermarché is part of the Carrefour group, which owns supermarkets, hypermarkets, and small stores in cities (Carrefour).

Carrefour launched a comparative television advertising campaign in 2012 which compared the prices of 500 leading brand products sold in its hypermarkets with the prices of these goods in competitors’ stores, and offered to reimburse consumers twice the price difference if they found cheaper prices for these goods than at Carrefour stores.

However, Carrefour compared its hypermarkets prices with Intermarché’s supermarket prices, without informing the public of the difference in the stores’ sizes and format. which prices were being compared in the advertisement. This information was only published on Carrefour’s website, and in small print.

Intermarché filed suit against Carrefour in October 2013, asking the Paris Commercial Court to enjoin Carrefour from disseminating the ad. The Court awarded Intermarché 800,000 euros in damages. Carrefour appealed to the Paris Court of Appeals, and also requested that the issue be referred to the CJEU for a preliminary ruling.

The European Union law and the French law of comparative advertising

Article 6 of Directive 2005/29 defines a misleading commercial action as one which “contains false information and is therefore untruthful or in any way… deceives or is likely to deceive the average consumer… or is likely to cause him to take a transactional decision that he would not have taken otherwise.” Article 2(b) of Directive 2006/114/EC defines “misleading advertising” as “any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behavior or which, for those reasons injures or is likely to injure a competitor.”

Article 4 of Directive 2006/114/EC allows comparative advertising if it is not misleading, Article 4(a), and if it “objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price,” Article 4(c). Similarly, French law authorizes comparative advertising if it is not misleading or likely to deceive, Article L. 121-8 of the Consumer Code, in force when the suit against Carrefour was filed.[1] Both articles recite the termsof Directive 2006/114/EC.

The Paris Commercial Court found that Carrefour advertising did not comply with Article L. 121-8 of the Consumer Code. The Paris Court of Appeals asked the CJEU if price comparison is allowed by Article 4 of Directive 2006/114/EC only if the goods are sold in stores with similar formats and sizes. It also asked the CJEU if comparing prices of stores with different sizes and formats is “material information” within the meaning of Article 7(1) of Directive 2005/29, which states that a commercial practice is “misleading” if it omits “material information that the average consumer needs” to make an informed transactional decision. The Paris Court of Appeals also asked the CJEU to explain to what degree and via which medium this information must be disseminated to the consumer.

Is comparative advertising only legal if it compares prices of products sold in shops of similar sizes?

The CJEU synthesized the questions of the Paris Court of Appeals as: whether Article 4(a) and 4(c) must be interpreted as saying that an advertisement comparing the prices of products sold in shops of different sizes is unlawful?

The CJEU noted that Article 4 of Directive 2006/114 does not require that the shops compared be of similar formats or sizes. However, comparative advertising must not undermine fair competition or the interest of consumers (at 22). This would be the case if the comparative advertisement is misleading.

The difference in size or format of the shop may distort the objectivity of the price comparison

Article 4(c) of Directive 2006/114 requires the comparison be objective. However, as noted by the Court, “in certain circumstances the difference in size or format of the shops in which the prizes being compared by the advertiser have been identifiedmay distort the objectivity of the comparison” (at 26). Indeed, Attorney General Saugmandsgaard Øe noted in his October 19, 2016 Opinion, “that generally… the prices of consumer products are likely to vary according to the format and size of the shop” (Opinion at 43). Such “asymmetric comparison” of prices could “artificially creat[e] or increase[e] any difference between the advertiser’s and the competitor’s prices, depending on the selection of the shops for the comparison” (Opinion at 57, and CJEU at 27).

While Directive 2005/29 does not define what the “material information” cannot be omitted from the ad, the CJEU found that material information is the information that an average consumer would need to make an informed transactional decision (at 30).

If the prices compared in the ad are those of shops of different sizes and formats, it is likely to deceive the consumer, if these shops “are part of retail chains each of which includes a range of shops having different sizes or formats” (CJEU ruling, paragraph 1). Indeed, the customer may believe that the advertised price difference applies to all the shops in the advertiser’s retail chain, and such advertising is thus misleading (at 33 and 34). As this information is “necessary” for the consumer to make an informed decision on where to shop, it is a “material information” within the meaning of Article 7 of Directive 2005/29 (at 35).

