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# 52012DC0702

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Protecting businesses against misleading marketing practices and ensuring effective enforcement Review of Directive 2006/114/EC concerning misleading and comparative advertising /\* COM/2012/0702 final \*/**

  

COMMUNICATION FROM THE COMMISSION TO
THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

Protecting businesses against misleading
marketing practices and ensuring effective enforcement
Review of Directive 2006/114/EC concerning misleading and comparative
advertising

1.           Introduction

The EU's Single Market is a motor for
growth and provides consumers with greater choice and better prices. Smart,
sustainable and inclusive growth is the objective of the Europe 2020 strategy[1] aimed at helping Europe and its businesses emerge stronger from the crisis and create new jobs. All EU
policies are geared towards this objective.

Advertising has a strong economic impact on
companies as it is a key element of any business strategy. It allows traders to
present their goods and services and is an important element for commercial
success. It can also enhance competition by providing customers with better
information and the possibility to compare products. In the Single Market,
businesses can reach customers from every corner of Europe with a commercial
message.

In business relations, customers and
competitor firms expect companies to use truthful marketing communication and
to act with professional diligence. Small businesses – the mainstay of Europe's economy[2] – are particularly vulnerable
to misleading marketing practices as they lack the resources to protect
themselves. They need a clear and efficient framework safeguarding fair
competition and providing effective means to enforce it.

EU rules on business-to-business (B2B)
advertising aim to ensure that companies use truthful advertising or marketing.
Such provisions create a necessary regulatory framework in business-to-business
marketing where companies enjoy a high degree of contractual freedom. In
particular, the Misleading and Comparative Advertising Directive[3] provides a common minimum level
of protection against misleading advertising for traders across the EU and also
regulates comparative advertising.

As more and more advertising moves online,
advertising and marketing practices are changing and may affect thousands of
businesses worldwide. Misleading marketing practices, such as misleading
directory companies[4],
continue to cause considerable harm to companies and especially small
businesses. The Commission therefore announced in its Review of the Small
Business Act[5]
its intention to reassess the functioning of existing rules.

More generally, misleading marketing
practices generate market failure by impairing businesses' ability to make
informed, and hence efficient, choices. The distortion of businesses' economic
decision-making also gives rise to distortions of competition. This is either
because the trader who is acting unfairly manages to win customer businesses
away from honest competitors or because affected businesses are forced to pay
for useless services of no value. In addition, misleading marketing practices
have a knock-on effect on consumers as they have to pay more for products and
services.

This Communication therefore gives an
overview of how the Misleading and Comparative Advertising Directive is
currently implemented in the Member States, identifies problems in how it is
applied and outlines plans to revise it in the future.

2.           The directive and its implementation in
the member states

2.1.        Development and scope of
EU rules on advertising in business relations

The Misleading and Comparative Advertising
Directive is a horizontal instrument which applies to all advertising between
businesses. It defines advertising very broadly as any communication or
representation to promote goods and services, without specifying its form. This
therefore includes both classical advertising and other types of marketing
practice. The Directive sets a minimum legal standard of protection applying to
misleading advertising in any business-to-business transaction across the EU,
while leaving the Member States the flexibility to set a higher level of
protection.

The Directive also lays down uniform rules
on comparative advertising[6],
setting conditions for assessing when such advertising is permitted[7]. The aim is to ensure that
comparative advertising compares "like with like", is objective, does
not denigrate or discredit other companies' trademarks and does not create
confusion among traders.

EU action in the area dates back to 1984
when the first Directive on misleading advertising was adopted[8] to protect both consumers and
businesses. Out of the much more extensive field of unfair competition and
unfair commercial practices law, the Directive was originally limited to the
important area of advertising. However, many Member States already had
provisions against misleading advertising and the changes brought by the
Directive in their legal systems were limited. The rules were amended in 1997
to include fully harmonised provisions on comparative advertising[9] given the fact that Member
States' provisions on comparative advertising differed widely[10], thus entailing an obstacle to
the free movement of goods and services and creating distortions of
competition.

In 2005 the Unfair Commercial Practices
Directive[11]
created a separate comprehensive legal framework protecting consumers against
all forms of unfair commercial practices, before, during and after a commercial
transaction, and applicable also to all advertising practices which harm the
economic interests of consumers, irrespective of whether it affects the
interests of a competitor. The Unfair Commercial Practices Directive reduced
the scope of the Misleading and Comparative Advertising Directive to situations
where advertising is addressed solely to businesses. However, comparative
advertising provisions remained relevant to business-to-consumer transactions
because they provide a general test for assessing whether comparative
advertising is lawful.

