Three cases in 2010 before the European Court of Justice – effectively the Supreme Court of the European Union – have rendered most restrictions on promotional marketing in the European Union invalid, a development which will make it much easier to run pan-European promotions.

All three cases involved consideration of the EU Unfair Commercial Practices Directive (UCPD) which was passed in 2005.

Starting with the reference from Germany.   The main case in which the court made its judgement on 10th January was a preliminary ruling in the case of Bekampfung unlauteren Wettbewerbs eV v (Case C304/08).
 
Basically, the main case concerned a German retailer who offered points for purchases which then went into a draw.  Under German law, this is illegal but the Court of Justice of the European Communities ruled that German law could not prevent such schemes operating on the basis of the following reasoning.
 
1.  Sales promotions schemes were subject to the EU Directive on Unfair Commercial Practices.
 
2.  The Directive was a Maximum Harmonisation Directive and therefore national law could not go further than the restrictions in the Directive.
 
3.  A sales promotion scheme had to be judged against the terms of the Directive and on that basis the German law was invalid because it constituted an automatic ban on games of chance linked to purchase.
 
4. European law takes precedence over national law.
 
 
The second case (C-261/08 and C-299/07) VTB-VAB NV -v- Total Belgium NV and Galatea BVBA -v- Sanoma Magazines Belgium NV.  This case concerned the issue of free gifts.   The judgement reinforced the earlier judgement and, quoting from the judgement, the courts said that the Directive '...must be interpreted as precluding national legislation, such as that at issue in the disputes in the main proceedings, which, with certain exceptions, and without taking account of the specific circumstances, imposes a general prohibition of combined offers made by a vendor to a consumer.'
 
In November 2010, the Court of Justice gave a further decision on reference from Austria in the case of Mediaprint Zeitungs - und Zeitschriftenverlag GmbH & Co. KG -v- Osterreich-Zeitungsverlag GmbH (Case C-540/08).  The court, once again, declared that national provisions on sales promotion were precluded from going further than the requirements of the Directive.  In particular, they ruled that a general provision in Austrian law which laid down a general prohibition on sales with bonuses was precluded and went on to say 'The possibility of participating in a prize competition, linked to the purchase of a newspaper, does not constitute an unfair commercial practice within the meaning of Article 5(2) of Directive 2005/29, simply on the ground that, for at least some of the consumers concerned, that possibility of participating in a competition represents the factor which determines them to buy that newspaper.'

Conclusion
 
We have three decisions from the European Court of Justice which have made it clear that sales promotion schemes are subject to the Directive and national laws which go further than the requirements of the Directive are invalid.

One of the most important effects of these decisions is that it is quite clear now that there is no legal basis under which the Northern Ireland authorities can object to a promotion which is run on the basis of the Gambling Act 2005 which operates in the rest of the UK.  A review of gambling legislation is taking place in Northern Ireland but irrespective of that the clear message from these cases is that the automatic ban in Northern Ireland of games of chance linked to product purchase is invalid and cannot be enforced.   Accordingly, the advice the IPM is giving its members is that free entry routes are no longer needed for Northern Ireland in prize promotions.

It may take some time for the clear impact of these decisions to work its way through.  We know, for example, that one or two countries are considering whether there is any way they can seek admendments to the Directive because of the obvious implication of these judgements on their own national sales promotion law.  So for the time being the IPM is able to give advice both in terms of the restrictions in national law as well as advising on the implications of these decisions of the European Court on those restrictions.

There may, for a while, be a tendency by some promoters not to wish to be seen to be running promotions against rules that are still on the Statute books of particular countries until such time as those laws have been formally changed to take account of the European Court decisions.  Such changes are not necessary as a matter of law, but there may nevertheless be an unwillingness to act on these decisions until local law has been changed to reflect the overall EU position.
 
We cannot see that in most cases national authorities will attempt to enforce national legislative restrictions on sales promotion which go further than the terms of the Directive because promoters would obviously have a clear defence.  We do feel, however, that some countries may resist the effect of these decisions and if they did it would be necessary for the relevant case to be referred to the European Court of Justice.

These decisions also apply to those countries which, although not part of the European Union, are part of the European Economic Area.  This means that the decisions are relevant also to Norway, Lichtenstein and Iceland.

Anyone who would like further advice on running promotions, whether in Northern Ireland and the rest of the UK, or in relation to other European countries, should register their enquiry with Morag Duhaney at the IPM on 0207 291 7736.

Philip Circus – Legal Affairs Director – IPM

March 2012.