Revision of the Act against Unfair Competition
With effect from 28 May 2022, the new provisions of the Unfair Competition Act (UWG) will come into force. This will implement the requirements of Directive (EU) 2019/2161 (the so-called Omnibus Directive). While the existing structure of the German UWG will remain, new provisions will be added that primarily cover issues in connection with digitalisation. A novel concept in the framework of the UWG is that consumers will receive their own claim for damages based on the UWG. Further, the reform provides for much higher fines for certain breaches of the law. This is a real paradigm shift in German unfair competition law which to-date has been very much relying on the self-regulation of the markets.
Scope of application of the new UWG
The addition of the new section 1(2) UWG defines the scope of application of the UWG in more detail than before. Also, more specific provisions regulating particular aspects of unfair commercial practices are to take precedence over the provisions of the UWG, for example the State Treaty on Media and the German Teleservices Act (TMG), which, in accordance with Union law, contains special provisions for advertising, e.g. in section 6 TMG.
In the future, the UWG will therefore only be applicable to unfair acts that are not dealt with in other specific regulations. However, the primacy of these provisions only extends as far as the aspect concerned is conclusively regulated in the more specific provision.
Prohibition of dual-quality regulations
The new section 5(3) No. 2 of the UWG, revised version, implements Article 3(3) of Directive (EU) 2019/2161, which contains provisions on dual quality. According to this, it is misleading if a product is marketed in one Member State of the European Union as identical to a product made available on the market in other Member States when these products differ substantially in their composition or characteristics, unless this is justified by legitimate and objective factors.
Goods may still be marketed in the future under the same trade marks, even when, for example, different recipes or ingredients are used in different Member States. However, they may no longer be marketed as identical. Even if a corresponding differentiation of products is primarily made in the case of foodstuffs, section 5(3) UWG, revised version, does not contain a restriction to foodstuffs. Basically, section 5(3) applies to all kinds of goods and services.
New information obligations for entrepreneurs
The newly created section 5b UWG introduces new and extremely important obligations for entrepreneurs to provide information. These provisions are particularly relevant for online marketplaces (legally defined in § 2 No. 6 UWG, revised version). Online marketplaces are not only web portals such as eBay, but also individual online shops on independent websites.
The operators of these online marketplaces will in future be required to provide information on whether the seller is an entrepreneur according to the seller's own declaration. This means that every seller will be obliged to provide information on whether or not the sale of his products on the platform takes place as an entrepreneur in the legal sense. If consumers buy from entrepreneurs within the meaning of the law, they are entitled to the claims and rights provided for in the Consumer Protection Law of the European Union.
This new obligation to provide information pursuant to section 5b (1) No. 6 of the UWG, revised version, is intended to provide consumers with certainty about their potential contractual partners and about the applicability of consumer protection rights. However, the operators of the online marketplaces are also not obliged to check the status indicated by the sellers regardless of the occasion.
New guidelines for customer ratings and additions to the UWG “blacklist”
Pursuant to section 5b (3) UWG, revised version, the entrepreneur who provides customer reviews must now indicate to customers whether he has taken measures to ensure the accuracy of the customer reviews and, if so, what reasonable measures these are. If the entrepreneur has not taken any measures, he must indicate that the authenticity of the reviews is not verified.
However, if the entrepreneur provides customer reviews in an advertising manner, he is obliged to ensure their authenticity and provide the consumer with information on the processes and procedures he has implemented to collect consumer reviews and verify their authenticity.
If the entrepreneur filters reviews, he has to explain according to which criteria he selects re-views for publication. In addition, the Omnibus Directive contains further factors (recital 47) according to which the entrepreneur must additionally inform consumers whether the reviews have been sponsored or influenced by way of a contractual relationship with a seller, how customer reviews are sourced and how the average review score is calculated.
The German UWG contains a so-called "black list" in the annex to section 3(3) where strictly prohibited practices are listed in detail. For the revised version of the UWG, the legislator considers the guarantee of genuine and accurate customer reviews to be so important that new provisions were added to the “black list”. In this respect, it is always inadmissible to mislead consumers about the authenticity of consumer reviews or to use falsified consumer reviews for the purpose of sales promotion.
According to the newly created No. 23b, it is always unlawful to claim that reviews of a good or service originate from consumers who have actually purchased or used that good or service without taking reasonable and proportionate measures to verify whether the reviews actually originate from such consumers. The entrepreneur does not have to guarantee the authenticity of the reviews, he only has to implement reasonable and proportionate measures to verify the authenticity of the reviews. Such steps would include technical means to verify the credibility of a person posting a review, for example by requesting the information when a consumer uploads a review.
At the same time, the newly created No. 23 c of the black list renders it unlawful per se to transmit or commission fake consumer reviews or recommendations and to misrepresent consumer reviews or recommendations on social media for the purpose of sales promotion.
Explicit regulations for influencers
After the Federal Supreme Court (BGH) dealt with the issue of influencer marketing last year in its so-called "Influencer Decisions", corresponding provisions are now included in the UWG. In this context, the definition of the central term "commercial act" in section 2 UWG has been amended to include digital content and services.
The new provision of section 5a (4) UWG, revised version, provides that the acting influencer must label his or her postings when he or she receives remuneration or similar consideration from outside companies or allows himself or herself to be promised such consideration. The term "similar consideration" includes, for example, commissions, products from external companies, products sent without being asked, which the influencer may use or keep, the provision of equipment or the reimbursement of costs. The labelling obligation does not apply where the consideration is not initiated by the entrepreneur but by independent third parties and where influencers themselves do not directly profit from an action or recommendation.