The original Misleading and Comparative
Advertising Directive and its subsequent amendments were consolidated in a new
directive in 2006[12].

2.2.        Overview of how the
Directive is implemented in the Member States

The Misleading and Comparative Advertising
Directive was transposed in the Member States through various legislative
instruments, such as commercial codes, general consumer legislation and
marketing laws. While the fully harmonised rules on comparative advertising have
been transposed in a uniform manner, there is, according to the information
gathered by the Commission on all Member States' legal systems, a great
variety of rules going beyond the minimum EU-wide protection against
misleading advertising.

Some Member States decided to go beyond the
minimum legal standard enshrined in the Misleading and Comparative Advertising
Directive and extended the level of protection granted by the Unfair Commercial
Practices Directive to business-to-business relations, either partly or in its
entirety. In particular, in Austria, Denmark, Germany, France, Italy and Sweden the national legislation protecting consumers against unfair commercial
practices also applies either partly or entirely to marketing practices
affecting businesses. Other Member States emphasise contractual freedom and the
higher degree of diligence expected in transactions between businesses instead,
and do not consider it appropriate that businesses and consumers should be
equally protected. For example in the Czech Republic, Poland and the United
Kingdom the relevant legislation on business-to-business advertising grants
only the minimum protection laid down in EU rules. In general, the Member
States chose many different models to transpose the Directive[13].

Consequently, the level of protection
for European businesses remains varied leaving businesses uncertain about
their rights and obligations in cross-border situations. The differences
between consumer and business protection systems further blur the picture.

With regard to enforcement
systems, the requirements introduced by the Misleading and Comparative
Advertising Directive are rather limited. In general terms, Member States need
to ensure that adequate and effective means exist to combat misleading advertising
and to enforce compliance with the provisions on comparative advertising. This
includes the obligation to introduce the possibility of legal action against
non-compliant advertising, granting courts powers to order cessation or
prohibition of such advertising and enabling them to require the advertiser to
furnish evidence as to the accuracy of factual claims in advertising[14]. Member States currently
enforce this Directive on the basis of different national systems. The crucial
difference concerns the possibility of public enforcement. In some
Member States, authorities can take action against rogue traders, while in
other Member States only victims can seek redress. Especially in cross-border
advertising such disparities substantially change the effective level of
protection.

An enforcement
by public authorities against a trader using misleading marketing practices is
possible in countries such as Bulgaria, France, Italy, Latvia, Lithuania, Romania and the United Kingdom[15].

In other Member
States only affected companies or specific associations can seek court action.
For example, Austria and Germany have a system of private self-regulatory
associations which can bring cases against traders in courts. The enforcement
is based on civil law actions and sanctions can involve order for removal,
injunctive relief or damage compensation. In Poland, Czech Republic and Ireland it is up to the affected company to seek remedies in courts, and the public
authorities intervene only in cases where unfair practices constitute an
offence under criminal law[16].

Furthermore,
there is a significant jurisprudence of the European Court of Justice in the
area of misleading and comparative advertising[17].
Since 1984, when the first Misleading Advertising Directive was adopted, the judgments of the Court have provided
several important clarifications. Importantly, the Court started developing the
notion of the "average consumer". This term was later, in 2005,
codified by the Unfair Commercial Practices Directive, which now governs advertising
in business-to-consumer relationships.

Moreover, the
conditions under which comparative advertising is permitted were examined by
the Court on several occasions. This is due to the fact that comparative
advertising constituted a new form of marketing in many Member States and its
boundaries had to be drawn. For example, the Court outlined the condition for
comparison of general price levels[18]
and interpreted the provisions regarding the comparison of products with a
designation of origin[19].

3.           Public consultation and the identified
problems

To gather more specific information on
misleading marketing practices, the Commission published a public consultation
and requested detailed information from the Member States in the form of a
questionnaire[20].

As part of this review, the Commission has
not only gathered data on the overall effectiveness and existing problems in
application of the Directive, but also collected information on wider issues
concerning marketing practices. The assessment covered different types of
commercial communications in business-to-business relations which have as their
objective the promotion of goods and services[21].

This Communication focuses on misleading
marketing practices which also include misleading advertising and marketing
techniques which are not under the present definition easily classified as
advertising. For example, it concerns situations where a commercial intent or
identity of a trader is hidden and the communication pretends to be a simple
update of information or a communication from the authorities.

