The complex patchwork of different national legislation relating to unfair commercial practices adds cost to those who market goods and services in multiple jurisdictions and can be a deterrent from entering new markets. The differences in legislation mean that businesses that wish to take legal action against unfair commercial practices need to negotiate their way through a minefield of independent, national enforcement routes, which often give inconsistent and contradictory results.
Directive 2005/29/EC of May 11 2005 concerning unfair business-to-consumer commercial practices (the UCPD) seeks to address these issues by approximating the laws of the member states on unfair commercial practices that directly harm consumers’ economic interests.
The UCPD is aimed at maximum harmonisation of national requirements. This means that member states cannot adopt national legislation that deviates from the substantive provisions of the UCPD. Its primary focus is consumer protection. The UCPD explicitly impacts the directives on misleading and comparative advertising in that their protection will be limited to traders.
The UCPD prohibits ‘unfair commercial practices’ and sets out a number of tests as to whether a commercial practice is unfair. The first, and most general, test is set out in Article 5 of the UCPD. This states that a commercial practice is unfair if: (i) it is contrary to the requirements of professional diligence of a trader acting reasonably and in good faith; and (ii) it materially distorts the economic behaviour of the average consumer to whom the commercial practice is addressed, or is likely to do so. A practice will materially distort a consumer’s economic behaviour if it causes, or is likely to cause, the consumer to take decisions regarding purchases that would not have been taken otherwise (for example, whether or not to purchase, or on what terms), regardless of whether the consumer acts on that basis. Next to this general test of unfairness, the UCPD also sets out two specific tests as to whether a commercial practice is unfair. A practice will be unfair if it is either misleading or aggressive, and criteria for assessing these are set out in Articles 6 to 9 of the UCPD.
Lastly Annex 1 to the UCPD contains a blacklist of 31 commercial practices that are considered to be unfair in all circumstances. This includes practices such as falsely stating that a product will only be available for a limited time, falsely claiming to be a signatory to a code of conduct or including in an advertisement a direct exhortation to children to buy the advertised products.
The UCPD has to be implemented by member states by June 2007. However, member states may continue to apply national provisions that are more restrictive or prescriptive than the UCPD until June 2013.
The UCPD contains many provisions that will impact on the consumer-facing marketing of goods and services within the EU. Here, we focus on the protection of lookalike products (that is, products whose appearance resembles an existing product) between businesses.
The UCPD does not affect national or international intellectual property laws and expressly applies only to business-to-consumer practices and not business-tobusiness practices. However, it does contain provisions that might give additional scope to the protection of lookalikes.
Recital 8 confirms that the UCPD ‘indirectly protects legitimate businesses from their competitors who do not play by the rules in [the] Directive’.
Article 6 provides that a commercial practice is misleading if it ‘contains false information, deceives or is likely to deceive the average consumer in relation to the ownership of industrial, commercial or intellectual property rights’.
Article 6 also prohibits ‘any marketing of a product which creates confusion with any products, trade marks, trade names or other distinguishing marks of a competitor’.
Article 11 gives member states discretion to allow competitors to take legal action against unfair commercial practices, provided they have a legitimate interest under national law.
Item 13 of the blacklist in Annex 1 provides that promoting ‘a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead a consumer into believing that the product is made by that same manufacturer when it is not’ is a misleading commercial practice. This article examines whether the implementation of the UCPD in France, Germany, the Netherlands and the UK provides for business-to-business protection against lookalikes in these jurisdictions. Our table sets out how and when the UCPD will be implemented in the various jurisdictions.
From a practical perspective, the UCPD will probably not expand the possibilities for competitors to take action against lookalikes in France.
As mentioned in the table, the UCPD will be implemented in the French Consumer Code. This code is aimed at the protection of consumers. It is likely that businesses will not be able to directly rely on the implementing measures, because they do not seek to protect businesses. Under existing French law, however, competitors do have an action based on general tort law if they can establish unfair competition practices by another competitor, which may include the use of lookalikes. Although the UCPD cannot be relied on directly, its test for unfair commercial practices relevant for lookalikes is not different from the test for unfair competition practices already existing under French law.
