1 April 2011CopyrightJens Künzel

Marketing goods using competitions

In Germany, such games were very common even before the 2004 revision of the German Act Against Unfair Competition (UWG). However, in the revised version of this act, the German Parliament for the first time included express provisions against certain ‘excesses’ in the use of competitions as marketing tools.

One of these new provisions provided that the promotion or execution of marketing measures such as competitions is unlawful—without regard to exceptional circumstances—if the opportunity for the consumer to participate in these games depends on the consumer having to buy goods or services prior to the game.

This ‘coupling’ of the game with the need to buy ‘something’ was considered to be an unfair influence on the consumer since competitions were generally considered to appeal to consumers to a far greater extent than other promotional or marketing measures.

In 2005, the European Union issued the Unfair Commercial Practices Directive. The purpose of this directive was to achieve a common level of protection of consumers, competitors and other participants in the European market against unfair commercial practices. The accepted opinion is that EU member states are not allowed to provide for a stricter level of protection against such practices in their separate jurisdictions.

“The Supreme Court ruled that the coupling of a competition with the need to buy something does not per se contradict professional standards of care common in the business in question.”

So, in the Million Chance I case, which concerned a competition used by the defendant in 2004—heard before Germany’s Supreme Court in 2005 and decided in 2008—the question arose whether the unconditional prohibition in the UWG could be reconciled with the directive. In 2008, the directive had still not been transformed into German national law. From the time the transformational law should have been enacted (December 12, 2007), the directive was to be observed by German courts in construing and applying the German UWG.

That is what the Supreme Court did in 2008 when it decided Million Chance I. It came to the conclusion that the competition in question would have to be ruled unlawful if the UWG were to be applied faithfully according to its wording and spirit.

However, the Supreme Court found itself unable to decide since the Directive on Unfair Commercial Practices seemed to provide for a less strict level of protection with regard to competitions: the relevant provision in the UWG does not deal with cases that the directive considered unfair and unlawful per se.

Furthermore, the provision in the UWG prohibited ‘aggressive’ or ‘misleading’ commercial practices within the meaning of Article 5 para (4) of the directive, which would have ‘saved’ the original meaning of this German provision. So in the case concerned, the German UWG had to be subsumed under the ‘general rule’ in Article 5 para (2) of the directive, which provides that an unfair commercial practice is contrary to professional standards of care and is capable of influencing the economic behaviour of the consumer.

That means that the strict and unconditional wording and spirit of the UWG possibly had to be construed in a way that an additional feature could be realised, namely that the specific competition under review is capable of influencing the decision of the consumer to buy.

This was the question that the Supreme Court in 2008 presented to the European Court of Justice (ECJ). The court asked whether Article 5 para (2) of the directive should be construed in a way that contradicts the strict wording of the German provision in the UWG. The ECJ held in January 2010 that Article 5 para (2) of the directive contradicted the relevant provision, when such a provision did allow consideration of the circumstances of the case and the relevance of the competition to the decision of the consumer.

The German Supreme Court, following the ECJ’s view, held that the competition in Million Chance I was not unlawful. The Supreme Court ruled that the coupling of a competition with the need to buy something does not per se contradict professional standards of care common in the business in question. The ECJ itself has repeatedly left the impression that it did not think such competitions in themselves contradicted these standards.

Also, there is no ‘misleading’ or ‘aggressive’ element as such in the coupling of the game with the necessity to buy something prior to the game.

Jens Künzel, LLM, is a partner at Krieger Mes & Graf v. der Groeben. He can be contacted at: jens.kuenzel@krieger-mes.de

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