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EU-China Workshop on Combating Illegal Publicity/Propaganda Behaviour of Businesses Day 1 Unfair Competition law: false advertising, false representation, false publicity / propaganda Kunming, 14 – 15 October 2010 Table of contents 1. Legal Framework 2. Case Law 3. Conclusions 1. Legal framework Combating Illegal Publicity/Propaganda Behaviour of Businesses 1.Legal Framework 2.Case Law 3.Conclusions Advertising race for Challengehas forbecome Advertising unique, cutting-edge, enticing way of ... passing on information to customers facilitating and positively influencing their buying decisions Difficult to keep content true to facts Human tendency to exaggerate benefits of products Easy to cross thin line demarcating puffery from misleading, deceptive or false advertisement Combating Illegal Publicity/Propaganda Behaviour of Businesses Interests to be protected 1.Legal Framework Competitors 2.Case Law 3.Conclusions Market Consumer Combating Illegal Publicity/Propaganda Behaviour of Businesses Main Regulation on illegal advertising Constitutional Rules National Regulation Article 21 Legislative Decree No. 145/2007 Directive 29/2005/EC Article 41 Legislative Decree No. 146/2007 European Parliament Resolution on January 13, 2009 1.Legal Framework 2.Case Law Legislative Decree No. 177/2005 3.Conclusions International Regulation Consumer Code (Legislative Decree No. 206/2005) Art. 2598 of Civil Code SelfRegulation Code of Discipline Self- Combating Illegal Publicity/Propaganda Behaviour of Businesses New provisions governing Unfair Commercial Practices Directive 2005/29/EC 1.Legal Framework 2.Case Law 3.Conclusions Law Decree 2 August 2007, n. 145 Law Decree 2 August 2007, n. 146 Ad hoc provisions on “Misleading and comparative advertisement”, aimed at protecting businesses in their commercial relations Amended articles 18-27 of the 2005 Consumers’ Code in connection with “Unfair business-to-consumer commercial practices”, Combating Illegal Publicity/Propaganda Behaviour of Businesses What is clearness? 1.Legal Framework 2.Case Law 3.Conclusions Advertising communication must be clearly distinguishable as such. When a medium presents news and other editorial matter to the public together with marketing communication, it should be ensured that the marketing communication is readily distinguishable as such; Subliminal advertisement is forbidden Combating Illegal Publicity/Propaganda Behaviour of Businesses What is lawful? Advertising communication shall include 1.Legal Framework 2.Case Law 3.Conclusions ①Terms, quotations and references to scientific and technical tests; ②Authentic Testimonials; ③Contents and conditions of the guarantee or warranty offered; ④Clear indication of dangers to health, safety or the environment, especially when such dangers are not immediately recognisable; ⑤Full compliance with provisions set forth for special type of products, i. Alcoholic Beverages ii. Cosmetics and Personal Hygiene Products iii. Food supplements and health foods iv. Physical and Aesthetic Treatments v. Medicinal Products and Curative Treatments vi. Courses and Study or Teaching Methods vii. Financial and real estate transactions viii. Package Tours ix. Games, Toys and Educational Products for Children Combating Illegal Publicity/Propaganda Behaviour of Businesses What is unlawful? Advertising communication shall not 1.Legal Framework 2.Case Law 3.Conclusions ①be misleading; ②play on superstition or credulity; ③contain statements or audio or visual treatments depicting physical or moral violence that may be considered indecent, vulgar or repugnant to prevailing standards of decency; ④offend moral, civil and religious beliefs; ⑤cause psychological, moral or physical harm, and exploit the credulity, inexperience or sense of loyalty of children or young people; ⑥Contain statement that may potentially endanger health, safety or the environment; ⑦copy or slavishly imitate communication of others (risk of generating confusion) or name, trademark, notoriety and corporate image of other marketers; ⑧denigrate the activities, companies or products of others. Combating Illegal Publicity/Propaganda Behaviour of Businesses What is unlawful? 