The information of the difference in shops ‘sizes and format must be clear

Such advertising is misleading unless the customer is informed that the prices compared concerns shops of different sizes and formats (at 36). Such information must “clearly” provided, in the advertisement itself (at 38).

It is the duty of the national courts to assert, case by case, whether a particular advertising is misleading (at 31) and thus the referring court, the Paris Court of Appeals, will have to ascertain, in the light of this case, if the Carrefour comparative advertisement is misleading (CJEU ruling, paragraph 2). It is very likely that it will rule that such comparative advertising is misleading, as Carrefour compared prices in its hypermarkets to prices with Intermarché’s supermarkets, and such shops. While both shops are part of a retail chain, they are different in size and format.

[1] Article L. 121-8 of the Consumer Code has since been  abrogated and  replaced,  without any changes, by  Article L. 122-1 of the Consumer Code.

The UK Issues Guidance on GDPR Consent

By Nikolaos Theodorakis

The General Data Protection Regulation (GDPR) will come into force on 25 May 2018, replacing UK’s Data Protection Act 1998 (DPA). It is yet unclear how Brexit will play out, yet in the meantime, the United Kingdom is moving to adopt the GDPR principles so that it adequately protects the personal data transferred within the EU. The GDPR sets a high standard for consent and compliance, which means that companies must start preparing for this transition.

The Information Commissioner’s Office (ICO) issued a guidance on GDPR consent on 2 March, explaining its recommended approach to compliance and its definition of valid consent. The ICO also provides examples and practical advice that can assist companies deciding when consent is unbiased, and when other alternatives must be sought.

The guidance’s main points on consent are:

  • Individuals should be in genuine control of consent;
  • Companies should check their existing consent practices and revise them if they do not meet the GDPR standard. Evidence of consent must be kept and reviewed regularly;
  • The only way to adequately capture consent is through an opt-in;
  • Explicit consent requires a very clear and granular statement;
  • Consent requests should be separated from other terms and conditions. Companies should avoid making consent a precondition of service;
  • Every third party who relies on the consent must be named;
  • Individuals should be able to easily withdraw consent;
  • Public authorities and employers may find using consent difficult. In cases where consent is too difficult, other lawful bases might be appropriate.

The basic notion of consent is not new. It was initially defined under the Data Protection Act 1998 (DPA) that implemented the Data Protection Directive 95/46/EC, which is currently in force. The GDPR builds on the standard of consent that was introduced in the DPA and includes more details and specific requirements. Consent is now defined in Article 4(11) of the GDPR in a similar way as in previous legislation, yet adding requirements of unambiguity and clear affirmative action. More provisions throughout the GDPR however relate to consent (e.g. Article 7 and recitals 32, 42 and 43), which complicates the notion of consent and what employers need to do to secure valid consent.

The ICO is running a public consultation on the draft guidance until 31 March 2017 to solicit the views of relevant stakeholders and the public. The feedback received will then be taken into account in the published version of the guidance, which is provisionally aimed for May 2017. The GDPR consent guidance can be found here, and the public consultation form here.

Other European countries have already launched relevant public consultation events:

In June 2016, the French data protection authority (“CNIL”) launched a public consultation on the GDPR. Two hundred twenty-fiv organizations participated in the public consultation and the outcome was integrated into recent guidance from the Consortium of European Data Protection Authorities. The CNIL’s report on the French public consultation is available (in French) here.

In Germany, the Interior Ministry has been drafting a proposed Data Protection Amendments and Implementation Law (Datenschutz-Anpassungs- und Umsetzungsgesetz – or “DSAnpUG”) approximately since the GDPR was passed.  The DSAnpUG implements the GDPR as well as the EU Law Enforcement Information Sharing Directive 2016/860. At present, several committees of the Upper House of Parliament (Bundesrat) are debating the draft, and a full vote of the Upper House is scheduled for March 8, 2017.

In February 2017, the Spanish Ministry of Justice launched a public consultation as a preliminary step before the drafting of a new bill implementing the GDPR.  The press release on the Spanish consultation is available (in Spanish) here.

