Mass distribution and the battle of prices : Is comparative advertising on price between different sized companies legal?


REAL, Avocats à la Cour

On February 8th 2017, the second chamber of the European Court of Justice gave a judgment following a demand for preliminary ruling from the Appeal Court of Paris in a case between the companies “Carrefour Hypermarché SAS” and “ITM Alimentaire International SASU”.

In this case, in December 2012, Carrefour launched a major television advertising campaign, entitled “garantie prix le plus bas Carrefour” (Carrefour lowest price guarantee), which compared the prices of 500 leading brand products for sale in its shops and in shops of competitors, including Intermarché shops, and offered to reimburse consumers twice the price difference if they found cheaper prices elsewhere.

From the second televised advertisement onwards, all of the Intermarché shops selected for comparison were supermarkets and all of the Carrefour shops were hypermarkets, of a superior size.

This information appeared only on the home page of the Carrefour website, where it was stated in small print that the guarantee applied only in Carrefour and Carrefour Planet shops and that it therefore did not apply in smaller shops of this brand.

Moreover, in the television advertisements, the word ‘Super’ appeared in smaller letters beneath the name Intermarché to indicate that this comparison only took into consideration prices in smaller shops of the brand.

The question is therefore whether comparative advertising on the prices applied in shops of different size and format, when these shops are part of a brand which owns a range of stores of different sizes and where the advertiser compares the prices applied in bigger stores of its brand with prices applied in smaller shops, constitutes unfair competition between these two companies.

Is comparative advertising only legal if it compares prices of products sold in shops of similar sizes?

The European Court of Justice had therefore to determine if this practice breaches Article 4 of Directive 2006/114/CE that details the conditions under which comparative advertising is legal.

In fact, Article 4, which was implemented in the Grand-Duchy of Luxembourg by Article 18 of the law of July 30th 2002 regarding commercial practices, indicates that comparative advertising is only permitted if the following cumulative conditions are fulfilled:

  • It is not misleading;
  • It compares goods or services meeting the same needs or intended for the same purpose;
  • It objectively compares one or more material, relevant, verifiable and representative feature of those goods and services, which may include price;
  • It does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor;
  • For products with designation of origin, it relates in each case to products with the same designation;
  • It does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;
  • It does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name; and
  • It does not create confusion among traders, between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor.

The European Court of Justice has therefore mentioned that according to the established case-law “comparative advertising contributes to demonstrating, in an objective manner, the advantages of various comparable goods and thus to stimulating competition between suppliers of goods and services to the consumer’s advantage, the conditions to be met for such advertising must be interpreted in the sense most favourable to that advertising, while ensuring at the same time that comparative advertising is not used anticompetitively and unfairly or in a manner which affects adversely the interests of consumers”.

In the present judgment, however, the Court determined that in certain circumstances the difference in size or format of the shops in which the prices being compared by the advertiser have been identified may distort the objectivity of the comparison.

It is certainly true that the prices of consumer products are likely to vary according to the format or size of the shop as well as the location of the stores.

As for example, prices in a small neighbourhood store in Paris will of course be higher than the prices applied in a department store in the outskirts of a large city.

This advertising can therefore have an influence on the economic behaviour of the consumer, which can lead to a belief that he would benefit from the price difference promoted in the advertising by buying products in the stores of the advertiser’s brand instead of the shops of the competing brand.

Nevertheless, such advertising is not misleading if the consumer has been informed that the prices compared concern products sold in stores of different size and format.

The European Court of Justice stated here that according to the Directive on unfair commercial practices, this information must be clear, precise and intelligible.

We can therefore conclude that a comparative advertising that compares prices of products sold in stores of different size and format is not as such illegal but can be so if it does not correspond to the objective comparison’s criteria or is misleading.

In view of these considerations, the European Court of Justice concluded that in this case, the advertising probably does not fulfil the objectivity criteria and that it may be misleading.

It will be up to the Appeal Court of Paris to appreciate the legality of these Carrefour television spots by considering the position of the European Court of Justice in this judgment.

The outcome of this battle of prices remains unsolved until a final decision is taken by the Appeal Court of Paris and the fall-out of this decision will probably be monitored very closely by the dominant players of the mass distribution sector.



Draft Legislation n°6996: Parental rights in Luxembourg finally equal for fathers and mothers?


REAL, Avocats à la Cour

On May 27th 2016, the Luxembourg government presented a new draft legislation reforming most of family law in Luxembourg and at last proposed equal rights for fathers and mothers regarding their parental rights.

In this context parental rights can be defined as the set of decisions that have to be taken by a father and a mother in relation to the person and also the assets of their minor child in order to safeguard its interests. These decisions include, for example, academic or medical decisions.

Currently, the situation is different for married and unmarried parents. Parental rights are indeed exercised jointly by married parents. In addition, in the case of a divorce, Article 378 of the Civil Code stipulates that parental rights must be exercised by the parent who has custody of the child.

A parent without custody of the child therefore cannot take important and essential decisions regarding the life of the child. The Constitutional Court criticized this legal provision and declared it unconstitutional as “the legislators don’t authorize two divorced parents to exercise jointly parental rights on their common children” (Mém. A197 of 22/12/2008 p.2617).

The actual legal framework is even more unequal and discriminatory for unmarried parents as the law stipulates that the parental rights of unmarried parents are exercised by the parent who voluntarily recognised the child, if it was recognised only by one of them.

Where the father and the mother both recognise the child, Luxembourg’s Civil Code states, in Article 380, that the mother exercises parental rights.

The Constitutional Court also declared in its judgment of March 26th 1999 that this legal provision of the Civil Code is unconstitutional as it is contrary to citizens’ equal rights before the law.

The legal framework in place at present is therefore discriminatory not only between married parents and unmarried parents but also between fathers and mothers.

As this legal framework has been strongly contested for many years by law professionals and also by parents, the legislator plans to amend the actual law by the draft legislation n°6996.

The draft legislation proposes a fundamental reform of the actual legal provisions regarding parental rights. Taking into consideration that new forms of union other than marriage now legally exist in Luxembourg, the text of the draft legislation proposes putting parents on equal footing regardless of their marital status.

The concept of co-parenthood, which will continue beyond the separation of the parents, constitutes the main focus of the reform of parental rights. The draft legislation therefore establishes the principle that parents, married or not, can jointly exercise parental rights in the best interests of their child.

Parental rights will then be defined in relation to the child’s interests, which will be the sole criteria in establishing the parental rights. The draft legislation recommends that a child whose parents are separated will continue to have close and direct ties with both parents.

Moreover, Article 372-1 of the draft legislation states that the agreement of both parents will be necessary for every act that falls within the scope of parental rights when they exercise them jointly. This agreement is needed both for usual acts and also for unusual acts, with the difference that for usual acts the agreement is presumed.

This paragraph puts an end to the unequal treatment between parents of a child born out of wedlock, which remained in Luxembourg law despite the Constitutional Court ruling n°7/98 of March 26th 1999.

Nevertheless, in cases of disagreement, the text provides that the parents will be able to conclude a written convention on their parental rights, which can be approved by the family law judge who can also be addressed by one of the parents when they cannot agree on the conditions of the execution of their parental rights.

This draft legislation will also change the actual jurisdiction, establishing a single family law judge and reforming divorce litigation and financial alimony.

Luxembourg will therefore, after many years of discussion, finally see this draft legislation take effect in 2018.