1.Legal Framework 2.Case Law 3.Conclusions (Following) Psychological, moral or physical harm, and exploit the credulity, inexperience or sense of loyalty of children or young people: ①violating generally accepted rules of social behaviour; ②acting dangerously or seeking exposure to dangerous situations; ③suggesting that failure to posses the promoted product means either their own inferiority or their parents' failure to fulfil their duties; ④suggesting that the role of parents and educators is inadequate in supplying healthy nutritional advice; ⑤suggesting poor eating habits or neglecting the need for a healthy lifestyle; ⑥soliciting other people to purchase the promoted product. Combating Illegal Publicity/Propaganda Behaviour of Businesses Comparative The protection of the interests of businesses adversely Advertising affected by misleading or unlawful comparative advertising 1.Legal Framework 2.Case Law 3.Conclusions has been removed from the Consumer Code and entrusted to separate ad hoc provisions contained in Legislative Decree 145 of 2 August 2007 Main requirements Comparative advertising is permitted when it helps to explain the technical or financial features and benefits of promoted products and services, objectively comparing the relevant basic, technically verifiable and representative features of competitive goods and services, that meet the same needs or are intended for the same purpose. Combating Illegal Publicity/Propaganda Behaviour of Businesses A legislative “revolution” 1.Legal Framework 2.Case Law 3.Conclusions From Misleading Advertisement pre-existing legislation wider To Unfair commercial practices legislation Extension of the perimeter of protection to forms of business conduct that are likely to distort the economic behaviour of consumers but do not fall squarely within the notion of advertising Combating Illegal Publicity/Propaganda Behaviour of Businesses What are Commercial Practices? 1.Legal Framework 2.Case Law 3.Conclusions “Commercial practices are any act, omission, course of conduct or representation, or commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product to customer” “A customer is any natural person who, in the commercial practices is acting for purposes which are outside his trade, business, craft or profession” Combating Illegal Publicity/Propaganda Behaviour of Businesses What is unfair? 1.Legal Framework 2.Case Law 3.Conclusions “A commercial practice is deemed to be unfair when contrary to the requirements of professional diligence, it materially distort the economic behaviour of the average consumer whom it influences or to whom it is addressed” “The concept of unlawful commercial practices is viewed as the undue distortion of customers’ decision-making process and the resulting impairment of their ability and freedom to make informed market choices” Combating Illegal Publicity/Propaganda Behaviour of Businesses Competition Rules and Consumer Protection 1.Legal Framework 2.Case Law 3.Conclusions There are important elements of convergence between the enforcement of competition rules and consumer protection, since unfair commercial practices are often used as an important “COMPETITION TOOL”. Indeed, commercial practices, and especially comparative advertising, are a powerful tool for the newcomers and a way to lead consumers to choose the best options for them, in terms of prices and quality, by means of more conscious, rational and informed decisions. Combating Illegal Publicity/Propaganda Behaviour of Businesses What is misleading? 1.Legal Framework 2.Case Law 3.Conclusions Actions (a) the existence or nature of the product; (b) the main characteristics of the product; (c) the extent of the trader's commitments, the motives for the commercial practice and the nature of the sales process, any statement or symbol in relation to direct or indirect sponsorship or approval of the trader or the product; (d) the price or the manner in which the price is calculated, or the existence of a specific price advantage; (e) the need for a service, part, replacement or repair; (f) the nature, attributes and rights of the trader or his agent; (g) the consumer's rights (h) in its factual context, taking account of all its features and circumstances, it causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise Omissions (a) in its factual context, taking account of all its features and circumstances, it omits material information that the average consumer needs to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise; (b) It hides or provides in an unclear, unintelligible, ambiguous or untimely manner such material information, and namely ① the main characteristics of the product, ② the geographical address and the identity of the trader, ③ the price inclusive of taxes, ④ the arrangements for payment, delivery, performance and the complaint , ⑤ the existence of a right of withdrawal or cancellation Combating Illegal Publicity/Propaganda Behaviour of Businesses What is aggressive? 