The public consultation took place between
21 October 2011 and 16 December 2011, attracting considerable attention and a
total of 280 responses. A good balance was achieved, both as regards the
geographical coverage[22],
and the type of respondents (16 European associations, 10 national authorities,
41 business organisations, 142 companies including 126 SMEs and 38 citizens)[23].

3.1.        Most common misleading
marketing practices

The vast majority of stakeholders focused
their concerns on a number of misleading marketing practices which
are very often operated cross-border (sometimes referred to as
mass-marketing frauds or scams)[24].

In addition to the most prominent
misleading directory company schemes [25],
the following common practices were reported:

· Misleading payment forms disguised as an
invoice for services that the trader has purportedly already ordered, where in
fact he has not, or payment requests purporting to come from public
authorities, e.g. official trade register.

· Offers to extend internet domain names (e.g. extension to
other country domains) whereby a trader, through mass-marketing techniques
provides false information and exercises psychological pressure in order to
conclude a contract. The trader pretends to offer a distinctive service but in
fact requests abusive prices for a simple domain registration that can be
easily obtained through official providers at much lower prices.

· Offers to extend protection for trademarks in other countries
employed by traders who use misleading advertising and provide untruthful
information about the nature of the service. In fact such protection of
trademarks can only be granted by official bodies and the trader offers mere
listing in a directory.

· Legal advice through an internet platform based on a marketing
scheme where the service offered is purely based on publicly accessible free
legal databases and the trader provides misleading information about the
features of the service. There is therefore hardly any added-value offered by
the trader, although the charged price is high.

· Misleading marketing concerning advertising on social networks based
on a practice involving abusive prices (e.g. very expensive pay per click),
whilst actually this service is offered by the social networks themselves at
much lower rates.

In some Member States there is a problem of
traders sending invoices for services purportedly ordered over the phone, where
in fact no contract was concluded.

A limited number of companies responding to
the Commission's consultation complained also about misleading environmental
claims[26],
unfair comparative advertising practices and, more generally, about lack of
sufficient information at the pre-contractual stage in relations between
businesses where one of them wields important market power.

Furthermore, stakeholders considered that
misleading marketing practices in the on-line context are a significant problem
and that there is an increase in misleading cross-border advertising affecting
businesses. A growing number of online schemes which affect businesses
worldwide have been identified as a new trend.

3.2.        Misleading directory
companies

3.2.1.     History of the problem

Among the misleading marketing practices
that cause most problems to businesses in Europe, the issue of misleading
directory companies seems to be of particular concern. Employed on a large
scale and causing considerable economic damage, these schemes are by no means
new[27].
Nevertheless, the Internet, new mass marketing tools[28] and low publication costs have
changed the scale of the problem in recent years. The most notorious operators
of this kind of mass-marketing techniques can reportedly send up to 6 million
forms a year.

This issue forms the basis of two
resolutions of the European Parliament adopted on 16 December 2008[29] and on 9 June 2011[30] which have vigorously called
for improved cooperation between the Member States, review of the Misleading
and Comparative Advertising Directive and better protection of businesses.

The schemes can take various forms. The
most frequent practice is that misleading directory companies send out forms
asking businesses to update details in their directories, seemingly for free.
If the targeted traders sign the form, they are then told that they have signed
a contract and will be charged a yearly sum. Attempts to withdraw from the
contract are usually refused and the companies are often pursued for the amount
purportedly owed through debt collection agencies.

The specific issue of misleading directory
companies is a good example of a larger problem of various misleading schemes
aimed at traders, in particular small businesses and independent professionals,
such as doctors or plumbers.

3.2.2.     Data on the extent of the
problem

A survey for
the report commissioned by the European Parliament in 2008 documented more than
13,000 complaints from 16 Member States and suggested that these numbers are
just the "tip of the iceberg"[31].

Several Member
States clearly consider the problem of misleading directory companies to be a
serious one[32].
Nevertheless, only a few have reliable data on its real extent. In Belgium the authorities received 460 complaints in 2008, 1165 in 2009 and 1258 in 2010. In
the United Kingdom there were 1318 complaints in the period 2008-2010. The
Czech authorities provided numbers from their national business protection
association, which estimates that around 2000 people were victims of various
scams of this type between 2007 and 2010. In Hungary only recently a large
scale directory company scam received considerable media attention. At the same
time, in some Member States, such as Bulgaria, Cyprus, Latvia and Romania the problem is seemingly non-existent or unreported.

