Claim of Special Characteristics and the Admissible Exaggeration in Advertising
The Czech Republic Supreme Administrative Court upheld a court decision on a dispute between the Council for Radio and Television Broadcasting (RRTV) and a manufacturer of infant formula called Sunar, one of the leading infant formula brands in the Czech Republic.
The manufacturer released a TV spot promoting the formula, which aired on TV in 2016. The spot included information on several ingredients of the formula (all of them being mandatory in infant formulas) and a slogan “Sharp mind, immunity, cognitive functions and palate. Who did they take after? After Sunar.” The company was fined a total of 50 000 CZK (EUR 2 000) by the RRTV for violating the Advertising Regulation Act and the EU Regulation on the provision of food information to consumers No. 1169/2011. The RRTV deemed the slogan to constitute a claim of special characteristics of the formula ensuring proper child development, when the ingredients in question are mandatory ones, hence causing the TV spot to be misleading the consumers.
However, the manufacturer appealed the decision before Regional Court and the case ultimately reached the Supreme Administrative Court, with the argument that the advertising does not link the compositional information to the slogan which is clearly an exaggeration.
The Regional Court held that the information on ingredients was included only briefly, at the very end of the TV spot, and in such small letters that the consumers were not able to properly read and process the information, not to mention making a connection between the information and the slogan, which is mentioned earlier in the spot. And while parents of young children are slightly more vulnerable consumers than average, they cannot be expected to make the said association. As a result, the Regional Court annulled the RRTV´s decision.
The Supreme Administrative Court upheld the Regional Court´s decision. The Supreme Administrative Court has already adjudicated in the past that the crucial point of view when assessing advertising is not necessarily the exact wording of the message, but rather how the message is perceived as a whole by the average consumer. And while the ingredients in question do affect the features included in the slogan, the manufacturer did neither claim any connection between the ingredients and the slogan, nor linked the information in the TV spot in any way. Moreover, according to the Supreme Administrative Court the slogan is a clear exaggeration, all the more in connection with the visual of the spot, featuring a baby with exaggerated abilities, and the background music resembling the main theme of Mission: Impossible.
Considering all the abovesaid, the Supreme Administrative Court deemed the TV spot to feature an admissible exaggeration and confirmed the Regional Court´s ruling annulling the RRTV´s decision, revoking the fine imposed.
Responding to the crisis: Ukrainians coming to the EU
Business Bulletin No. 1/2022 – Sanctions
The ongoing war in Ukraine has already led to a number of tragedies – deaths and injuries of both civilians and soldiers on both sides of the conflict, the forced emigration millions of refugees from across Ukraine, and increased geopolitical tensions around the world. It also has a huge impact on relations between Western countries and Russia. In response to Russia’s invasion of Ukraine, the EU, the USA, the UK, as well as many other countries have been adopting unprecedented restrictive measures against Russia, as well as against Russian companies and nationals, unseen since the World War II, aimed at discouraging Russia economically to continue in the war against Ukraine. In this paper, we would like to describe and summarise the EU restrictive measures in force against Russia, whether were adopted before or after the outbreak of the war.
Business Bulletin No. 3/2021
The promised end to the coronavirus is not (yet) in sight, so even after almost two years we briefly mention new measures related to the spread of COVID-19 disease at the beginning of our last Business Bulletin of this year. Although coronavirus is still the most interesting topic for the media, we cannot ignore other, equally important topics that also affect or will affect our daily functioning. That is why we present a summary down below of the most important information concerning the new Building Act (including the current developments related to the introduction of new government, which opposed the original version), information related to the change in the functioning of the data box system and we also mention the amendment to the Electronic Communications Act which, among other things, quite significantly affects the existing regulation of so-called cookies.
Fourteen Million Czech Koruna Fine and Revocation of Trade License? Finally!
Inspectors of the Czech Agriculture and Food Inspection Authority (SZPI) succeeded in proving unfair commercial practices carried out by the seller of food supplements BEAUTY LINE s.r.o. The company mainly engaged in distance selling of cosmetics, through letters sent mainly to seniors, and in particular in the form of consumer competitions for prizes and cash prizes (BEAUTY LINE offered consumers cash prizes worth several hundred thousand Czech koruna for the purchase of products). The SZPI received dozens of complaints about the company’s practices from consumers themselves.
Withing the scope of six administrative proceedings, inspectors repeatedly proved the use of unfair commercial practices and failure to comply with the imposed cooperation. The company was then fined a total of CZK 13,945,000 (EUR 550,000) for these offences. SZPI also filed a complaint with the Trade Licensing Department of the Prague 12 Municipality to revoke the trade license. The Office complied with the complaint and revoked the company’s trade licence for a period of three years.
