The German Federal Supreme Court has recently had occasion to rule on the interpretation of Sections 4 and 5 of the German Act on Unfair Competition again.
In one recent decision (Judgment of Nov. 20, 2008 - file no. I ZR 122/06), the Court had to decide on the admissibility of a sale in light of the prohibition in the German Act on Unfair Competition of raising prices for a brief period of time in order to be able to grant a rebate. The defendant, a company operating do-it-yourself stores, conducted a sale in January 2005 that was advertised with the slogan “20% rebate on everything, except animal food.” Such a rebate is generally permitted under current German unfair competition law, provided it is not misleading. When the plaintiff conducted test purchases, however, it was discovered that the defendant had raised prices on at least four products just before the sale. While these higher prices were applied for a longer period of time in the past, a special price was applied in the week immediately before the rebate that, however, was not marked as such.
The Federal Supreme Court held that this was misleading and constituted unfair competition under S. 5 para. 4, first sentence of the Act on Unfair Competition, because the defendant had raised the price in order to be able to grant a rebate. This will be considered to be misleading if a company advertises a reduction in price, provided that the original price was applied only for an unreasonably short period of time. With respect to the four products purchased by the plaintiff, the defendant had raised the reduced price just as the sale began. Such a pricing policy is as misleading as advertising an earlier price that was only applied for a short period of time.
In another recent decision by the German Federal Supreme Court concerning sales and rebates (decision of Nov. 11, 2008 - file no. I ZR 120/06), the Court had to deal with time limits for end-of-season sales. The Court clarified that, unlike in the past, current German unfair competition law no longer provides for an obligation to limit the period of time during which such a sale is conducted. Previously, there was an obligation to limit an end-of-season sale. The current S. 4 and 5 of the Act on Unfair Competition do not provide such an obligation anymore. However, S. 4 no. 4 of the Act on Unfair Competition provides for an obligation of transparency that includes the duty to inform consumers of an existing limitation for a sale. In the specific case at issue, neither party had stated to the Court that the defendant had actually intended to impose a particular time limit with respect to the sale. As a consequence, the action brought by an association against unfair competition was dismissed.