It is important to remember that invalid consent can have severe financial consequences, apart from reputational damage. Infringements of the basic principles for processing personal data, which includes consent, are subject to the highest tier of administrative fines. This means a fine of up to 20 million Euro, or 4% of a company’s total worldwide annual turnover, whichever is higher, could be issued.

Courts 2.0: An Update on the Growth of Online Courts in the EU

By Irene Ng (Huang Ying)

In the past two years, the EU and its member states have been developing online dispute resolution (“ODR”) mechanisms to allow its citizens to resolve disputes faster and in a more cost-effective manner. The EU has launched its very first ODR platform back in February 2016 that is dedicated to helping “consumers and traders resolve their disputes out-of-court”.

The acceptance and use of ODR by the EU shed a light on how technology can facilitate dispute resolution in various ways. Instead of discussing how there are different forms of ODR within EU member states, this short article intends to focus on how EU member states have tried to revolutionize their court systems with technology, i.e. the creation of an online court.

The idea of such an “online court” is not novel. Much earlier in February 2015, the UK Courts and Tribunals Judiciary’s Online Dispute Resolution Advisory Group released an ODR Report advocating for Online Dispute Resolution for low value civil claims, i.e. claims of up to GBP 25,000. This online court dealing with small claims is intended to combat the existing system, which has been criticized as being “too costly, too slow, and too complex, especially for litigants in person” (see here). The report then suggested that a new “Internet-based court service” be established”, which will allow disputes to be brought to a “speedy, fair conclusion without the involvement of judges” (see here).

Talks about the development of an online court system remain relatively quiet. One noteworthy development in the EU, however, is the Dutch’s integrated legal services platform, i.e. the Rechtwijzer 2.0, an “online-base dispute resolution platform that supports people throughout their justice journey” (see here). Although technically not a court system in itself, the embracement of using technology as a means of resolving disputes may help build a person’s comfort level in using Internet-based courts, thereby paving the way for more EU members to call for such court systems.

When thinking about online courts, turning to other non-governmental companies or institutions for inspiration on cost-effective dispute resolution methods that can be implemented within courts may be interesting. For instance, companies such as eBay and Modria have ODR systems in place to handle disputes between buyers and sellers. While eBay and Modria do not technically provide a “court” environment to litigate disputes, they have however aggregated much experience over the years to allow effective dispute resolution services without a human judge. This goal is similar to what the UK has in mind when discussing about how the small claims court should be reformed. If so, then it may be worthwhile for courts to explore how these companies develop effective and robust systems to deal with such voluminous small claims, so as to implant them in their court systems to improve efficiency.

However, it appears that the development of online courts seems to be targeted towards courts handling voluminous amounts of small claims. For other courts, the development of a fully Internet based court seems to be less of a priority at the present moment – yet it should be worth noting that across the EU, courts in different EU member states are slowly integrating technology within the court. For instance, in Germany, the German courts developed an “electronic legal proceedings” system, which intends to promote planning certainty in legal proceedings for all parties involved. This project has been implemented in a variety of ways in the different states in Germany (see Eletronischer Rechtsverkehr).  Similarly, the Slovenia courts have allowed attorneys who intend to commence a lawsuit can do so using an online portal (see Portal e-Sodstvo). With the expansion of other litigation services such as eDiscovery, it will not be surprising to see courts in EU member states modernizing or revamping documentation processes as well.

The greater growth and acceptance of online services may result in EU citizens becoming more comfortable with online legal services, including the use of online courts to resolve disputes. Whether technology becomes sophisticated enough for complex cases in court remains however to be seen – although with enough investment in such technologies across a span of time, online or semi-integrated online courts for all levels of the court hierarchy may become a reality some day.

Do-It-Yourself Synthetic Biology Punishable in Germany

By Bartlomiej Kolodziejczyk

Do-It-Yourself synthetic biology is a rapidly evolving and emerging social biotechnology movement in which individuals, community groups, and small organizations study biology and life science using methods similar to those of traditional research institutions. DIY synthetic biology is primarily undertaken by individuals with extensive research training from academia or biotech and pharmaceutical corporations, who then mentor and supervise novice DIY biologists with little or no formal training.

