Draft Business Protection from Misleading Marketing Regulations 2008 have been published. They are due to come into effect on 26 May 2008. They implement a European Consolidated Directive on Misleading and Comparative Advertising.
What has changed?
The Directive consolidates existing rules on advertising which have been made and amended over a period of time. The new regulations will revoke the Control of Misleading Advertisements Regulations 1988.
The main point to note is that the new regulations are limited to business-to-business advertising for goods or services. This reflects the fact that the corresponding consumer legislation is now covered by a separate directive. The consumer requirements are being implemented in the UK (also in May) by the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).
What do the regulations prohibit?
Business-to-business misleading advertising is prohibited. Advertising is misleading if it:
- in any way deceives or is likely to deceive the traders to whom it is addressed or whom it reaches and, by reason of its deceptive nature, is likely to affect their economic behaviour; or
- for those reasons injures or is likely to injure a competitor.
Relevant factors include any information that is given concerning:
- the characteristics of the goods/services e.g. composition, specification, fitness for purpose
- the price (or how it is calculated)
- the conditions of supply
- the nature and attributes of the advertiser e.g. qualifications, ownership of intellectual property rights
The regulations set out the conditions under which comparative advertising (advertising which identifies a competitor or a competitor's product) is permitted. So far as the comparison is concerned, such advertising is permitted only if a number of conditions are met. These mostly reproduce the existing criteria and include the following:
- it must not be misleading under the regulations nor (a new requirement) must it be a misleading action or omission under the CPRs
- it compares goods/services meeting the same needs or intended for the same purpose
- it objectively compares material, relevant, verifiable and representative features
- it does not create confusion among traders between the advertiser and a competitor or between their respective trade marks
- it does not discredit or denigrate a competitor's trade marks or goods/services
- it does not take unfair advantage of the reputation of a competitor's trade mark or designation of origin of competing goods/services
- it does not present products as imitations of products bearing a protected trade mark
If any of these conditions is not met, the comparative advertising is prohibited even if it does not deceive anyone or alter economic behaviour. Traders and bodies responsible for codes of conduct or monitoring compliance with such codes must not promote misleading advertising or prohibited comparative advertising.
What are the penalties?
The regulations will be enforced by the OFT and trading standards authorities. Customers and competitors have no direct right of action under the regulations. However, in some cases businesses affected by advertising which breaches the regulations may have rights of action under the laws of trade mark infringement and passing off.
Civil enforcement is possible (e.g. a court order to secure compliance with the regulations). The prohibition on misleading advertising carries criminal sanctions. The maximum penalties are an unlimited fine and/or up to 2 years' imprisonment. If a company commits the offence, an officer can also be prosecuted if he/she consented to or connived in the offence or it was due to his/her neglect.
There is a defence of "innocent publication" available to someone accused of publishing misleading advertising if he/she is in the business of publishing advertisements, received the offending advertising in the course of that business and did not know, nor have any reason to suspect, that its publication would amount to an offence.
What should businesses be doing?
While there is little substantive change to the business-to-business regime, businesses should use the new regulations as an opportunity to refresh their awareness of the legal framework for advertising. Given the new condition for permitted comparative advertising (which cross-refers to the CPRs) it is worth checking any comparative advertising material for its products to ensure that it is compliant. Brodies has produced a separate note on the CPRs.