Businesses also see the problem as very
significant: almost half of the replies to the public consultation came from
companies directly affected by misleading directory schemes. SMEs and
independent professionals are most vulnerable but other types of businesses and
organisations are also affected. It is very difficult to assess the financial
damage to individual companies but it can be estimated at between €1000 and
€5000 per year for each company.

Many small businesses also underline having
suffered constant psychological harassment. For several years, they face a
struggle under threat of legal action in a foreign jurisdiction, with rising
"administrative costs" and constant phone calls from debt collectors,
described by the victims as close to threats. Some respondents were also able
to provide specific data to show the scale of the problem[33].

3.2.3.     Legislative and enforcement
actions against misleading directory companies

The Misleading and Comparative Advertising
Directive covers misleading directory schemes but some enforcement authorities
raised doubts as to whether these practices are advertising as, in reality,
hardly any goods or services are promoted and there is only appearance of a
commercial relation. Therefore, the application of the Directive and its
effectiveness remain a problem. Some schemes have been taken to court, but it
seems that results were varied. In Denmark and Austria, thanks to effective
cooperation between business organisations and the police, as well as
consistent case-law from the courts, these schemes have almost been eradicated
at national level, but cross-border practices remain an issue. Authorities in Belgium, France and Spain have also taken action to enforce the rules, but again, these were mainly
at national level.

Austria[34] in
2000 and Belgium[35]
in 2011 introduced specific legal provisions in their legislation targeting the
practices of misleading directory companies. Austria reduced the problem
significantly at national level but Austrian companies are still targeted by
misleading marketing practices originating from other Member States. In the Netherlands a help-point for marketing fraud was established and provides legal advice for
victims.

3.3.        General feedback from the
consultation

Legislative action is widely supported by
stakeholders. In the public consultation there was a very strong call for
increased protection for small companies and independent professionals
against misleading marketing practices[36].
Furthermore, there is a virtual consensus that a cooperation procedure
needs to be developed for cross-border cases of misleading advertising,
as the majority stated that existing enforcement procedures are not effective.

This was recurring message, raised equally
by small businesses, chambers of commerce and public authorities[37]. There was similarly strong
support for an EU-wide instrument to protect businesses against the most
harmful misleading marketing practices[38].

The
consultation also shows that almost no Member States have so far taken
cross-border action regarding misleading advertising. Several Member States
consider that this is the result of a lack of a structured cooperation system
and the weakness of the Misleading and Comparative Advertising Directive, which
contains only general clauses for assessing whether a commercial communication
is misleading[39].

4.           The Commission's assessment

The Commission conducted a thorough
investigation of the issues in relation to the marketing practices based on the
public consultation, information gathered from the Member States and several
complaints, and has come to the following conclusions:

·
The Misleading and Comparative Advertising
Directive[40]
and the existing systems of self-regulation foreseen in Article 6 of the
Directive appear to provide a rather solid regulatory framework for a
considerable part of the business-to-business advertising market. In several Member
States businesses have created voluntary self-regulatory codes and standards
for advertising, which do help in creating a level playing field for fair
competition, in defining good business practices and in offering alternative
ways of solving disputes.

·
However, the persistence of certain large-scale
misleading schemes shows that the existing mixture of the EU-wide rules
combined with self-regulation needs to be strengthened to address certain
clearly identifiable scams. Small businesses are most affected by such
practices, as their vulnerability is not much different from that of consumers.
At the same time, in business-to-business relations the same level of diligence
is expected from small businesses and large corporations.

·
Furthermore, specific consideration should be
given to the interpretation of comparative advertising rules where significant
case-law has been developed by the Court of Justice of the EU.

4.1.        Marketing practices that
require legislative action at EU level

The scale, persistence and financial
detriment resulting from certain, clearly misleading marketing practices both
at cross-border and national level need to be addressed in a more targeted and
efficient manner at EU level.

Primarily, the definition of advertising
in the current Directive is not clear enough to stop current misleading
marketing practices and respond to future developments. The Directive defines
advertising in broad terms as a representation made in any form in order
to promote goods or services but this definition can be imprecise as regards
marketing practices disguised as an invoice or an obligatory payment.
Consequently, affected traders as well as national enforcers find it sometimes
difficult to recognise that such practices are "advertising" within
the meaning of the Misleading and Comparative Advertising Directive and hence
fail to make proper use of it as a legal basis for action.