The movement has become so prominent that many large cities have designated “biomarker spaces” run by citizen scientists and eager DIY synthetic biology enthusiasts. Complete, ready-to-use DIY synthetic biology kits can be purchased online from a variety of sources and savvy scientists have used these tools to alter biological organisms, i.e. E. coli bacteria, plants and more, and engineer them to, for example, glow in the dark.

These developments bring many opportunities, but at the same time present peculiar challenges. The fact that some of these organisms can be hazardous to the environment, biodiversity, and human health cannot be overemphasized. Moreover, inexpensive genome modification methods that are easily implemented by novices could create new channels for bioterrorism, which may be especially concerning given recent terrorist activities.

On 25 January 2017, the Federal Office for Consumer Protection and Food Safety of Germany (Bundesamt für Verbraucherschutz und Lebensmittelsicherheit) issued a statement prohibiting the use of DIY synthetic biology and genetic engineering kits outside of the specialized facilities and research institutions.

Whoever disobeys the law by ordering a DIY kit and utilizing that kit outside of the designated facilities will be liable to a fine up to 50,000 Euros in accordance with § 38 (1) (2) Genetic Engineering Act (GenTG). Furthermore, if Genetically Modified Organisms (GMOs) are released due to the use of the DIY kits, the offender can face imprisonment of up to three years or a fine as stated under Section 39 (2) (1) GenTG.

The statement sent a wave of shock through the DIY bio community. The enactment of laws governing the proliferation of biotechnology, such as the regulation of genetic engineering (Gentechnikgesetz – GenTG), ratified on 20 June 1990, is not new. However, recent developments and the growing movement of biohackers pushed the Federal Office for Consumer Protection and Food Safety to enforce these regulations. In accordance with § 8 para. 1 sentence 1 GenTG, genetic engineering work may only be carried out in genetic engineering facilities, i.e. in suitable, officially designated laboratories under the supervision of a qualified project manager or researcher.

Germany is not the only state trying to regulate this new movement. A few days prior to the German statement, the U.S. Food and Drug Administration (FDA) quietly proposed regulations that would require any genetically engineered organism to go through a strict regulatory procedure. In essence, the FDA wants to define any organism that a scientist purposefully genetically modifies as a “drug”, and such development would have to pass strict and lengthy clinical trials to be approved.

Europe is generally stricter than the United States in regulating genetic engineering and genetically modified products. In certain European states, the legality of DIY genetic engineering is ambiguous. Germany’s statement may inspire other European and non-European nations to take similar, firm stances to regulate the activities of the social biotechnology movement. Recent events indicate that precautionary measures will be embraced by more nations across the globe.

Transatlantic Antitrust and IPR Developments Bimonthly Newsletter Issue No. 1/2017 (January 23, 2017)

Contributors: Gabriel M. Lentner, Marie-Andrée Weiss,
Martin Miernicki, Nikolaos Theodorakis,
Valerio Cosimo Romano

Editor-in-chief: Juha Vesala

 


Contents     

Antitrust

United States

Tenth Circuit holds IPRs defense available to rebut a refusal to deal antitrust claim

European Union

European Commission approves the acquisition of LinkedIn by Microsoft, subject to commitments

Intellectual property

European Union

CJEU rules that lending an e-book is legal if the first sale right has been exhausted

After many twists and turns, the CJEU holds that the Rubik’s cube trademark is invalid

Other developments

European Union

The General Data Protection Regulation (GDPR) and the Way Forward

The road to the future of European traffic: European Commission publishes strategy on Cooperative Intelligent Transport Systems

Competence of the EU to conclude Free Trade Agreements: AG’s opinion in Case 2/15 on the EU-Singapore Free Trade Agreement

Read More…

Tenth Circuit holds IPRs defense available to rebut a refusal to deal antitrust claim

By Valerio Cosimo Romano

On 31 October 2016, the United States Court of Appeals for the Tenth Circuit (the “Court of Appeals”) held that the invocation of IPRs is a presumptively valid business justification sufficient to rebut a refusal to deal claim.

