Italy: Guidance By The Court Of Justice Of The European Union On Advertising Issues

Last Updated: 13 August 2013
Article by Felix Hofer

Over the last years the Court of Justice of the European Union (CJEU) frequently had to provide guidance on various legal aspects impacting on advertising. A news blurb – posted earlier this month – reports about some of these decisions, released in 2013.

Thus there are a number of additional CJEU decisions with important indications, which marketers promoting their products throughout the territory of the European Union should bear in mind.

(a) Applicable Law and Jurisdiction.

It is definitely no secret that today many marketing campaigns are conceived for an international target public, not only by big multinational companies, but also by small and medium players, intending to reach out, with their commercial communication, to a cross-border – if not global - audience.

When performing such cross-border campaigns, specifically directed to distinct geographic areas, marketers are usually aware of the fact that they may need to care about legal implications deriving from domestic provisions in the targeted countries. Their awareness about such potential implications is generally not so strong, when their promotions and offers are not specifically – and knowingly - targeted to foreign customers, but can be simply accessed and reached by a foreign audience.

The question therefore is: when are marketers at risk of becoming subject with their promotional campaigns to EU Law or to domestic law of the Union's member states?

Approached by an Austrian Highest Instance Court, the CJEU had to look into this problem and offered (in its judgment dated December, 7th, 2010, Grand Chamber, relating to joint cases C-585/08 and C-144/09) some enlightening criteria.

The factual premise of the first case are to be found in a "voyage by freighter from Trieste (Italy) to the Far East", booked on the Internet through the intermediary services of a travel organizer. The latter promoted and described the trip on its website and indicated that "... there was a fitness room, an outdoor swimming pool, a saloon and video and television access on the vessel. Reference was also made to three double cabins with shower and toilet, to a separate living room with seating, a desk, carpeting and a fridge, and to stopping at ports of call from which excursions into towns could be undertaken". Unfortunately, such described conditions were only partially met by the vessel's actual traveling characteristics. The person who had booked the trip therefore sought for price reimbursement.

In the second case more or less identical issue arouse with respect to an on-line booking of a room, where the services provided did not appear to be in line with the description offered on the hotel's website.

In the context of these lawsuits legal issues on jurisdiction and applicable law arouse and the CJEU was called in to assess (among other issues) whether "... the fact that an intermediary's website can be consulted on the internet is sufficient to justify a finding that activities are being 'directed' [to the Member State of the consumer's domicile].. " (making that State's national provisions on jurisdiction relevant).

To the purpose the CJEU had to consider EU Regulation No. 44 of 2001 (on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) and specifically the provision establishing the jurisdiction of the place of consumer's domicile when "... the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer's domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities" (so Article 15/1/c of the Regulation).

It also felt that "the question which this raises is whether intention on the part of the trader to target one or more other Member States is required and, if so, in what form such an intention must manifest itself" being that such ".. intention is implicit in certain methods of advertising" (so Section nos. 64 and 65 of the judgment).

In the following Sections (from no. 66 to no. 69) the Court passes on to offering indications on the definitions of 'advertising' and 'activities directed to'.

On the first aspect the Court:

  • Reminds its consolidated case-law according to which ".. 'advertising' and 'specific invitation addressed' within the meaning of Article 13 of the Brussels Convention cover all forms of advertising carried out in the Contracting State in which the consumer is domiciled, whether disseminated generally by the press, radio, television, cinema or any other medium, or addressed directly, for example by means of catalogues sent specifically to that State, as well as commercial offers made to the consumer in person, in particular by an agent or door-to-door salesman ..",
  • Explains that "the classic forms of advertising .... involve the outlay of, sometimes significant, expenditure by the trader in order to make itself known in other Member States and they demonstrate, on that very basis, an intention of the trader to direct its activity towards those States" , where such " .. intention is not ... always present in the case of advertising by means of the internet. Since this method of communication inherently has a worldwide reach, advertising on a website by a trader is in principle accessible in all States, and, therefore, throughout the European Union, without any need to incur additional expenditure and irrespective of the intention or otherwise of the trader to target consumers outside the territory of the State in which it is established", and
  • Concludes that "it does not follow, however, that the words 'directs such activities to' must be interpreted as relating to a website's merely being accessible in Member States other than that in which the trader concerned is established", as it appeared clear that "whilst seeking to confer further protection on consumers, the European Union legislature did not go as far as to lay down that mere use of a website, which has become a customary means of engaging in trade, whatever the territory targeted, amounts to an activity 'directed to' other Member States which triggers application of the protective rule of jurisdiction referred to in Article 15(1)(c) of Regulation No 44/2001".

