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EU: Advertorials May Increasingly Become the Target of Unfair Competition Claims

EU: Advertorials May Increasingly Become the Target of Unfair Competition Claims

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In a preliminary ruling following a request by the German Federal Court of Justice (case C-371/20), the Court of Justice of the European Union (CJEU) interpreted Point 11 of Annex I to the Unfair Commercial Practices Directive (Directive 2005/29/EC; UCP-Directive). This provision aims at preventing the use of editorial content in the media to promote a product where a business has paid for the promotion without making this clear in the content or through images or sounds clearly identifiable by the consumer (advertorial).

The CJEU ruled that this provision is to be interpreted as the promotion of a product by the publication of editorial content "paid for" by a business, where the business provides consideration with an asset value for the publication, whether in the form of a sum of money or in any other form, provided there is a definite link between the payment and the publication and that this will, among other things, be the case where that business makes available, free of charge, images protected by copyright on which the commercial premises and products that it offers for sale are visible.

Possible impacts on advertising practices

The ruling goes quite far and may have an impact on the advertising (media cooperation) practices of businesses across the EU. The CJEU's interpretation of the term "payment" in the provision is relatively extensive, as it would suffice that the provision of copyrighted images to the medium is already to be regarded as "payment". Apparently, the CJEU is trying to circumvent a problem often arising in practice, namely that advertising cooperation "veiled" as editorial content ​​is difficult to challenge if the commercial background of such cooperation needs to be proven. In practice it is rarely possible to prove that an actual "payment" was made for the editorial content in the sense of a payment of a sum of money.

Nevertheless, the fact that the CJEU sees the provision of copyrighted images by a company sponsored with editorial content as a "payment" within the meaning of Sec. 11 of Annex I of the UCP Directive must not be overestimated. On this basis, one could see a "payment" from the medium for reporting on a company every time press photos are provided (e.g. on a company's press portal or in connection with press releases), even if it is "real" editorial content and the photos are used for illustration purposes only. However, this cannot be intentional and would go beyond the protective purpose of the provision. This ruling thus does not seem to be fully applicable to such cases.

Preceding opinion of the German Federal Court of Justice

It should be noted that the referring German Federal Court of Justice had already resolved the essential preliminary questions by itself: (i) in the opinion of the German Federal Court of Justice, the (presumably paid) editorial content was in any case a "business transaction" of the business being featured in the content; (ii) the publication of this editorial content was aiming at promoting the sales of the clothing store; and (iii) the advertising and financial connection with the advertised company was not recognisable with the required clarity when reading the editorial content.

In the case before the CJEU, it was only a question of whether, despite the existence of these circumstances, the provision might not be applicable due to the possible lack of the formal element "payment". In the case of "genuine" editorial reporting (even if it is illustrated by copyrighted images) these preliminary questions resolved by the German Federal Court of Justice may generally have to be answered differently than in the case of advertising cooperation such as that at issue here. In this respect, the CJEU also emphasises the relevance of the pecuniary advantage (the "payment") being suitable for influencing the content of the publication.

What lies ahead?

Going forward, businesses should carefully review their media cooperation and advertorial practice in light of these recent developments, otherwise they stand to sanctions by authorities or courts (triggered by competitors and consumer protection associations).

By Michael Woller, Partner, Schoenherr

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