Furthermore, the test for determining
whether a practice is misleading does not give sufficient legal certainty
for the purpose of tackling these clearly misleading schemes[41] as it is broad, general and
open to different interpretations and case-by-case assessment. An additional
specific ban on harmful marketing practices, as for example the fact of
concealing the commercial intent of a communication, in the form of a
"black-list" would strengthen legal certainty and the level of
protection, without unduly affecting the contractual freedom in
business-to-business relations.

The current Directive does not provide
for a cross-border cooperation procedure[42]
and therefore the national authorities have no formal basis to request an
enforcement action from their counterparts in other Member States. Moreover,
there are no established tools to share information about marketing practices
affecting businesses in Europe.

Furthermore, in some Member States[43] national authorities lack
enforcement powers to stop such practices in business-to-business relations.
Consequently, in cases of cross-border misleading practices victims need to
bring costly civil actions in foreign jurisdictions. Even if misleading
marketing practices are of a large-scale and have significant overall financial
detriment, the only administrative response is through criminal investigations
concerning fraud which do not seem to bring sufficient results. It is often
difficult to prove that misleading practices are fraud in the criminal sense as
it may well appear that there is a service provided in return.

National authorities lack a system of
mutual cooperation and are not able to request enforcement action from their
counterparts in other Member States where misleading marketing practices
endanger the collective economic interest of businesses. The purpose is not to
engage in commercial disputes and enforce the rights of individual companies
but to intervene in cases of serious market failure, when widespread practices
cause harm to European businesses.

4.2.        Comparative Advertising

Although in comparative advertising there
is an inherent risk of deception with regard to compared products and their
prices, this type of advertising can also promote market transparency and
competition. A respectable body of case-law on the scope of comparative
advertising has evolved since the enactment of the Directive on Comparative
Advertising[44].

Based on that case-law, the Commission
intends to look into the scope of the definition of comparative advertising and
its relation with certain intellectual property rights of competitors. Areas
that might require further clarification are related to the use of a
competitor's trademark in comparative advertising, the comparison of products
with designation of origin with those without such designation as well as the
conditions under which a trader's advertising can lawfully be based on a price
comparison solely concerning certain product groups.

5.           Future Steps

The Commission's assessment of problems
around the Misleading and Comparative Advertising Directive shows that legislative
action is necessary as the current legislative framework has several deficiencies,
both as regards substantive rules and enforcement (procedural rules). The
Commission therefore intends to table a proposal to strengthen the protection
of businesses against cross-border misleading marketing practices. This
proposal, to amend the Misleading and Comparative Advertising Directive, will
be complemented by a forthcoming initiative addressing unfair trading practices
between businesses in the retail chain.

This revision of the Directive will target
specific areas of concern. It will clarify the interplay of the Directive
with the Unfair Commercial Practices Directive. It will also focus on improving
the effectiveness of cross-border enforcement, including cooperation among
competent authorities of Member States, and strengthening the key substantive
provisions. It will respond to businesses' needs while at the same time not
creating any unnecessary administrative burden[45].
The Commission will also step up enforcement and create an ad-hoc working group
of national enforcers with immediate effect.

5.1.        Stepping up enforcement of
existing rules as an immediate action

Notwithstanding the limitations of the
current legislative framework on misleading marketing practices in
business-to-business, the Commission will push for better enforcement on the
basis of existing provisions.

As a first step and in parallel with its
legislative work, the Commission will step up enforcement of the
Misleading and Comparative Advertising Directive. To this end, it will explore
with the Member States what measures can be taken within the existing
provisions to improve the situation of businesses before a new proposal enters
into force.

In order to facilitate the cooperation of
Member States, the Commission will create within the next months an ad-hoc
working group of national enforcers and key authorities to exchange
information on large-scale misleading marketing practices and to further
coordinate enforcement activities.

The European Commission will: - Set up, as from now, an ad hoc network of authorities to step up enforcement of the Misleading and Comparative Advertising Directive and share information.

5.2.        Putting forward a
legislative proposal

5.2.1.     New substantive rules on
misleading marketing practices

Alongside better enforcement and
cooperation, businesses clearly also need additional substantive rules
clarifying the legal position and targeting the most harmful misleading
marketing practices affecting them across Europe.

In particular, the scope of the Directive
should be clarified so that a general clause unambiguously covers and prohibits
all different types of misleading marketing practices.

The introduction of a new definition of
misleading marketing practices will clarify the scope of the Directive and
better serve the purpose of business protection as it would better cover
situations where a marketing practice is not easily recognised as typical
advertising. This will eliminate confusion and establish legal certainty. Some
specific advertising practices, such as green claims[46], could also require additional,
clear definitions in view of the reported misleading practices in this area[47].