On the second aspect the CJEU:

  • Clarifies that "among the evidence establishing whether an activity is 'directed to' the Member State of the consumer's domicile are all clear expressions of the intention to solicit the custom of that State's consumers" where such "clear expressions of such an intention on the part of the trader include mention that it is offering its services or its goods in one or more Member States designated by name. The same is true of the disbursement of expenditure on an internet referencing service to the operator of a search engine in order to facilitate access to the trader's site by consumers domiciled in various Member States, which likewise demonstrates the existence of such an intention",
  • Holds that ".. a finding that an activity is 'directed to' other Member States does not depend solely on the existence of such patent evidence. In this connection, it should be noted that, by its legislative resolution on the proposal for a regulation that is referred to in paragraph 43 of the present judgment (OJ 2001 C 146, p. 101), the European Parliament rejected wording stating that the trader had to have 'purposefully directed his activity in a substantial way' to other Member States or to several countries, including the Member State of the consumer's domicile. Such wording would have resulted in a weakening of consumer protection by requiring proof of an intention on the part of the trader to develop activity of a certain scale with those other Member States",
  • Therefore takes the view that "other items of evidence, possibly in combination with one another, are capable of demonstrating the existence of an activity 'directed to' the Member State of the consumer's domicile. In cases such as those in the main proceedings, the following features, which have been invoked before the Court and the list of which is not exhaustive, would, subject to the relevant national court ascertaining that they are present, constitute evidence of an activity 'directed to' one or more other Member States within the meaning of Article 15(1)(c) of Regulation No 44/2001: the international nature of the activity at issue, such as certain tourist activities; mention of telephone numbers with the international code; use of a top-level domain name other than that of the Member State in which the trader is established, for example '.de', or use of neutral top-level domain names such as '.com' or '.eu'; the description of itineraries from one or more other Member States to the place where the service is provided; and mention of an international clientele composed of customers domiciled in various Member States, in particular by presentation of accounts written by such customers",
  • With respect to 'language or currency used' finds that "...they do not constitute relevant factors for the purpose of determining whether an activity is directed to one or more other Member States. That is indeed true where they correspond to the languages generally used in the Member State from which the trader pursues its activity and to the currency of that Member State. If, on the other hand, the website permits consumers to use a different language or a different currency, the language and/or currency can be taken into consideration and constitute evidence from which it may be concluded that the trader's activity is directed to other Member States",
  • Answers the submitted question by stating that "... in order to determine whether a trader whose activity is presented on its website or on that of an intermediary can be considered to be 'directing' its activity to the Member State of the consumer's domicile, within the meaning of Article 15(1)(c) of Regulation No 44/2001, it should be ascertained whether, before the conclusion of any contract with the consumer, it is apparent from those websites and the trader's overall activity that the trader was envisaging doing business with consumers domiciled in one or more Member States, including the Member State of that consumer's domicile, in the sense that it was minded to conclude a contract with them", also adding that "...the following matters, the list of which is not exhaustive, are capable of constituting evidence from which it may be concluded that the trader's activity is directed to the Member State of the consumer's domicile, namely the international nature of the activity, mention of itineraries from other Member States for going to the place where the trader is established, use of a language or a currency other than the language or currency generally used in the Member State in which the trader is established with the possibility of making and confirming the reservation in that other language, mention of telephone numbers with an international code, outlay of expenditure on an internet referencing service in order to facilitate access to the trader's site or that of its intermediary by consumers domiciled in other Member States, use of a top-level domain name other than that of the Member State in which the trader is established, and mention of an international clientele composed of customers domiciled in various Member States. It is for the national courts to ascertain whether such evidence exists".

