German publisher Axel Springer wins partial victory against ad-blocking software provider

The German Higher Regional Court of Cologne has ruled partly in favour of the publisher Axel Springer, prohibiting ad-blocking software provider Eyeo GmbH from offering paid whitelisting.

This ruling puts a new twist on a long-running battle between German newspaper publishers and broadcasters on one hand and ad-blocking software providers, in particular Eyeo GmbH, on the other hand (see also our article from November 2015). Different studies find that the usage rates of ad-blocking software among German internet users are between 25 and 40%. The use of ad-blockers amongst the younger demographic most relevant as a target audience for advertising exceeds even the higher end of this spectrum. Eyeo’s software Adblock Plus, initially an open source project, has become the most successful ad-blocking software in Germany. Eyeo is creating revenues by selling paid whitelisting to companies under its “Acceptable Ads” initiative. Eyeo claims that whitelisted companies’ advertising must meet certain criteria for “acceptable ads”. Large entities have to pay a significant share of the revenue created by the whitelisted ads to Eyeo.

Publishers who depend to a great degree on the revenue created by selling advertising space on their websites are struggling with the growing popularity of ad-blocking software. They have, therefore, brought a large number of cases against ad-blocking software providers before German courts since 2015. In these cases, publishers have argued that the ad-blocking software itself and Eyeo’s whitelisting business model violate German unfair competition laws.

The first cases to be decided (and widely reported) appeared to come down clearly on the side of the ad-blocking software providers. There has, however, been a shift towards a more publisher-friendly interpretation of unfair competitions laws since the end of last year. Although the majority of German courts of first instance still consider ad-blocking software to be basically permissible under German unfair competition laws, publishers succeeded before the lower courts of Berlin and Frankfurt and now successfully challenged Eyeo’s practice of paid whitelisting before the Higher Regional Court of Cologne. The decision of the Cologne court is the first appeals court decision addressing the distribution of ad-blocking software and the decision has opened the way for an authoritative judgment of the German Federal Supreme Court.

Ruling

The court affirmed the regional court’s (court of first instance) finding that the provision of ad-blocking software itself was permissible. The court held that Eyeo did not deliberately obstruct the publisher’s offerings. There was no direct impact on the content of the website, since the advertisements were not removed from the publisher’s site, but only prevented from being shown on the user’s screen. Moreover, the Court found that it was within the users’ legitimate discretion to decide whether they wanted to have advertisements displayed or not. The Cologne court did, however, decide that the offer of paid whitelisting constituted an “aggressive business practice” pursuant to Sec. 4 lit. a of the German Act against Unfair Competition (“UWG”). In the court’s view, Eyeo unduly used a position of power to exert pressure on companies willing to advertise. The Court found that Eyeo acted as a “gatekeeper”, regulating access to advertising and that, therefore, companies willing to advertise were forced to buy their way out of EYEO’s ad blocking filter. The current decision does only prohibit paid whitelisting on specific Springer websites and does not have an immediate impact on Eyeo’s ability to operate the feature with regard to other websites.

Eyeo called the decision a “consolation prize” for Springer and emphasized that the court had considered its software permissible. Springer, however, stated that they were pleased that the Court had prohibited Eyeo’s business model. According to press reports, Springer and Eyeo are still arguing how the ruling is to be interpreted. Eyeo claims that it is sufficient if it offers free whitelisting to Springer, but emphasizes that it will continue to require that any ads displayed align with the criteria for “acceptable ads” as set out by Eyeo. Springer on the other hand wants Eyeo to refrain from blocking any advertisements on Springer’s website, whether Eyeo considers them “acceptable” or not. Both parties have already announced that they will file an appeal against the decision to the German Federal Supreme Court (the Bundesgerichtshof).

Conclusion

While it is too early to assess the ultimate outcome of the extensive legal battles between publishers and the providers of ad-blocker software, the decision does show that publishers’ efforts to fight back against ad-blocking might not remain entirely fruitless. Given the importance of the paid whitelisting for Eyeo’s business model, publishers are likely to consider the decision to amount to something more than a “consolation price”. There is also the issue of public relations – the decision, together with the ongoing legal disputes before other German courts, has drawn more attention to publishers’ interests and their concerns against the use of adblocking technology; a technology which many consumers may so far have perceived primarily as a legitimate tool to control what is sometimes seen as an abundance of intrusive advertising on some websites. Together with active public campaigning by individual large publishing houses such as Gruner + Jahr, this may have an impact on adoption rates or create an increasing willingness of the consumer actively to whitelist individual sites. On the legal front, an authoritative decision of the Federal Supreme Court can be expected within the next one to two years.

File Number 6 U 149/15