The inspectors found violations of the legal provisions in particular in creating a false impression regarding “free” products offered for which consumers had to pay for the ordered food supplements. Furthermore, the company gave the misleading impression that consumers would win a cash prize if they ordered the products for free testing. In these cases, however, consumers had to expend funds because receipt of the prize was conditional on the consumer purchasing the goods from a catalogue and paying the shipping and packaging charges. The company also offered the goods through a competition for prizes of up to millions without these prizes being awarded. They even extended their practices by using a fortune teller who contacted the seniors to inform them that they were about to get lucky and win
A further offence was the use of prohibited medical claims when offering food supplements, contrary to the requirements of the EU Regulation. Food supplements are classified as food and cannot be attributed curative effects.
The seriousness of the breach of the legislation is seen by the SZPI in the fact that there was a long-standing behaviour of the company which distorted the economic behaviour of consumers, where the company addressed consumers informing them that they were prize winners, but the receipt of the prize was conditional on the consumer making a financial outlay and what is more, the consumer never received the prize after the payment.
Cigarette Advertising Case in the Czech Republic – Leaflets in Cigarette Packages
A dispute between one of the largest cigarette producers, Philip Morris, and the Czech Ministry of Industry and Trade, regarding an advertising campaign, has reached the Supreme Administrative Court.
In 2015, the cigarette manufacturer released a campaign consisting in inserting advertising leaflets promoting a consumer competition into Chesterfield cigarettes packages. The issue here is that in the Czech Republic, tobacco advertising is strictly regulated by the Advertising Regulation Act, making it virtually banned with just a few well-defined exceptions. Apart from advertisement in periodicals for tobacco trade specialists and motorsport competitions sponsorship, one of the few allowed types of advertisement are the ones located in specialized tobacco shops and in those sections of stores intended for sale of tobacco products (cigarette advertising is not permitted in places other than these).
This was the exception Philip Morris was trying to apply in the case of mentioned ad leaflets, arguing that given leaflet was inserted into cigarette packages placed in either specialized tobacco shops or designated tobacco sections of other stores. However, the Ministry of Industry and Trade rejected this argument, arguing that from the moment the package is sold, it leaves the store and therefore gets outside of the “permitted zone”, and imposed a fine for unauthorized advertising. The Regional Court agreed with the Ministry’s reasoning, and so Philip Morris appealed to the Supreme Administrative Court. However, the tobacco manufacturer did not manage to convince the Supreme Administrative Court with its argumentation either. The Administrative Court stated that the purpose of the legislation was to minimize the spread of tobacco advertising, and thereby reducing the number of smokers and preventing new addictions. It concluded that it is clear from the wording of the exemptions that their aim is to restrict the appearance of tobacco advertising exclusively to places where tobacco products are sold. They therefore apply only to advertising items that are permanently placed at the place of sale, and thus cannot be publicly disseminated and influence the public outside the place of sale. In the present case, however, that could not have been the case, since the advertising leaflet was inserted into consumer packages of cigarettes, which are by their very nature presumed to be ‘distributed’ outside the authorized places. Given that the leaflets were placed inside the packages, making it impossible to see them before its opening, it can hardly be concluded that the advertisement was supposed to be seen in the designated areas. On the contrary, due to its placement the leaflets had greater effect outside of the designated premises, since no customers would presumably open the package inside the store to leave the leaflet there.
Philip Morris hence lost the case and is obliged to pay the imposed fine. Which is, however, rather symbolic in this case – only CZK 20,000 which equals to roughly EUR 800.
Advertising against Food Quotas
Czech Confederation of Commerce and Tourism (CCCT) has recently launched a campaign fighting the proposed amendment to the Food Act, introducing mandatory food quotas, that was quite surprisingly approved by the Parliament this January and has caused quite a stir. The proposed amendment (due to many formal and practical reasons) did not pass the Senate and the legislators were to debate it again on April 13, 2021. Therefore, the CCCT has decided to take an action and present the potential negative impact of such regulation to general public in the meantime by means of advertising.
The CCCT persistently keeps pointing out that passing such a law would not only considerably limit the supply and offer of most groceries, but would also lead to significant price increases. The self-sufficiency of the Czech Republic in the field of food is currently about 40 percent, but according to the proposed amendment, the share of Czech food on store shelves should reach 55 percent by 2022 and at least 73 percent by 2028. The issue is that even Czech farmers themselves admit that they are not able to meet even 50 percent of food supply, not to mention all the types of food that are not (and cannot) be produced in the Czech Republic at all.