1.Legal Framework 2.Case Law 3.Conclusions In its factual context, taking account of all its features and circumstances, by harassment, coercion, including the use of physical force, or undue influence, it significantly impairs or is likely to significantly impair the average consumer's freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to take a transactional decision that he would not have taken otherwise. Types of harassment, coercion and undue influence (a)timing, location, nature or persistence; (b)the use of threatening or abusive language or behaviour; (c)the exploitation by the trader of any specific misfortune or circumstance of such gravity as to impair the consumer's judgement, of which the trader is aware, to influence the consumer's decision with regard to the product; (d)any onerous or disproportionate non-contractual barriers imposed by the trader where a consumer wishes to exercise rights under the contract, including rights to terminate a contract or to switch to another product or another trader; (e)any threat to take any action that cannot legally be taken. Combating Illegal Publicity/Propaganda Behaviour of Businesses General Rule on Unfair Competition Acts 1.Legal Framework 2.Case Law 3.Conclusions Article 2598, no. 3, of the Italian Civil Code: “…acts of unfair competition are performed by whoever: …3) avails himself directly or indirectly of any other means which do not conform with the principles of honest commercial practices and are likely to injure another’s business” (unofficial translation). Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Proceedings 1.Legal Framework 2.Case Law 3.Conclusions In 2009 2.597 complaints were submitted to the Authority. Of the 2.597 complaints received 1.882 were dismissed and namely: ①70% of these referred to practices not falling under the definition of commercial practices under the Consumer Code and Legislative Decree No. 145/2007; ②24% of these were referred to circumstances submitted according to the law abrogated by Legislative Decrees 145 and 146/2007, ③1% of these were referred to events already decided by the Authority, ④1% were manifestly groundless; ⑤4% moral suasion. (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Outcome of investigation 1.Legal Framework In 2009, 272 complaints were examined by the Authority, 246 of these led to the adoption of a measure and 24 were closed by dismissal 2.Case Law 3.Conclusions (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Investigations Description Number Dismissal because ungrounded 1.Legal Framework 2.Case Law 3.Conclusions 13 Closure of investigation 2 Closure with a communication to the Parliament, the Executive and Banca d’Italia 4 Acceptance of committment 6 Appliance of Reg. 2006/2004 1 Misleading and/or Unfair practices 239 Misleading (B2C) 181 Misleading and aggressive (B2C) 35 Aggressive (B2C) 13 Contrary to the requirements of professional diligence 2 Misleading/Unfair Comparative (B2B) 6 Misleading (previous legislation) 2 Non-compliance with commitments 7 (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Compliant and findings 1.Legal Framework 2.Case Law 3.Conclusions Total Infringements 145 131 Consumers’ associations 40 37 Competitors 19 15 Government Department 32 32 Ex officio 28 24 1 0 Individual consumer Competitors’ associations (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Medium used to disseminate the advertisement 1.Legal Framework 2.Case Law 3.Conclusions Total Infringements Internet 84 76 Printed material (brochures, leaflets etc) 63 60 Daily and periodical press 48 44 National television 30 29 Packaging 2 2 Telephone 11 11 External advertising 10 10 Local television 3 3 Postal service 4 4 E-mail 1 1 Radio 4 3 SMS 4 4 Inventories 4 4 38 29 Others (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Fines resulting from proceedings Total Fines (Euro) 231 34,925,000 1.Legal Framework Unfair Commercial Practices 2.Case Law Misleading and Comparative Advertising 6 355,000 3.Conclusions Misleading Aderertising (previous legislation) 2 2,000 Failure to comply with commitments 7 358,000 246 35,640,000 Total (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM Fines resulting from proceedings/ Sectors Sector Total Fines (Euro) Telecommunications 60 13,644,000 Banking and Insurance 53 8,171,000 2.Case Law Foodstaff, Pharmaceutical and Transport 40 5,427,000 3.Conclusions Energy and Industry 41 4,776,000 Services 45 3,264,000 239 35,282,000 1.Legal Framework Total (AGCM Report issued on 31 march 2010) Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM’s view on Unfair Commercial Practices Telecommunications Mobile internet services (shock billings) 1.Legal Framework 2.Case Law 3.Conclusions The Agcm dealt with mobile internet services that lead to abnormally expensive bills for consumers and related advertising campaigns. In particular, the above-mentioned campaigns promoted hi-speed web-surfing, up to a 5 GB monthly download threshold, for a very low monthly rate. The Agcm fined the companies under investigation: a)for providing insufficient information to consumers, with specific regard to the (very expensive) tariff applicable after overcoming the 5 GB monthly threshold; b)for not giving consumers the possibility to monitor their download traffic in order to stay safely under the 5 GB monthly threshold or assess their over-the-threshold traffic; c)for providing insufficient information to consumers about the areas not covered by the H3G network. Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM’s view on Unfair Commercial Practices Energy Enel Energia 1.Legal Framework 2.Case Law Enel Energia, a company of the Enel group operating on the electricity supply free market, was judged to have adopted unfair commercial practices: a)by moving customers from the so-called “protected market” to the “free market”; b)by initiating an unsolicited supply of natural gas; 3.Conclusions The company started unsolicited electricity and gas supplies and in some cases demanded payment, hindering the exercise of the right to second thoughts and using aggressive marketing procedures. Combating Illegal Publicity/Propaganda Behaviour of Businesses AGCM’s view on Unfair Commercial Practices Transport Meridiana (Sweep 2007) 1.Legal Framework 2.Case Law 3.Conclusions Agcm fined Meridiana for violating the Consumers’ Code and deemed unfair the company’s practices in the following areas: a)Transparency of fares: On its website, Meridiana included a fuel surcharge linked to oil prices within the category “airport taxes and charges”; b)Insurance Policy: Absent a precise choice by the consumer to refuse the insurance policy (by un-ticking a box on Meridiana’s website), the company took for granted his consent; c)Compensation to Passengers for Flight Delays: The airline did not comply with the current regulations and did not offer consumers adequate information; d)The “HI-FLY 2007/2009” Loyalty Program: Consumers wishing to join the loyalty program had to purchase a “co-branded” credit card: therefore, some consumers were not admitted to the program, while some costs and charges were not clearly explained by the airline. Combating Illegal Publicity/Propaganda Behaviour of Businesses Courts’ view on Unfair Commercial Practices 1.Legal Framework 2.Case Law 3.Conclusions “it is deemed to be an unfair commercial practice for denigration, the circumstance that a market operator communicates that a claim against a competitor has been awarded before a Court” (Court of Venice, 21 march 2007) “it is deemed to be unfair the practice of a market operator who communicates true circumstances or facts regarding the competitor in order to discredit him” (Court of Eboli, 2 May 2004) Combating Illegal Publicity/Propaganda Behaviour of Businesses Courts’ view on Unfair Commercial Practices 1.Legal Framework 2.Case Law 3.Conclusions “it is deemed to be unfair for exaggeration, the commercial practice of a market operator who promotes its products as the sole and unique with specific characteristics or qualities” (Court of Appeal of Florence, 15 January 2002) Combating Illegal Publicity/Propaganda Behaviour of Businesses Courts’ view on Unfair Commercial Practices 1.Legal Framework 2.Case Law 3.Conclusions “it is unfair the comparison of a product to others, to the extent that this practice is deemed to be used in order to draw unfair advantage from the notoriety of others” (Court of Turin, 11 February 2008; Court of Bologna, 1 March 2008) Combating Illegal Publicity/Propaganda Behaviour of Businesses Courts’ view on Unfair Commercial Practices 1.Legal Framework 2.Case Law 3.Conclusions “The use of a packaging similar to the one used by a competitor determines a case of unfair commercial practice as it is aimed to obtain and undue advantage from the notoriety of trademarks of competitors” (Court of Bologna, 18 May 2005) Combating Illegal Publicity/Propaganda Behaviour of Businesses ① 1.Legal Framework ② 2.Case Law 3.Conclusions ③ ④ The Consumer Protection System countering Unfair Commercial Practices represents a good way for EU Member States to promote competition and enhance the smooth functioning of the market. The enforcement of the new Unfair Commercial Practices rules entails a widening of the national competition authorities’ powers that may allow consumers and businesses to receive more effective protection. Companies might take advantage of the new provisions by using the black-lists of specifically prohibited practices as benchmark to self-assess their day-to-day commercial conduct. There are important elements of convergence between the enforcement of competition rules and consumer protection, due to the fact that commercial practices are an important COMPETITION TOOL. Combating Illegal Publicity/Propaganda Behaviour of Businesses Thank you Guido Foglia [email protected] OUR VITAL STATISTICS “The outfit’s strengths lie in the lawyers’ accuracy and attention to detail and the fact that a partner always follows the case closely” Chambers Europe Independent Italian law firm More than 300 professionals of which 43 Partners, 49 Salary Partners, 13 Of Counsel Five offices in Italy and abroad Practice in all main areas of law