While at this points readers of this case-law report (so as its author) will still feel rather confused (even though on a much higher level) on the issue when exactly jurisdiction of a EU member state will come into play as a result of cross-border advertising directed from abroad to a member state of the EU, it appears quite obvious that trans-national campaigns will always involve some risks and require careful in-advance scrutiny as to potential legal implications. Unfortunately, most multinational companies, located outside Europe, seem to widely ignore such risky aspects relating to their global advertising. A quick look at the content available on the websites of some of these companies comforts the author's opinion that a number of businesses could potentially face lawsuits in foreign jurisdictions (before courts seated within the territory of member states of the Union).

(b) Nutritional and health claims.

1. - A pharmaceutical company distributing on the Czech market a food supplement named "...XYZ" (term also registered as a national trademark) used a statement on the packaging claiming that the product helped ".. to reduce a risk factor in the development of osteoporosis and fractures". The Czech State Agricultural and Food Inspection Authority held that such statement resulted in an incorrect health claim, infringing on the provisions of an EU Regulation (set to govern nutrition and health claims made on food), and therefore served the company with a fine.

The company questioned the fine, initially, through a first and second instance administrative procedure and then by accessing a Regional Court, in the first run, and finally the Supreme Administrative Court, in appeal.

The legal background of the dispute lies in the provisions of Regulation (EC) n. 1924/2006 of the European Parliament and of the Council. Such provisions govern (so Article 1/2) "... nutrition and health claims made in commercial communications, whether in the labelling, presentation or advertising of foods to be delivered as such to the final consumer") and specifically set (so Article 14/2) that: "In addition to the general requirements laid down in this Regulation and the specific requirements of paragraph 1, for reduction of disease risk claims the labelling or, if no such labelling exists, the presentation or advertising shall also bear a statement indicating that the disease to which the claim is referring has multiple risk factors and that altering one of these risk factors may or may not have a beneficial effect".

According to the opposing company's defense arguments in the specific case the Czech Authorities and Courts had failed to duly consider:

  • The transitional measures provided by Article 28/2 of the Regulation, holding that "Products bearing trademarks or brand names existing before 1 January 2005 which do not comply with this Regulation may continue to be marketed until 19 January 2022 after which time the provisions of this Regulation shall apply",
  • The provisions of Article 1/3 establishing that "A trade mark, brand name or fancy name appearing in the labelling, presentation or advertising of a food which may be construed as a nutrition or health claim may be used without undergoing the authorization procedures provided for in this Regulation, provided that it is accompanied by a related nutrition or health claim in that labelling, presentation or advertising which complies with the provisions of this Regulation",
  • Finally, Article 2/2/6, according to which " 'reduction of disease risk claim' means any health claim that states, suggests or implies that the consumption of a food category, a food or one of its constituents significantly reduces a risk factor in the development of a human disease".

The Czech Supreme Administrative Court considered that the decision of the case required adequate clearance on the correct interpretation of some of the provisions laid down in Regulation no. 1924 of 2006. In detail, the Court asked the CJEU for guidance on the following aspects (Case C-299/12):

(i.) 'Is the following health claim: "The preparation also contains calcium and vitamin D3, which help to reduce a risk factor in the development of osteoporosis and fractures", a reduction of disease risk claim within the meaning of Article 2(2)(6) of Regulation ... No 1924/2006 ..., even though that claim does not expressly mention that the consumption of that product would significantly reduce a risk factor in the development of the disease mentioned?

(ii.) Does the concept of a trademark or brand name within the meaning of Article 28(2) of Regulation ... No 1924/2006 ... also include commercial communications, which appear on the packaging of the product?

(iii.) May the transitional provisions in Article 28(2) of Regulation ... No 1924/2006 ... be interpreted as referring to (all) foods which existed before 1 January 2005, or as referring to foods bearing a trade mark or brand name and which, in that form, already existed before that date?'

The CJEU replied to the questions submitted by the referring Court explaining that:

(i.)"From the use of the verbs 'suggests or implies' it follows that classification as a 'reduction of disease risk claim' .... does not require that such a claim expressly states that the consumption of a food significantly reduces a risk factor in the development of a human disease. It is sufficient that that claim may give the average consumer who is reasonably well informed and reasonably observant and circumspect the impression that the reduction of a risk factor is significant" (the court also noted that categorical statements - such as 'helps' or 'helps reduce' - are suitable to convey to consumers the overall impression of a significant risk reduction claim, not being necessary to the purpose that such effect is high lightened by additional terms, e. g. through the term 'significantly').