The case involved a dispute between a software company and the developer of aviation terminal charts (which provide pilots with the information necessary to navigate and land at a specific airport). The developer holds copyrights for portions of its charts, which use a proprietary format. The parties negotiated and executed a license and cooperation agreement under which the developer would waive its standard licensing fee and grant the software company access to proprietary products that facilitate the integration of the developer’s terminal charts into third-party systems. In exchange, the software company would create a data management reader that works in conjunction with an e-book viewer. After the execution of the agreement, the software company registered with Apple as a software application developer and requested the necessary toolkit from the developer to develop an app. The developer did not provide the toolkit. Rather, it announced it had created its own app, offered to its customers at no additional cost beyond their terminal chart subscription fee.

The software development company sued the developer. The district court granted summary judgment for developer on the antitrust claims but denied summary judgment on the remaining claims for loss of profits, awarding more than $43 million in damages. The developer appealed, challenging only the district court’s ruling related to the loss of profits. The software company cross-appealed, challenging the dismissal of its antitrust claims, alleging a single anticompetitive conduct consisting in a refusal to deal, in violation of § 2 of the Sherman Act.

To determine whether a refusal to deal violates § 2, the Court of Appeals first looked at market power in the relevant market, in which the court assumed that the developer enjoyed monopoly power. Second, the Court of Appeals looked at the use of the product, and concluded that the assertion of IPRs is a presumptively rational business justification for a unilateral refusal to deal. In its legal reasoning, the Court of Appeals relied on the approach taken by both the First and Federal Circuits in Data General and Xerox, respectively. In Data General, the First Circuit held that while exclusionary conduct can be pursued by refusing to license a copyright, an author’s desire to exclude others from use of its copyrighted work is a presumptively valid business justification for any immediate harm to consumers. In Xerox, a Federal Circuit declined to examine the defendant’s motivation in asserting its right to exclude under the copyright laws, absent any evidence that the copyrights were obtained by unlawful means or used to gain monopoly power beyond what provided for by the law. Quoting Novell and Trinko, the Court of Appeals also recognized the existence of a limited exception, available only where the plaintiff can establish the parties had a preexisting, voluntary, and presumably profitable business relationship, and its discontinuation suggests a willingness to forsake short-term profits to achieve anti-competitive ends. On this last point, the Court of Appeals held that the software developer did not present any evidence.

Therefore, it concluded that the developer did not have an independent antitrust duty to share its intellectual property with the software company. Consequently, it reversed and vacated the jury’s award of lost profits, but affirmed the partial summary judgment on software company’s antitrust claims.

European Commission approves the acquisition of LinkedIn by Microsoft, subject to commitments

By Valerio Cosimo Romano

On 6 December 2016 the European Commission (the “Commission”) approved the acquisition of LinkedIn by Microsoft, conditional on compliance with a series of commitments.

Microsoft is an U.S. technology giant. LinkedIn is a company based in the US, operating a social network dedicated to professionals. The parties operate on complementary areas and have limited overlaps. In its investigation, the European Commission focused on professional social network services, customer relationship management software solutions, and online advertising services.

First, the Commission investigated whether, after the merger, Microsoft could have strengthened LinkedIn’s position by pre-installing and integrating the social network on its systems. The European watchdog came to the conclusion that such measures could significantly enhance LinkedIn’s visibility to the detriment of competitors. Second, the Commission investigated the area of customer relationship management software solutions and found that the networking service does not appear to be a must-have, and access to its database is not essential to compete on the market. The Commission therefore concluded that the transaction would not enable Microsoft to foreclose this market. Third, the Commission found that after the transaction a large amount of user data would still be available on the market. Thus, it concluded that there were few competition concerns arising from the combination of the parties’ online non-search service activities and data to be used for advertising purposes. Lastly, even though privacy concerns do not fall within the scope of EU competition law, the Commission analyzed the potential impact of data concentration on the market as a result of the merger. The European competition watchdog concluded that data privacy is an important parameter of competition between professional social networks, which could have been negatively affected by the transaction.

In order to address the competition concerns identified by the Commission, Microsoft committed to (i) ensuring that manufacturers and distributors would be free not to install the social network on Windows and allowing users to remove it from devices where pre-installed; (ii) allowing competing professional social network service providers to keep intact their current levels of interoperability with Microsoft’s products and (iii) granting them access to Microsoft’s proprietary application dedicated to software developers.

In light of these commitments, the Commission gave green light to the acquisition.