Intellectual Property Law

Misleading Advertising under the EU Directive and Austria's Law

By IBLS Editor

Council Directive 84/450/EEC regulates misleading and comparative advertising in the European Union.  Even though must European Union (EU) Member States have adopted this Directive within their domestic legislation, some conflicts between Directive 84/450/ECC and domestic marketing laws arise.  This article illustrates on the conflicts between the EU Directive on misleading and comparative advertising and its Austrian counterpart.

The purpose of Directive 84/450/EEC is to protect consumers, traders, businesses, professionals, and the public in general, against misleading advertising and the unfair consequences thereof; and to establish the conditions under which comparative advertising is permitted. This Directive defines misleading advertising as one that deceives, including its presentation, or is likely to deceive the persons to whom it is addressed or whom it reaches, and that may affect recipients? economic behavior, or is likely to injure a competitor. Article 7 of Directive 84/450/EEC allows Member States to adopt advertising laws extending greater protection. 

Australian Law on Unfair Competition, Bundesgesetz gegen den unlauteren Wettbewerb (UWG), authorizes petitions for injunction and actions for damages against those providing misleading advertising.  UWG specifically states: ?Persons who, in the course of trade and for the purposes of competition, provide potentially misleading information on business matters, in particular as regards the nature, origin, production method or pricing of particular goods or services or of the entire range on offer, or as regards price lists, the method of procurement or source of supply of goods, awards won, the reason for or purpose of the sale or the quantity of stock, may be the subject of an application for an injunction ordering them to cease and, where they knew or must have known that the information was potentially misleading, an action for damages.?  Likewise, UWG states that advertisement of goods originating from and making part of an insolvency estate should not disclose the fact that goods come from an insolvency estate. 
 
In 2003, the European Court of Justice decided a misleading advertising case involving the above rules.  An Austrian company (the advertiser) engaged in auction sale of goods from insolvency estates, published an advertisement that expressly stated that the auctioned goods came from an insolvency estate. The Ad was posted in the company?s website, in some catalogues, and in the press.   An Austria?s plaintiff filed a petition for injunction against the advertiser, claiming, among others, that the goods sold by the advertiser were no longer part of insolvency estates but rather goods owned by the advertiser after having been acquired from an insolvency estate.  Plaintiff argued the advertiser Ads were misleading because those auctions were not conducted on behalf of the estate administrator but on behalf of and for the benefit of the advertiser.  Plaintiff said the advertiser should cease its advertising practice because it was unfair and misleading.

Vienna?s highest regional court upheld the injunction.  The advertiser filed an extraordinary appeal on a question of law before Austria?s Supreme Court.  The Supreme Court requested a preliminary ruling from the European Court of Justice.  The main question was whether UWG article 30 violated article 28 Directive 84/450/EEC which authorized the free movement of goods.  The advertiser claimed that noting that goods came from insolvency estates was truthful advertising and should not be prohibited.  In fact, the advertiser said, this advertising was not prohibited in other member states like France, Belgium, and Sweden.  Plaintiff claimed this type of advertising should be prohibited under community law as unfair and misleading advertisement. 

The European Court of Justice held that Directive 84/450/EEC does not preclude the prohibition established by UWG article 30.  The Court held that even though this Directive does not concretely address auction advertisement and sales of insolvency estate goods, the Directive authorizes countries to enact marketing laws that provide greater protection.  Additionally, UWG article 30 does not violate article 28 or article 29 of the EC, regarding free movement of goods across the EU.  ?Article 28 EC is to be interpreted as meaning that it does not preclude national legislation which prohibits any reference, however true, to the fact that goods come from an insolvency estate, where public announcements or notices intended for a large audience advertise the sale of goods originating from, but no longer forming part of, an insolvency estate. Such legislation may nevertheless constitute a disproportionate restriction on the freedom to provide services, if it can properly be assessed against the provisions relating to that freedom (Article 49 EC).?  Article 49 EC refers to freedom to provide services among the EU.  Thus, this particular UWG article 30 prohibition conflicts with Article 49  (free movement of services) but it does not conflict with article 28 (free movement of goods).      
 

Full post as published by IBLS Internet Law Blog on June 30, 2008 (boomark / email).