Mon Dieu! French shoppers can expect a better deal following the ECJ's recent decision on the legality of price comparisons in Lidl CNC v Vierzon Distribution SA (C-159/09). Shoppers throughout the EU should benefit, too, as the Court's ruling brings into sharper focus how price comparisons between rival brands can be made under the Misleading Advertising Directive. Brand owners who compete on price should take notice now in order to avoid falling foul of the rules.
Price Comparisons, À La Carte
The case arose out of a comparative advertising campaign of a type not unfamiliar to grocery shoppers across Europe.
E. Leclerc, a French discount chain, placed a newspaper ad in France showing till receipts listing 34 items, mainly foodstuffs, in general terms, from both Leclerc and rival discounter, Lidl. The Leclerc receipt showed a total of EUR 46.30, while the Lidl receipt for the same items totalled EUR 51.40. The ad proclaimed, "Low prices - And the proof is E. Leclerc is still the cheapest."
Lidl sued, claiming that the ad was misleading and deceptive and therefore breached French advertising laws based on the EU Misleading Advertising Directive. Under those laws, comparative advertising by reference to price was permitted, but only where the comparison was between like products, was objective and verifiable, and was not inaccurate or misleading.
In considering Lidl's claim, the French court sought guidance from the ECJ on whether comparative advertising based on price could be allowed in respect of foodstuffs at all, since such goods would almost invariably be made from different ingredients, or in different places, or by different manufacturers, all of which could affect a shopper's desire to consume the products.
The ECJ said an efficient oui to the question referred. It noted that some of the leading cases on comparative advertising had already involved foodstuffs and there was no reason in principle to exclude such goods from fair comparative advertising. Indeed, to do so would be to remove some of the most important daily consumer products from the scope of comparative advertising, to the ultimate disadvantage of consumers.
Nothing in the Directive suggested that there should be such an exclusion. Consequently, comparative advertising by reference to the price of foodstuffs was permissible, provided it met the further criteria required under the Misleading Advertising Directive.
Not All Bries Are Equal
Fortunately, the case did not end there. Leclerc's campaign offered a prime opportunity to give guidance on a type of supermarket advertising that is becoming more and more prevalent, and the Court seized it to express views on what supermarkets (and indeed other advertisers) must do in order to bring price comparisons under the protective scope of the Directive.
In particular, the Court held that price comparisons must be objectively verifiable. Leclerc's ad showed till receipts that referred to items in general terms, including reference to size, weight, etc. While the Court properly refrained from commenting on the legality of Leclerc's specific ad (which was rather a question for the national court), it did rule that for price comparisons to be verifiable, a consumer needed to know exactly which products were being compared. This would necessitate not only an indication of what product was being compared (eg a 225 g can of tuna fish), but also what brands were being compared (eg BUMBLE BEETM tuna vs a supermarket's own-brand).
This led into another point, which is that price comparisons must not omit information that would, if included, explain the price differential in terms other than pure competitiveness. That is to say, a price comparison between genuine Parmesan cheese and a cheese that looks and tastes like Parmesan, but is not the genuine article, would not be fair if it did not make clear that the cheaper product was not truly Parmesan, but rather only a similar product. Likewise, a price comparison between the market-leading salmon product from one store and a much cheaper own-brand without the same cachet would not be fair if it did not make clear what brands were being compared. Otherwise, a significant number of consumers could be misled into assuming that the very same product was cheaper in the advertiser's store, when in fact the products differed in ways that were capable of affecting the consumer's choice.
Finally, the Court held that a comparative ad based on price could be misleading where it implied, based on the products and prices compared, that the consumer could regularly save money on everyday goods by shopping with the advertiser instead of with the rival. In other words, if an advertiser implies that price savings shown on a list of given items are representative of lower prices across the board, when in fact he is comparing only products which he knows he sells more cheaply, then the advertisement could be misleading. This was in fact a core part of Lidl's claim against Leclerc, who Lidl alleged had made a misleadingly selective comparison because it only showed goods that were cheaper at Leclerc. Indeed, it is hard to see why Leclerc would have done anything else.
This case is apt, because supermarket price comparisons are becoming ever more common. It is not unusual to walk into a supermarket and see two trolleys filled with items from that shop, on the one hand, and a rival, on the other, together with signs or till receipts showing the respective totals and highlighting the advertiser's shop as cheaper.
Such advertising can be highly influential in tough economic times, as shoppers base more and more buying decisions on price. The guidance in Lidl therefore gives supermarkets and other advertisers a firm and timely steer on how to make aggressive and effective price comparisons, but at the same time stay on the right side of the fence.
First and foremost, advertisers must be clear about what is being compared, to ensure that the price comparisons are objectively verifiable. Item, size, quantity, brand and date of comparison are all relevant facts that should be included in any comparative ad based on price, if only in the small print (but not so small as to escape entirely the notice of an average shopper).
Second, advertisers must compare like for like. Comparing a market-leading brand with an unknown or generic brand is not a fair comparison; the explanation for the cost differential is not the advertiser's competitiveness, but rather the generally cheaper nature of the unknown or generic brand. Compliance with the first rule above should help guide advertisers safely through this minefield, but traps for the unwary still lurk, for example in cases where the ingredients used on equivalent products are different in some qualitative way that is capable of affecting consumer choice (eg all-meat sausages as opposed to sausages that are cheaper because they are made with a substantial amount of filler).
Finally, advertisers who tout their wares based on price should beware the danger of selective price comparisons. Ads like that of Leclerc are intended to suggest that goods are cheaper in general at the advertiser's outlet, not just that the selected goods are cheaper. Yet, any comparison based on price will necessarily involve some selection of products that are cheaper at one outlet than another, and serious competitors are likely to offer some goods more cheaply than the competition, but others at the same or a higher price. Basic comparisons of staple products might run a lower risk of being regarded as selective, but even so, ads should be worded carefully to avoid any false suggestion that all products are always cheaper at the advertiser's outlet.
Some ads, though, are inherently selective, being intended to highlight temporary sales on particular items, and those should make clear that the ad relates to those items expressly and is time-limited. Accompanying slogans that suggest that the advertiser is always cheaper may undermine that message and should be considered carefully in context before inclusion in the finished ad. Although the guidance in this case relates primarily to supermarkets, it is relevant to other advertisers too. In these cases, though, small print may more often be needed to highlight where products differ. Ads that highlight price differences on the same models and brands are likely to be safer than comparing different brands, since the latter are more likely to differ in material ways.
Arguably, however, the tour de force of this decision is not in its technical guidance for advertisers, which is helpful, but rather in its underlying message that brands matter. The fact that a price comparison may be held unfair if it is between a market leader and a generic product and that fact is not disclosed shows that strong brands are at the heart of strong companies. Well-known brands with strong, positive images command a higher price in the market, and tactics to undermine their sales by price comparisons with generic or lesser-known brands will only work where the comparison is full and frank about the nature of the comparison.
Following this ruling, it is clear that rivals cannot steal a march by comparing the less desirable with the desirable unless they say that is what they are doing. That is likely to prove unpalatable for many competitors' tastes.