Adverts that compare the prices of products sold in shops having different sizes or formats may be held as misleading, in breach of consumer protection laws, if there is no disclosure of the nature of the comparison being made, the Court of Justice of the EU (CJEU) said.
The CJEU was ruling in a case referred to it from the Court of Appeal in Paris. It was asked by the French court to help it interpret the EU's Comparative Advertising Directive for the purpose of resolving a dispute between rival retailers.
Carrefour Hypermarchés has asked the Court of Appeal to overturn an earlier decision by the Commercial Court in Paris which took issue with adverts it ran. Those adverts compared prices for certain branded products sold in Carrefour stores against the prices for those goods sold in rival Intermarché's shops.
According to the CJEU's ruling, the prices referenced in the Carrefour adverts were for goods sold in Carrefour hypermarkets and Intermaché supermarkets, a fact which was not disclosed in the Carrefour's TV ads. As a result, the Commercial Court held that Carrefour had engaged in "acts of unfair competition" and ordered it to stop its advertising campaign and pay €800,000 in compensation to ITM Alimentaire International, which raised the complaint against the adverts on behalf of the parent company for Intermaché stores.
The Commercial Court said that Carrefour had adopted "a misleading method of selecting sales outlets and distorting the representativeness of the price comparisons" in breach of consumer laws in France which require "objectivity in a comparative advertising campaign".
The Comparative Advertising Directive generally allows companies to compare their products or services to those produced by rivals as long as adverts are not misleading. The adverts in question must also compare goods or services meeting the same needs or intended for the same purpose, and objectively compare one or more material, relevant, verifiable and representative features of those goods and services, such as price.
Additional rules exist under the Directive which, among other things, prohibit comparative advertising from denigrating rivals' trade marks or taking unfair advantage of their reputation.
In its ruling, the CJEU explained that retailers are not prohibited from running adverts that compare the price of products they sell against the price of those products sold in stores operated by rivals that are of a different size or format.
However, it is said that retailers behind comparative adverts of that nature must be careful not to omit "material information" from those ads which would render them misleading to consumers. The CJEU said 'material information' would include an admission that price comparisons concern goods sold in stores of different formats or size.
"Comparative advertising will be misleading if it may in any way, either by action or omission, deceive the consumers to whom it is addressed and affect the economic behaviour of those consumers or, for those reasons, adversely affect a competitor," the CJEU said. "Advertising will, therefore, be misleading … if it omits material information that the average consumer requires, according to the context, in order to take an informed transactional decision or if it hides such information or provides it in an unclear, unintelligible, ambiguous or untimely manner and which consequently may cause the average consumer to take a transactional decision that he would not have taken otherwise."
"In the present case, advertising in which the advertiser, with a view to comparing the prices of products sold in its shops with those of products sold in competitors’ shops, uses, on the one hand, the prices charged in shops having larger sizes or formats in its retail chain and, on the other hand, the prices charged in shops having smaller sizes or formats in the retail chains of competitors, whereas each of those retail chains contains a range of shops of different sizes and formats, is liable to deceive the average consumer by giving that consumer the impression that all the shops forming part of those retail chains have been taken into consideration in making the comparison and that the price differences indicated are valid for all the shops in each chain irrespective of their size or format, whereas … that is not necessarily the case," it said.
"That advertising is liable to influence the economic behaviour of the consumer by causing him to take a decision in the mistaken belief that he will benefit from the price differences claimed in the advertising when buying the products concerned in all the shops in the advertiser’s retail chain rather than in shops belonging to the competing retail chains. It follows that such advertising is liable to be misleading," it said.