The UCPD will be implemented by amending the German Act against Unfair Competition (the UWG). Unlike the French Consumer Code, the UWG regulates fairness in commercial practices in a business-to-business context.
The implementation of the UCPD will invoke amendments to Section 5 UWG, which might give brand owners wider protection against commercial practices that consist of marketing lookalikes. The current prohibition in Section 5 UWG only applies to misleading advertising, and will be amended to also cover misleading commercial practices. So protection against unfair commercial practices, including the marketing of lookalikes, might be broadened, although the scope for such protection is already wide under German law. Marketing activities that did not previously fall within the scope of the term misleading advertising might be covered under the new provision. This includes commercial practices such as post-sale customer assistance and handling (Article 6(1)(a)) or the use of business codes of conduct (Article 6(2)(b)).
The UCPD will be implemented in the Dutch Civil Code by introducing a special tort action for the benefit of consumers based on unfair commercial practices. The provision intends to protect consumers against unfair commercial practices by businesses, by establishing a duty of care for businesses towards consumers. Most likely, businesses will not be able to directly rely on this special tort action against competitors, because it does not seek to protect businesses.
However, the possibilities for businesses to take action against lookalikes based on the general tort law might expand as a result of the implementation of the UCPD into Dutch law.
If a business obtains a commercial advantage over a competitor by infringing consumer protection provisions (such as the implementing provisions of the UCPD), the competitor might have an action in tort against the business for breach of a duty of care on the basis of general tort law. Unfair commercial practices such as the marketing of lookalikes might result in liability of, and injunctive relief against, the business, which must respect its consumer protection duties, just as its competitors.
The UCPD will be implemented as a single Regulation in the UK. Businesses will not be granted a right to directly enforce this Regulation against competitors. The UK government has indicated that existing arrangements for enforcing compliance with consumer protection law (that is, through designated enforcement bodies such as Trading Standards Departments) will be suitable and adequate for enforcing the provisions set out in the UCPD. In the UK, implementation of the UCPD will not provide additional scope for brand owners to protect their brand properties against lookalikes.
More generally, the UK government has indicated that it intends to monitor IP-related unfair competition cases and, if necessary, will make changes to existing arrangements to prevent for example, the marketing of lookalikes. This might provide for additional possibilities for businesses to take action against lookalikes.
Enforcing the UCPD
Although member states are not able to implement the UCPD with substantive provisions that differ from the Directive, they are free to choose the means through which adequate and effective enforcement measures exist to combat unfair commercial practices.
Some member states, such as France, the Netherlands and the UK, have granted enforcement powers to national authorities who are able to enforce the UCPD, ex officio and/or on the basis of complaints by persons or organizations with a legitimate interest. Regulation 2006/2004/EC on Consumer Protection Cooperation, which lays down a framework for cross-border cooperation in consumer protection matters by the responsible national authorities, might be relevant with regard to the cross-border enforcement of the UCPD. In France, Germany, the Netherlands and the UK, the implementation of the UCPD might result in different scopes of protection offered to competitors against lookalikes. In Germany and the Netherlands, the introduction of the UCPD seems to broaden the scope of protection and to provide for additional possibilities to combat lookalikes. The UK will not provide this broader scope of protection, as businesses will not be permitted to enforce directly the legislation implementing the UCPD against competitors. The implementation of the UCPD is unlikely to expand the possibilities to take action against lookalikes in France.
National jurisdictions have historically approached unfair commercial practices as a matter of common sense. The UCPD will introduce detailed provisions to regulate this approach to provide a level playing field for businesses engaged in crossborder marketing. In some jurisdictions, the UCPD could broaden the possibilities for protection against lookalike products. A clearer picture on this should be available by 2008, when there is likely to be more clarity on both implementation of the UCPD and its interpretation in the national courts.
This article is based on one first published in Managing Intellectual Property in April 2007.
The authors would like to thank the following people from Freshfields Bruckhaus Deringer for their contribution to this article: Wieke van Angeren (Amsterdam), Jill Delaney (London), Chris Forsyth (London), Sjo Anne Hoogcarspel (Amsterdam), Julia Meuser (Hamburg) and Peter Ruess (Düsseldorf).