(ii.) On the second aspect, "...while commercial communications may not be considered, as a general rule, as trade marks or brand names, it cannot be excluded that such a communication appearing on the packaging of a food constitutes at the same time a trade mark or a brand name" (being it clearly necessary to the purpose that the specific expression benefits from protection set by national legislation for trademarks or brand names, a requirement to be ascertained by the referring national Court).

(iii.) ".. Article 28(2) of Regulation No 1924/2006 must be interpreted as referring only to foods bearing a trade mark or brand name which must be considered a nutrition or health claim within the meaning of that regulation and which, in that form, existed before 1 January 2005".

The take away for Marketers is that nutritional or health claims, made in their promotional campaigns, not only need to pay attention to the specific wording used for their commercial communication, but also have to carefully consider the impression (both, direct as well as implied) their promotional messages are capable of conveying to consumers. A formally correct wording may not always result sufficient to avoid legal issues.

2. – Back in 2010 a German Administrative Court also sought guidance from the CJEU on a case involving nutritional and health claims.

Then the commercial communication of a German winegrowers' cooperative was questioned by the Department responsible for supervising the marketing of alcoholic beverages in the Land of Rhineland-Palatinate. Specifically the Department took issue with the fact that the cooperative marketed grape varieties under the term 'mild edition' and making reference to 'gentle acidity' as well as with the description of the wine as 'easily digestible' (where such characteristic was also referred to reduced acidity levels). In addition, the German Authority had ascertained that labels on the bottles described the wine with the statement that "It owes its mildness to the application of our special "LO3" protective process for the biological reduction of acidity ..." with the inscription "mild edition, easily digestible", while the price catalogue reported the wine's characteristics in the following terms "mild edition – gentle acidity/easily digestible". On these premises the Authority felt that the promotional messages resulted not compliant with the prescriptions of Article 4/3 of EU Regulation No. 1924 of 2006, which prevents "Beverages containing more than 1,2 % by volume of alcohol" from bearing "health claims".

The winegrowers' cooperative vibrantly contested the Authority's assessment about the promotional messages containing 'health claims' and the case ended up before the German Federal Administrative Court, which expressed "reservations about the broad interpretation of the concept of 'health claims' adopted by the lower courts" and took the view that "... given the function common to all foods, which is to provide the human body with nutrients and other substances, a description relating to the merely temporary maintenance of bodily functions or to general health-related well-being cannot be sufficient to establish a link with health ...", finding that " ... the reference is to a 'health claim' only where longer-term, sustained effects on physical condition or well-being are referred to, not just fleeting effects on metabolic processes which leave the constitution and, therefore, the actual state of health unaffected". It also voiced ".. doubts as to whether the prohibition of health claims in respect of wine is compatible with the fundamental rights of the freedom to choose an occupation and the freedom to conduct a business, in so far as producers or distributors of wine are prohibited from referring to their product as being easily digestible owing to its low acidity, even if that claim is correct".

The German Court therefore sought guidance from the CJEU (case no. C-544/10) on its doubts, summarized in the following three questions:

'(i) Does the reference to health in a claim within the meaning of the first sentence of Article 4(3) of [Regulation No 1924/2006], read in conjunction with Article 2(2)(5) or Article 10(3) thereof, require there to be a beneficial nutritional or physiological effect aimed at a sustained improvement of physical condition, or is a temporary effect, limited in particular to the time taken by the intake and digestion of the food, sufficient?

(ii) If the assertion of a temporary beneficial effect may in itself be a reference to health:

In order for it to be assumed that such an effect is due to the absence or reduced content of a substance within the meaning of Article 5(1)(a) and recital 15 in the preamble to the Regulation, is it sufficient merely to assert in the claim that an effect generally derived from foods of this kind and frequently perceived as being adverse is limited in a particular case?

(iii) If the answer to Question 2 is in the affirmative:

Is it compatible with the first subparagraph of Article 6(1) of the Treaty on European Union, as amended on 13 December 2007 (OJ 2008 C 115, p. [1]), read in conjunction with Article 15(1) (freedom to choose an occupation) and Article 16 (freedom to conduct a business) of the [Charter], as amended on 12 December 2007 (OJ 2007 C 303, p. 1), for a producer or marketer of wine to be prohibited, without exception, from making in its advertising a health claim of the kind at issue [in the main proceedings], even if that claim is correct?'

