Clifford Chance

Facts of the case

The defendant sells herbal teas under the trademark "CUPPER". To promote these teas, it placed advertisements in the magazine "Lebensmittel Zeitung" ("Food Newspaper") – a magazine for managers in the food industry, i.e. a professional audience. The teas were advertised using the adjective "sustainable", for example "sustainable chamomile" or "sustainable mint" and also praised as, inter alia, resource-friendly, positively emphasising the tea's "short delivery routes" and that they "promote biodiversity". The defendant thus referred to the label according to the Regulation (EU) 2018/848 on organic production and labelling of organic production .

The plaintiff, a registered association recognised under the German Act against Unfair Competition, alleged that the defendant did not make it clear that its application related exclusively to the criteria of the quality label and it was not advertising any other sustainability aspects.

Court ruling

The court held that by law the defendant was allowed to use the organic production label for promotion purposes because the method used to produce the teas complied with the requirements. However, since the defendant did not clarify that this was the only reason for the claims, the court considered the defendant's conduct to be misleading commercial practice.

According to the German Act against Unfair Competition, a commercial practice is misleading if it gives the addressed audience an impression that does not correspond to the actual facts. Bremen Higher Regional Court classified the risk of misleading commercial practice to be particularly high with regard to environmental protection and compatibility as this type of advertising usually appeals to people in a highly emotional way and uses vague terms with meaning that cannot (yet) be clearly determined (e.g. the terms under discussion).

In the opinion of the court, anyone who uses these terms must also explain their meaning as the risk of being misled results from the lack of clarification of undefined terms. In the present case, this requirement was not met. Bremen Higher Regional Court essentially builds on German case law, providing for particularly strict requirements for sustainability advertising. In July 2023, Düsseldorf Higher Regional Court ruled that use of the term "climate neutrality" can constitute a misleading practice by omission. In the court's view, there was a lack of material information for consumers and other market participants because the advertising in dispute did not clarify how "climate neutrality" was achieved.

The term "climate neutrality" and the obligations for advertisers to provide sufficient information in this respect was also the subject of another decision before Frankfurt am Main Higher Regional Court. According to the court, claims to "climate neutrality" can potentially be backed up by demonstrating the purchase of CO2 certificates, supporting third-party climate projects and/or taking own climate-friendly measures (e.g. using green electricity or decarbonating the production process).

Applying these legal prerequisites in the present case, the background of the claims need to be described as precisely as possible. This requirement is underlined by a statement of the court in the tea-case: Advertising using environmental terms "should be judged by strict standards, similar to health advertising".

In light of the above, the court approved the more specific statements made by the defendant. For example, the claim that organic production provides bees with fodder plants and promotes biodiversity is permissible because it is less vague.

Professionals included

Unlike in the precedent cases where the advertisements were directed at consumers, the advertisement here was published in a magazine directed at professionals. Therefore, the defendant argued that a professional audience could be expected to understand the claims better and would be able to establish the connection between the organic production label and the claims. However, the court held that the German Act against Unfair Competition does not differentiate between professionals and consumers in this respect and that, moreover, the relevant terms were ambiguous, even among experts, so that a risk of being misled remained also for this group. Because for the court there mere fact that the addressed professionals were required to conduct additional research already constituted a risk of a potential violation of unfair competition law.

Takeaways

The crux of advertising with environmental terms is that the claims are already considered to be "unfair" if terms that are meaningless at first glance are used. Companies themselves must therefore explain the terms they use. It is doubtful whether overloading advertising with educational information will ultimately help to educate consumers. Until EU's legislation provides for a clear framework for reliable, comparable and verifiable information in advertising with environmental terms, we recommend ensuring full compliance with the case law presented herein, in particular since the directive will still need to be implemented by the member states after it has been adopted by the EU, which will take some time. In any event, whether an advertisement is compliant with the above principles is a question that can only be answered by assessing all circumstances of the specific case.