This article was first published in French in Le Monde du Droit magazine.
Kathie Claret, partner, and François-Xavier Mirza, associate, Bryan Cave Paris, comment on recent case law on misleading advertising in mass retail.
Comparative advertising is permitted by EU Directive 2006/114. The same directive, on the other hand, prohibits misleading advertising, defined 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 behaviour or which, for those reasons, injures or is likely to injure a competitor”. In French law, Article L. 121-8 of the French Consumer Code allows comparative advertising provided that, precisely, it “is not “misleading or likely to deceive”.
The historical players in mass retail confront each other…
In December 2012, Carrefour (21% market share in 2016) launched a television advertising campaign based on a comparison of Carrefour's prices with those of competitors such as Intermarché (14.4% market share in 2016). However, the size and layout of the Intermarché stores selected for comparison (supermarkets) were different from the Carrefour stores (hypermarkets).
ITM, the company in charge of Intermarché's strategy and commercial policy, obtained in 2014 from the Commercial Court of Paris the cessation of this advertising campaign and 800,000 euros in damages for misleading advertising.
Carrefour appealed this decision and succeeded in convincing the Paris Court of Appeal to refer a question to the European Union Court of Justice (the “EUCJ”) as to whether such advertising, that compares the prices of products sold in shops of different sizes or layouts, is lawful under Directive 2006/114.
In a judgment of 8 February 2017 (Case C-562/15), the EUCJ reminded that any comparative advertising must objectively compare prices and not be misleading. However, according to the EUCJ, the objectivity of the comparison may be distorted as regards shops of different sizes and layouts if the advertisement does not mention that difference, thus deceiving consumers. The information given to the consumer must be clear and included in the advertising message itself.
The EUCJ thus invited the Paris Court of Appeal to examine whether “the advertising at issue satisfies the objective comparison requirement or is misleading, first, by taking into consideration the average consumer of the products in question (…), and, secondly, by taking into account the information contained in that advertising (…)”.
In this case, the information was displayed on the home page of the Carrefour website in small print. In the television advertisements the word “super” was mentioned below the name Intermarché in even smaller print.
… while uniting against new rising players
Carrefour, defendant in the aforementioned case, is the claimant in another case that targets this time a new player whose turnover is increasing since a change in its positioning resulting in an upgrade in product range: Lidl (5,2% market share in 2016).
Carrefour recently sued Lidl for compensation before the Commercial Court of Evry on the grounds that the company has allegedly not complied with the rules applicable to television promotions, which provide for a minimum period of 15 weeks during which the price announced and the available stocks must be maintained in store. Carrefour had previously obtained the suspension of the broadcasting of the advertisement through a “procédure en référé” (summary procedure).
In this case, a company is apparently willing to intervene in the proceedings in order to support Carrefour in the demonstration of the damage resulting from the practices at issue, a company called... Intermarché.
Sometimes allies, sometimes opponents, mass retailers no longer hesitate to make judicial strategy part of the defence of their market shares.