With respect to the aspects dealt with in the first two questions the CJEU (judgment September 6th, 2012, Third Chamber) considered that:

  • Under the provisions of Article 2(2)(5) of Regulation No 1924/2006 and in relation to the general ban set for alcoholic beverages "the starting-point for the definition of a 'health claim' within the meaning of that regulation is the relationship that must exist between a food or one of its constituents and health. That being the case, it must be noted that that definition provides no information as to whether that relationship must be direct or indirect, or as to its intensity or duration. In those circumstances, the term 'relationship' must be understood in a broad sense",
  • Therefore "the concept of a 'health claim' must cover not only a relationship implying an improvement in health as a result of the consumption of a food, but also any relationship which implies the absence or reduction of effects that are adverse or harmful to health and which would otherwise accompany or follow such consumption, and, therefore, the mere preservation of a good state of health despite that potentially harmful consumption" and that "moreover, the concept of a 'health claim' is deemed to refer not only to the effects of the consumption – in a specific instance – of a precise quantity of a food which is likely, normally, to have only temporary or fleeting effects, but also to those of the repeated, regular, even frequent consumption of such a food, the effects of which are, by contrast, not necessarily only temporary and fleeting", being necessary " take into account temporary and fleeting effects as well as the cumulative effects of the repeated and long-term consumption of a certain food on the physical condition",
  • Subsequently "... the answer to the first two questions is that the first subparagraph of Article 4(3) of Regulation No 1924/2006 must be interpreted as meaning that the words 'health claim' cover a description such as 'easily digestible' that is accompanied by a reference to the reduced content of substances frequently perceived by consumers as being harmful".

On the issue of whether the fact that a producer or distributor of wine is not allow to make use of health claims (even if inherently correct), could be held as compatible with the fundamental principles pertaining to freedom to choose an occupation and freedom to conduct a business, the CJEU held that such compatibility of the specific ban had to be assessed not just with respect to said fundamental principles, but also in the light of the protection of health. A fair balance between rights having equal dignity had be sought. Furthermore it had to be kept in mind that, in general terms, ".. alcoholic beverages represent a special category of foods that is subject to particularly strict regulation". Accordingly, Regulation No. 1924 of 2006 not only calls that "nutrition and health claims in general must not be false, ambiguous or misleading", but with regard to alcoholic beverages sets even stricter requirements, considering ".. essential that all claims in relation to such beverages are entirely unambiguous, so that consumers are in a position to regulate their consumption while taking into account all the inherent dangers associated with such consumption, and in so doing to protect their health effectively".

On such premise the Court concluded that:

  • (as in the specific case) "even if the claim at issue can be regarded as being substantively inherently correct in that it indicates reduced acidity levels, the fact remains that it is incomplete. The claim highlights a certain quality that facilitates digestion, but is silent as to the fact that, regardless of a sound digestion, the dangers inherent in the consumption of alcoholic beverages are not in any way removed, or even limited", and that
  • "By highlighting only the easy digestion of the wine concerned, the claim at issue is likely to encourage its consumption and, ultimately, to increase the risks for consumers' health inherent in the immoderate consumption of any alcoholic beverage. Consequently, the prohibition of such claims is warranted in the light of the requirement to ensure a high level of health protection for consumers", while
  • No inconsistence with the other fundamental principles of the EU Treaty was therefore to be found, as the system laid down in the provisions of Regulation No. 1924 of 2006 and the specific ban, affecting not the 'production' and the 'marketing' of alcoholic beverages, but only their advertising and labeling, resulted to be consistent with the proportionality requirement between rights of equal strength and relevance.

Again, marketers and the advertising industry will need to carefully consider not just the content of their explicit promotional statements, but also the risk potential of 'implied impressions' deriving from their commercial communication to the general public. They will be well advised by bearing in mind that under EU Law (and under case-law of the CJEU) "... the concept of a 'health claim' must cover not only a relationship implying an improvement in health as a result of the consumption of a food, but also any relationship which implies the absence or reduction of effects that are adverse or harmful to health and which would otherwise accompany or follow such consumption, and, therefore, the mere preservation of a good state of health despite that potentially harmful consumption".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Felix Hofer
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