However, the wording of section 5a (4) of the UWG revised version generally presumes that a consideration has been received. Should a legal dispute arise, it is the responsibility of the Influencer to demonstrate that no consideration was provided in the relevant case.
Even though these provisions should bring a little more legal clarity, further questions remain open and will ultimately have to be clarified by case law. For example, it is unclear when a self-interested business act by influencers leads to a labelling obligation or how exactly the labelling as advertising must be designed and presented in the postings.
Advertising/persistent addressing of consumers
The previous provision of section 7 (1) No. 1 of the UWG, old version, is deleted in the revised version of the UWG and inserted as a new No. 26 in the so-called "black list".
Pursuant to the new provisions, any form of persistent and unsolicited contact using a means of distance selling, i.e. by telephone, facsimile, e-mail or any other means suitable for distance selling, is now always forbidden. The only exception to this is if the contact serves the lawful enforcement of a contractual obligation.
Individual claim for damages for consumers
Often described as a "paradigm shift" in the more than 100-year history of the UWG, the newly created individual claim for damages for consumers pursuant to section 9 (2) of the revised version of the UWG is a novelty. The assertion of damages directly via the UWG was previously only possible for competitors.
According to the new provisions, those who intentionally or negligently engage in a commercial act that is illegal under section 3 of the UWG and thereby cause consumers to come to a commercial decision that they would not otherwise have taken, are obliged to compensate consumers.
This implements Art. 11a of the Omnibus Directive in German law. However, said Art. 11a also gives consumers the right to reduce the price or terminate the contract. These options remain to be implemented in the next reform.
In addition, section 9 (2) sentence 2 UWG, revised version contains statutory exceptions like violations of section 3a UWG (breach of law), section 4 UWG (protection of competitors), section 6 UWG (comparative advertising) as well as no. 32 on the “blacklist” (demand for payment in the event of unsolicited visits to the home of a consumer on the day of conclusion of the contract). In these cases, the consumer cannot claim damages.
Additionally, the burden of proof for a claim for damages is borne by the consumer. This is likely to be the biggest challenge in practice, especially for legally inexperienced consumers.
New fines for EU-wide infringements
The newly created section 19 of the UWG, revised version introduces new fines. In some cases, very sensitive fines can be imposed for a violation of section 5c of the UWG, revised version.
Pursuant to section 5c (1) of the UWG, revised version, an infringement of consumer interests by unfair commercial practices is prohibited if it is a widespread infringement pursuant to Art. 3 No. 3 of Regulation (EU) 2017/2394 (CPC Regulation).
The threshold of a widespread infringement or even a widespread infringement with a Union dimension (infringement in at least two thirds of the Member States, which together account for at least two thirds of the population of the EU) can quickly be exceeded be online businesses. Thus, the relevance of this provision for any entrepreneur and company active in this field is obvious.
However, the offence under section 5c (1) can only be sanctioned within the framework of a "coordinated enforcement action" within the meaning of Art. 21 of the CPC Regulation, according to which the authorities of at least two Member States take action. While the defense against such actions is made more difficult because expert advice more than one member is necessary, it requires effort to commence a coordinated action on the part of the Member States as well.
In the case of an administrative offence within the meaning of section 19 (1) of the UWG, the fine may be up to EUR 50,000.00 and higher - up to 4 % of the annual turnover - for companies which have achieved an annual turnover of more than EUR 1.25 million in a Member State affected by the infringement in the year preceding the decision by the authorities. The annual turnover may also be estimated. If there is no evidence for an estimate of the annual turnover, the fine can amount to a maximum of two million euros. This represents a clear difference to the previous provisions on fines according to section 20 of the UWG, which are, however, not replaced by this, but retained.
Revision of the Price Indication Ordinance
In addition to the revised UWG, a new Price Indication Ordinance (PAngV) will come into force on 28 May 2022, which will completely replace the existing regulations in this respect. The changes are also based on the corresponding requirements of Directive (EU)2019/2161 (Omnibus Directive).
Although the question "whether" the basic price must be indicated has not undergone any changes, the legal provisions regarding the "how" of the price indication have been modified. The basic price now not only has to be in the immediate vicinity of the total price, but it must now always also be unambiguous, clearly recognisable and easily legible.
Ultimately, however, this basically codifies the case law of the BGH to the effect that the total price and basic price must be perceptible at a glance and not hidden e.g. behind a separate link or by a mouse-over.
Also, section 5 PAngV revised version, stipulates that the unit of measure for the indication of the basic price must be 1 kilogramme, 1 litre, 1 cubic metre, 1 metre or 1 square metre. The previous possibility to indicate smaller quantities in 100 grams or 100 millilitres has been completely eliminated.
With section 11 PAngV revised version, the legislator implements provisions from Art. 6a Directive (EU)2019/2161 and thus introduces new information requirements in the PAngV for advertising with price reductions.
Whenever a price reduction for a product is announced to consumers, the lowest total price within the last 30 days prior to the application of the price reduction (so-called reference price) has to be indicated. Constant recording of prices applied to a product or service are recommended. Perishable goods and goods with a short shelf life are exempt from this requirement.
The new regulation applies equally to stationary and online trade as well as to other distribution channels, but only covers goods. Also, traders are free to advertise with a price comparison (e.g. at a recommended retail price), provided that it is clearly recognisable for consumers that this is merely a comparison and not a reduction.