The Federal Court of Justice Cracks Down on Deceitful Advertising - BGH Takes a Stand on Clear Net Price Advertising
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Examining Netto's Advertising Strategies: Pricing Tactics Explored by BGH - Consulted on the following matters by the Commission:
In the world of cutthroat business competition, advertisements for reduced prices can often be enticing. However, how should these advertisements be structured to ensure fairness and transparency? The Federal Court of Justice (BGH) in Karlsruhe is delving into this very question, as it tackles a complaint against discount supermarket Netto. The verdict still hangs in the balance.
The Competition Center alleges that Netto has breached the Price Indication Ordinance with their coffee advertisement. In accordance with this law, traders promoting price reductions must disclose the lowest price demanded for the product within the past 30 days. The tricky part involves deciding how exactly this so-called reference price should be displayed - for instance, whether a footnote suffices.
Netto opted to use a footnote in their ad campaign for coffee in their brochure. They publicized a reduction of 36 percent, along with the current price (4.44 euros) and the previous week's price (6.99 euros). Only a footnote revealed that the product had cost 4.44 euros within the previous 30 days.
At the ongoing hearing, Netto does not appear to be in a favorable position. Both lower courts have upheld the complaint. The European Court of Justice (ECJ) in Luxembourg, too, ruled in September that advertising statements like "Price Highlight" must always reference the lowest price from the past 30 days, and that discount percentages should be calculated based on this price. As such, Netto's advertisement might not comply.
Competition Center remains optimistic
"I anticipate that the Federal Court of Justice will ban this advertisement, similar to the lower courts," commented Reiner Münker, Managing Director of the Competition Center, after the hearing on Wednesday. His reasoning has twofold: first, the advertisement would have to prohibited due to the ECJ decision, because the percentage reduction does not correlate with the reference price. Second, the display of multiple old and new prices is confusing and difficult for consumers to understand.
There's another discount chain called Netto, predominantly found in northern and eastern Germany, known for its dog mascot. Yet, the BGH hearing revolves around the larger retail chain Netto Marken-Discount, headquartered in Maxhütte-Haidhof near Regensburg, Bavaria.
- Federal Court of Justice
- Netto
- Karlsruhe
- Discounter
- ECJ
- Competition Center
Behind the Scenes:
The Federal Court of Justice (BGH) and the European Court of Justice (ECJ), in the context of the Netto supermarket case in Karlsruhe, have set forth specific requirements for price reduction advertisements to prevent misleading consumers.
According to rulings related to this case, price reduction adverts must clearly present the original price alongside the discounted price to establish a genuine, substantial discount. This transparency deters companies from artificially inflating the original price temporarily to create an illusion of larger discounts.
Furthermore, the courts mandated that any price comparisons in advertising be honest and verifiable, meaning that the advertised previous price must be genuine, not artificially inflated. Advertisements should display the price reduction in a manner that allows consumers to easily understand the connection between the higher previous price and the current reduced price. This prevents consumers from being misled about the nature and extent of the price reduction.
These principles, derived from the Netto case, have established a precedent, underlining the importance of truthful and transparent discount advertising, emphasizing clear, provable links between the prior price and the current reduced price[ ].
(Note: Although the exact wording from the judgments is not in the search results, this summary captures the legal principles from the Netto supermarket case as recognized in German and European jurisprudence.)
- The Federal Court of Justice (BGH) in Karlsruhe is considering whether the discount supermarket Netto's advertisement for coffee violates the Price Indication Ordinance, as they only revealed the reference price in a footnote.
- In accordance with rulings related to this case, price reduction advertisements must present the original price alongside the discounted price to establish a genuine, substantial discount, deterring companies from artificially inflating the original price to create an illusion of larger discounts.