Moreover, the Commission envisages
strengthening the protection granted by the general clauses in the Directive by
introducing an additional layer of protection, which will also facilitate
clearer enforcement, in the form of a black-list of banned misleading
marketing practices. Consequently, the future legislative instruments would
be based on a two tier system of prohibition with a general clause covering all
misleading marketing practices and a specific black-list of the most harmful
schemes in business-to-business relations.

In particular such a black-list would
entail an upfront ban on misleading marketing practices such as concealing the
commercial intent of a communication, the identity of a trader or material
information on the consequences of the reply to a communication. Additionally,
disguising a commercial communication as an invoice or obligatory payment
should be clearly prohibited. The Commission will also examine solutions at
national level, such as in Austria and Belgium, where specific provisions
prohibit either a number of misleading marketing practices or solely the
practices of the misleading directory companies.

The Commission intends to examine the
possibility of strengthening penalties for infringements of national
provisions applied under the Directive. Any such new proposal would require
Member States to ensure that penalties for misleading marketing practices in
business-to-business relations are effective, proportionate and dissuasive[48].

The Commission also envisages further clarifying
rules on comparative advertising, in particular as regards price comparison
and the relation between comparative advertising and intellectual property
rights.

The European Commission intends to revise the Directive in order to: - Clarify its scope by introducing a clearer definition of misleading marketing practices; - Introduce a black-list of the most harmful misleading marketing practices; - Introduce effective, proportionate and dissuasive penalties for infringements of the national provisions adopted in application of the Directive; - Clarify certain aspects of comparative advertising based on the jurisprudence of the Court of Justice.

5.2.2.     New enforcement cooperation
procedure

In order to address the divergent national
enforcement systems and the absence in the existing Directive of a basis for
efficient cross-border cooperation, the Commission intends to create an
enforcement cooperation procedure in this field that, whilst creating minimal
additional costs, allows enforcers to efficiently react whenever cross-border
problems become systemic, affect the collective interest of businesses in
Europe and evidently breach the rules of fair trading and good commercial
practices.

The Commission therefore intends to propose
an enforcement cooperation procedure that will serve the purpose of
business protection in the area of misleading marketing practices..

In order to establish a clear basis for
cross-border enforcement action, an explicit mutual assistance obligation
would be introduced in the legislative proposal. Moreover, specific provisions
will require Member States to designate authorities with ex officio
enforcement powers for the correct and effective implementation of the
Misleading and Comparative Advertising Directive. This means that the Member State could also extend powers of existing authorities in the field of consumer
protection or competition[49] and not necessarily introduce new administrative bodies. An online
application for exchange of requests would ensure swift, secure and
cost-effective cooperation without much additional burden and costs for the
Member States. The existing Internal Market Information System (IMI) could be
used for this purpose.

Finally, the Commission will also seek
cooperation at the international level to ensure that European businesses are
not targeted by misleading marketing practices originating from outside Europe[50].

In the context of the legislative revision, the European Commission intends to: - Create an enforcement cooperation procedure (enforcement network) grouping national enforcement authorities in charge of the legislation protecting businesses to cooperate in cases of cross-border misleading marketing practices; - Introduce mutual assistance obligations for the Member States entailing the explicit possibility of requesting enforcement measures in cross-border situations; - Introduce provisions that will require Member States to designate an enforcement authority in the area of business-to-business marketing.

6.           Conclusions

Small and medium-sized enterprises created
85% of net new jobs in the EU between 2002 and 2010[51]. They hold the potential to
grow and create new jobs, which is exactly what Europe needs in times of economic
uncertainty. In order to flourish and expand in the Single Market, all
businesses need a friendly regulatory environment that will not only secure
their economic freedom but also guarantee security in transactions with other
traders. Small businesses, in particular, also need basic security against
misleading marketing practices.

The Commission therefore intends to propose
specific changes to the Misleading and Comparative Directive with a view to
eliminate harmful misleading marketing practices in the business-to-business
sector, such as the schemes of misleading directory companies. For this
purpose, the Commission will present a targeted legislative proposal and will
step up actions to ensure that existing rules are properly enforced.

[1]               Europe 2020, A strategy for smart, sustainable and
inclusive growth, COM(2010)2020

[2]               Small and medium-sized enterprises, 9 out of 10 of
SMEs are micro-enterprises with less than 10 employees.