In its expressive campaign, the CCCT showed on the example of five basic products (cucumber, tomato, sea salt, chili peppers and pate) that passing the quotas would lead to these foods no longer being available the way Czech people are used to. The campaign used concise slogans such as “Czech salt? IT DOESN’T EXIST.” or Czech pate? JUST 5 DAYS A YEAR.” to show the senselessness of the proposed amendment and to create public pressure against the quotas. The campaign was visible on on-line banners, TV spots, social media or the website drahejidlo.cz (meaning “expensive food” in Czech).
In the end, the proposed amendment to the Food Act was passed without the food quotas. What did pass the Parliament, though, was the provision banning “dual quality food”. That means seemingly identical food products sold in various EU countries under the same name and in the same package, but with substantially different food composition and ingredients.
The dual quality food has been a long-discussed topic in the Czech Republic and surveys confirm that 9 out of 10 Czech consumers consider it to be an unfair practice. The European Commission also dealt with this subject in its recent study, comparing the quality of food products of the same brand in EU countries. It revealed that approximately one third of examined products had different composition.
The new amendment therefore aims to end this ambiguity in quality of comparable food products by introducing strict sanctions. Retailers will now face fines of up to CZK 50 million for selling food products seemingly interchangeable with products sold in others member states, but with substantially different composition.
Business Bulletin No. 2/2021
Optimistic prognoses or guaranteed information regarding the end of the global pandemic of COVID-19 did (unfortunately) not come true, and we must therefore deal with this disease and its consequences more than a year after its official outbreak in the Czech Republic. Although we would all like to see that the situation is under control and the responsible authorities know exactly what to do and how, both the issued measures and related communication are still quite confusing. Therefore, we summarize for you the most important information about current development below – in particular the information on mandatory testing of employees in companies and related personal data issues, the newly effective Pandemic Act and the newly planned compensation programs COVID 2021 and COVID – Nepokryté náklady.
Sales promotion and equal access to health services
In cooperation with some private medical clinics that belong to the same group of companies in Czech Republic Prime Minister’s Trust Fund, Internet news server iDnes offered preferential orders and appointments for certain medical examinations or procedures as the main enticement for those who would subscribe to annual subscription of the news server, using a motto “Buy yourself a health for Christmas”.
As part of the benefit for subscribers, tests for COVID-19, MRI, above-standard ultrasonic tests or surgical and orthopaedic operations were offered. However, some of these procedures are largely covered by public health insurance and, for example, people usually wait for hip or knee surgery for a year.
Equal access to health services (covered by public health insurance) for all is one of the main principles of the public health insurance system in the Czech Republic. This principle is ensured at the constitutional level by the Charter of Fundamental Rights and Freedoms and further specified, for example, in the Act on Health Services and Conditions of their Provision or in the Anti-Discrimination Act. The legal regulations contain exhaustive list of situations in which a health care provider may refuse to accept a patient into care, or, with regard to the capacity of the facility and the patient’s health condition, set a reasonable waiting time. In other words, it is forbidden for the health care provider to reject the insured person without a reason, or make acceptance or priority treatment conditional to any financial payment (e.g. purchase of an annual subscription to the news server).
In this case, iDnes used the immoral factor of the current fear for health as part of the sales promotion of its subscription, and it would probably have worked out unless the legal regulations had not been fundamentally violated. In the case of preferential treatment of subscribers, the medical facility would in fact breach the law, for which they could not only be fined, but the health insurance company could and should terminate its contract with such facility. The reason is that the respective regulation contains a provision according to which it is not possible to lessen the availability of health care for insured persons because of the fact that they do not pay any extra fees. In such a case, iDnes would commit deceptive advertising, because it would not be able to ensure the priority treatment in medical facilities.
The entire campaign immediately became the subject of debates over suspected violations of the principles of public health insurance, including equal access to health care. iDnes therefore quickly adjusted its campaign – medical procedures are still offered with benefits, however, according to iDnes, they are no longer offered as priority treatment. Unfortunately, iDnes or medical clinics involved in the campaign were not subject to further investigation in this matter at all.
Business Bulletin No. 1/2021
We dedicate this first issue of Business Bulletin in 2021 to new regulations in Czech law, which either become effective on January 1, 2021 or in the beginning of 2021. Some of the changes have been awaited for a long time and published in the Collection of Laws many months ahead, while others waited for their publication until the very end of 2020. Out of many changes we choose those which may have a substantial impact to business and the functioning of business corporations.