Advertising, promotions and consumer law: what the law says

The legislative framework for advertising communication

Prohibition of deceptive and unfair marketing practices

The legal framework on deceptive marketing practices is the main tool to regulate the content of advertising communications through the establishment of a harmonized European and national legislative framework:

• At the European level, the Unfair Commercial Practices Directive 2005/29/EC established the principle of a general prohibition of practices that are contrary to professional diligence and that alter or are likely to alter the economic behaviour of the average consumer. It specifically identifies deceptive practices as a major category of unfair practices.
• In domestic law, these principles are transposed to Articles L. 121-2 et seq. of the Consumer Code.

Thus, in accordance with Article L. 121-2 of the Consumer Code, a practice is considered misleading when it is based on “false or misleading claims, indications or presentations“.

This qualification applies to a wide range of elements of advertising communication, including:

• The essential characteristics of the product or service: its nature, its composition, its substantial qualities, its origin (“made in France”), its environmental impact, or the expected results of its use.
• The price and the conditions of sale: the method of calculation, the promotional nature, the price comparisons
• The identity and qualities of the professional: his skills, his rights, or the scope of his commitments

Thus, the seller must provide fair information on the qualities of the product or service rendered and must be able to provide the required justifications in support of its claims.

Commercial practice is considered misleading when it is contrary to professional diligence and substantially alters or is likely to alter the consumer’s economic behaviour.

The reference to the expected behaviour of the consumer is studied in the light of the “reasonably informed and reasonably observant and circumspect consumer with regard to a good or service” (L. 121-2 of the Consumer Code). It is therefore the analysis of the behaviour of the average consumer that will serve as a reference but for which this factual determination will fully fall within the sovereign power of the trial judges.

Deceptive commercial practices constitute an offence punishable by two years’ imprisonment and a fine of 300,000 euros (Article L132-2 of the Consumer Code).

Supervision of comparative advertising

Article L. 122-1 of the Consumer Code defines comparative advertising as any advertising communication that, whether explicit or implicit, aims to identify a competitor or the goods and services it offers.

The identification of the competitor may be carried out directly (by mentioning his name or brand) or indirectly, provided that it allows the average consumer to unambiguously recognize the company or product concerned.

To be lawful, comparative advertising must comply with the conditions listed in Article L122-1 of the Consumer Code. Thus, it must not be misleading and likely to substantially alter the consumer’s economic behaviour.

It must relate to goods or services meeting the same needs or having the same objectives, and sold concomitantly, that is to say, products or services that will be considered substitutable by the recipient of the advertisement.

In addition, the comparison must be objective and verifiable.

It can relate to the comparison of product characteristics, such as its performance, environmental impact or durability, but also its effectiveness, but can also relate to price comparison.

Ultimately, comparative advertising must not have the effect of denigrating or discrediting the products or services of a competitor, which could be qualified as unfair competition.

The legislative framework for promotional commercial operations

The legal framework for price reduction announcements

The legal regime for price reduction announcements has been substantially amended to comply with European Union law, in particular Directive (EU) 2019/2161, known as the “Omnibus”.

In internet law, the framework for price reduction announcements is provided for in Article L. 112-1-1 of the Consumer Code:

“I. Any announcement of a price reduction indicates the previous price charged by the trader before the price reduction was applied.

This previous price corresponds to the lowest price charged by the trader to all consumers in the last thirty days prior to the application of the price reduction.

As an exception to the second paragraph, in the event of successive price reductions during a specified period, the previous price is that applied before the application of the first price reduction.

This I does not apply to price reduction announcements relating to perishable products threatened with rapid alteration.

II.-These provisions do not apply to transactions by which a trader compares the prices he displays with those of other professionals “.

Thus, any announcement of a price reduction must indicate the “previous price” charged by the trader, which is defined as the lowest price that the trader has applied to all consumers during the last thirty days preceding the application of the reduction.

This rule aims to ensure the loyalty and reality of the advertised promotion, by preventing traders from artificially inflating a reference price just before announcing a discount.

However, there are exceptions to this principle:

Successive price
• reductions: In case of gradual and uninterrupted reductions during a given period (for example, successive markdowns during sales), the previous price to be taken into account is the one that was practiced before the very first reduction in the series

Perishable

• products: The previous price rule does not apply to perishable products threatened with rapid deterioration.

Failure to comply with these price information obligations is likely to constitute a misleading commercial practice within the meaning of Article L. 121-2 of the Consumer Code.

The specific legal framework for “sales”

Although the rules on price reduction announcements apply during sales, these are a specifically regulated business transaction. Balances are defined as sales aimed at the accelerated disposal of goods in stock, accompanied or preceded by advertising and announcing a price reduction.

Thus, the balances are characterized by 3 cumulative conditions:

• accompanied or preceded by advertisements announcing price reductions,
• aimed at the accelerated disposal of goods in stock,
• on the dates determined by the Consumer Code.

If one of the conditions is not met, then the commercial transaction cannot include the word “sales” in its denomination. Failing this, the offending trader is liable to a maximum fine of €15,000 (€75,000 for the legal person) and the display penalty provided for in Article 131-35 of the Criminal Code (Articles L. 310-5 4° and L. 310-6 of the Commercial Code).

Supervision of promotional sales

Retailers have the option to offer their customers other types of promotional offers such as:

• Batch sales: Batch sales is a promotional sales technique consisting in imposing on the consumer the purchase of a batch of products, without the offer necessarily presenting a reduced price.
  

The framework for price reduction announcements provided for in Article L 112-1-1 of the Consumer Code is not applicable to combined or linked conditional offers or sales in batches of identical or separate products (for example: “One item purchased, the second offered”).

• Sales with vouchers and prize pools: the customer can benefit from vouchers or a prize pool system set up through a loyalty program system.

Sales with vouchers and prize pools are not considered as price reduction announcements within the meaning of Article L.112-1-1 of the Consumer Code because they are price advantages that can be used not at the time of sale but later and/or reserved for a part of the clientele (example: loyalty program).

However, this type of sales is subject to the general regime of unfair commercial practices.

• Advertising sweepstakes and contests:
  

The lottery is legally defined as a “promotional operation causing the award of a win or an advantage of any kind by means of a draw […]or by the intervention of a random element”.

The determining criterion of the lottery is therefore the allocation of an endowment based on a hazard, a chance.

Article L. 121-20 of the Consumer Code authorizes lotteries offered by professionals to consumers in the following terms:

“As long as they are unfair within the meaning of Article L. 121-1, commercial practices implemented by professionals with regard to consumers, in the form of promotional operations aimed at the allocation of a win or an advantage of any kind by means of a drawing of lots, whatever the modalities, or by the intervention of an optional element”.

Thus, the lottery offered by a professional to a consumer is authorized unless it is unfair.

Moreover, unlike the lottery, the competition is based on the allocation of an endowment not on a hazard but on the skills, performances, abilities of the participant in his participation in the commercial operation of the professional like a photo contest, a prize offered to the candidate having found the best answer to a question…