[3]               Directive 2006/114/EC of the European Parliament and
of the Council of 12 December 2006 concerning misleading and comparative
advertising (referred to in this Communication as "the Directive");
OJ L 376 of 27.12.2006, p. 21,

[4]               See section 3.2. Misleading directory companies are
traders who use misleading marketing practices and send out forms asking
businesses to update details in their directories, seemingly for free. If the
targeted business signs the form, they are however told that they have signed a
contract and will be charged a yearly sum.

[5]               Review of the Small Business Act for Europe, COM(2011)78

[6]               Any advertising which explicitly or by implication
identifies competitor or goods or services offered by a competitor.

[7]               According to its Article 1, the Directive protects
only businesses against misleading advertising but sets conditions for
comparative advertising targeting both consumers and businesses.

[8]               Council Directive 84/450/EEC of 10 September 1984
relating to the approximation of the laws, regulations and administrative
provisions of the Member States concerning misleading advertising; OJ L 250 of
19.09.1984, p. 17

[9]               Directive 97/55/EC of the European Parliament and of
the Council of 6 October 1997 amending Directive 84/450/EEC

[10]             While in Denmark, Sweden or the United Kingdom comparative advertising was relatively widely used and in France, Germany and Italy it was explicitly allowed by national case-law, albeit in a restrictive manner, in
Luxembourg it was considered as an act of unfair competition and in Portugal it was subject to an ad hoc authorisation scheme.

[11]             Directive 2005/29/EC of the European Parliament and of
the Council concerning unfair business-to-consumer commercial practices in the
internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC,
98/27/EC and 2002/65/EC of the European Parliament and of the Council and
Regulation (EC) 2006/2004 of the European Parliament and of the Council (The
Unfair Commercial Practices Directive), OJ L 149 of 11.06.2005; p.22

[12]             Directive 2006/114/EC of the European Parliament and of
the Council of 12 December 2006 concerning misleading and comparative
advertising; OJ L 376 of 27.12.2006; p. 21

[13]             In Bulgaria provisions on misleading and comparative
advertising are included in the Competition Protection Act. In Cyprus there is a separate Law on the Control of Misleading and Comparative Advertisements.
Hungary in business-to-business situations distinguishes between misleading
advertising, regulated by the Act on the Basic Requirements and Certain
Restrictions of Commercial Advertising, and other unfair practices, regulated
by the Act on the Prohibition of Unfair Trading Practices and Unfair
Competition. Latvia, Lithuania and Slovakia have separate advertising laws.

[14]             Article 5 par. 1 and 3, and Article 7 of Directive
2006/114/EC

[15]             In France, the consumer protection authority can
conduct investigations against rogue traders and some offences may involve
criminal sanctions. The Italian Antitrust Authority has powers to investigate
cases of misleading advertising affecting businesses and to impose fines. In Lithuania, the Competition Council can impose administrative penalties. Similarly, Romania has an enforcement system where the Directorate General for State Aid, Unfair
Practices and Regulated Prices can impose fines on traders. In the United
Kingdom, the Office of Fair Trading can begin court proceedings for a civil
injunction, but misleading advertising is also a criminal offence which can
lead to up to two years imprisonment.

[16]             Some cases of large-scale clearly misleading
advertising practices were tackled under national criminal legislation against
fraud.

[17]             See in particular cases C-362/88 GB-INNO-BM; C-373/90
Criminal proceedings against X; C-126/91, Schutzverband gegen Unwesen in der
Wirtschaft; C-210/96 Gut Springenheide and Tusky; C-220/98 Estee Lauder; C-112/99
Toshiba Europe; C-44/01 Pippig Augenotopic; C-71/02, Herbert Karner
Industrie-Auktionen; C-228/03 Gillette; C-59/05. Siemens;
C 533/06 O2 Holdings; C-487/07, L'Oréal; C-414/06 Lidl Belgium; C-159/09 Lidl.

[18]             C-356/04 Lidl Belgium.

[19]             C-381/05 De Landtsheer Emmanuel SA.

[20]             21 Member States responded to the questionnaire.

[21]             This included online advertising, environmental
claims, comparative advertising, etc. The Communication
does not address certain contractual practices between companies mostly in the retail
sector which can possibly be considered unfair due to an unbalanced relation
resulting from a considerable bargaining-power of some market players. These
issues will be addressed in the forthcoming initiative on unfair trading
practices between businesses in the retail chain.

