Czech Republic: Can completely true statements be misleading?

19.04.2016

The Czech Supreme Court has recently ruled on the issue of whether a true statement in an advertising spot may be inconsistent with good morals of competition, and may therefore be considered unfair conduct.

Unfair competition is unwanted conduct that interferes with competition. The law prohibits such actions, for the protection of other competitors and of customers. Anyone who comes into conflict with good morals of competition in economic relations by performing acts that may be detrimental to other competitors or customers, is acting unfairly. The evaluation of truthfulness (accuracy) of data that a competitor provides certainly cannot be the sole criterion for assessing the possible inconsistency of such conduct with fair competition. The Civil Code, similarly as the previous Commercial Code, expressly states on some merits of unfair competition that eligibility of deception occurs even when the information of itself is correct or true, if it can mislead because of the circumstances and context in which it was made.

The Supreme Court thus recently overturned the judgment of the Municipal Court which, in a case where they evaluated the harmony of negotiations with good morals, merely evaluated truthfulness of an assertion. The company that has been heavily promoting their products on television and on the Internet, with the statement of the goods being “as seen on TV”, demanded in court that the other competitor who was selling almost identical goods be prevented from using the phrase “as seen on TV” for its goods sold in its own online shop. The competitor’s products were only advertised in a television broadcasting campaign in a few spots (transmitted within a one month period), on a less viewed TV channel, and this being after the commencement of the court case.

The court, based on the facts of the case, stated that not only the condition that the acting must take place in economic relations, but also the condition that such acting must be contrary to the good morals of competition were met. Such acting, even though true after the broadcasting of several commercials, still has misleading and parasitic elements. In a situation where one company conducts a massive television campaign, and a competitor promotes products with almost identical names in television commercials on a tiny scale, it is clear that most customers consider the products of such a competitor to be the products of the company conducting the television campaign. Such a competitor would only “ride on the coat tails” of the other advertising campaign. The negotiations also fulfilled the third condition of unfair competition, concerning actions that may be detrimental to other competitors (e.g. drawing away customers from the company conducting the television campaign).

If, in the above situation, the correctness of the statement “as seen on TV” was the sole criterion in assessing the conflict with the good morals of competition, ad absurdum this indication could even be used for products that have only been presented on TV for as little as in a five-second spot. The practices of the competitor, described above, met all of the conditions to be considered unfair competition.