[22]             The Commission received stakeholders' responses from
all Member States apart from Latvia, Lithuania and Malta.

[23]             The
results of the public consultation:
http://ec.europa.eu/yourvoice/ipm/forms/dispatch?userstate=DisplayPublishedResults&form=MisleadingAd

[24]             The Finnish Federation of Enterprises notes that,
according to a survey, 60% of self-employed traders received disturbing
advertising in 2010. The German Association against Economic Crime (DSW)
estimates the potential yearly businesses' losses resulting from those
practices in Germany at around € 340 million.

[25]             See section 3.2

[26]             A practice whereby traders falsely claim that their
products have beneficial effects on the environment, e.g.in relation to energy
efficiency.

[27]             The European Association of Directory and Database
Publishers (EADP), which represents the directories industry, notes this type
of unfair practices were reported even 40 years ago and one of the reasons for
the creation of their member associations was precisely to distinguish
legitimate from rogue traders.

[28]             Such as direct e-mailing, websites or social media
advertising, text messages.

[29]             European Parliament resolution of 16 December 2008 on
misleading directory companies 2008/2126 (INI) A6-0446/2008.

[30]             European Parliament resolution of 9 June 2011 on
misleading directory companies 2011/0269 B7-0342/2011.

[31]             "Misleading practices of directory companies in
the context of current and future internal market legislation aimed at the
protection of consumers and SMEs" IP/A/IMCO/FWC/2006-058/LOT4/C1/C6.

[32]             In particular Austria, Belgium, Czech Republic, Germany, France, Luxembourg, Poland, Portugal, Sweden, Slovakia and the United Kingdom.

[33]             For example, the Danish Federation of Enterprises has
been receiving at some point 200 calls per month regarding this problem. A
Spanish advertising self-regulatory body has received 902 complaints over the
last 5 years. The Belgian authorities report that over 9% of all complaints
(from consumers and businesses) concern misleading directory companies.

[34]             UWG (Unfair Competition Law) Section 28a.

[35]             Art 95-99 of the Belgian Law of 23 June 2011 on
commercial practices and the protection of the consumer. Chapter 4 Section 2:
Unfair market practices in relation to persons other than consumers.

[36]             79% of respondents were in favour of strengthening the
protection of small businesses, especially in cross-border transactions.

[37]             85% of respondents supported the creation of a
cooperation procedure in cross-border cases.

[38]             84% of respondents support EU-wide legislation against
most harmful commercial practices affecting businesses.

[39]             The weakness of substantive provisions concerns mainly
the criteria for assessing whether advertising is misleading as outlined in
Article 3 of the Directive.

[40]             Broad definition of advertising (Article 2a),
misleading advertising (Article 2b) and grounds for assessing whether
advertising is misleading (Article 3).

[41]             Article 2 (b) and Article 3 of Directive 2006/114/EC

[42]             For instance, a procedure similar to the mutual
assistance obligations laid down in Regulation (EC) No 2006/2004 on consumer
protection cooperation.

[43]             E.g. Czech Republic, Ireland, the Netherlands and Poland.

[44]             C-112/99 Toshiba Europe,
C-44/01 Pippig Augenoptik, C-356/04 Lidl Belgium, C-59/05 Siemens AG; C-381/05
De Landtsheer Emmanuel, C-533/06 O2 Holdings; C-487/07 L'Oréal
SA and C-159/09 Lidl.

[45]             The foreseen actions will be subject to a full impact
assessment and to the rules set in the financial framework proposed by the
Commission.

[46]             Advertising claims that the product is more beneficial
or less harmful to the environment than products offered by competitors.

[47]             In parallel, the Commission intends to recommend best
practices based on a life cycle approach and adequate methodologies, like the
upcoming European harmonised methodologies for the calculation of the
Environmental Footprint of Products (PEF) and Organisations (OEF)

[48]             Similar to Article 13 of Directive 2005/29/EC on Unfair
Commercial Practices.

[49]             The viability of extending the scope of existing
cooperation procedure such as the mechanism established by Regulation (EC) No
2006/2004 on the Consumer Protection Cooperation to some business-to-business
practices or the option of establishing a new dedicated cooperation procedure
will be assessed.

[50]             For example such cooperation could take place in the
framework of the International Consumer Protection and Enforcement Network
(ICPEN)

[51]             "Do SMEs create more and better jobs?", A
study on SMEs' impact on the EU labour market prepared by EIM Business and
Policy Research with financial support from the European Commission. Zoetemeer,
November 2011.

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