KKO:2017:83

Was the promise of a company to compensate a difference in price misleading?

Diary number: S2016/66
Issue date: 7.12.2017

Background and the issues to be decided

In its marketing, a trader had made a ‘price commitment’, according to which it seeks to offer the lowest prices in the market and undertook, under certain conditions, to pay compensation to a consumer who, having bought a product from the trader, subsequently finds that another trader had offered the product at a lower price.

The Consumer Ombudsman had requested in the Market Court that the trader be prohibited from presenting, in the form of price commitments, unsubstantiated claims that it sold its products at the lowest prices in the market. The trader had opposed the request. According to the judgment of the Market Court, the trader had not claimed that the prices of its products were the lowest in the market, and the Market Court dismissed the request of the Consumer Ombudsman.

The issue before the Supreme Court was how the method by which the trader marketed its products was to be understood from the point of view of the consumer.

Applicable provisions

According to Chapter 2, section 1 of the Finnish Consumer Protection Act, methods that are inappropriate from the point of view of consumers may not be used in marketing. According to Chapter 2, section 3(1) of the named Act, a method shall be deemed inappropriate if it is likely to clearly weaken the ability of the consumer to make an informed transactional decision or other decision that conserning consumer goods, and to lead the consumer to take a decision which he or she would not have taken in the absence of the method. Section 6(1) of the Chapter provides that false or misleading information may not be given in marketing if this information is likely to lead the consumer to take a transactional decision or other decision that conserning consumer goods that he or she would not have taken in the absence of the information provided. Section 6, subsection 2(3) provides that the misleading information may pertain in particular to the price of the consumer goods or the manner in which it is determined, a special price advantage and the terms of payment.

Chapter 2 of the Finnish Consumer Protection Act implements Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practice in the internal market (hereinafter ’Directive’). The Directive harmonizes at the Community level the rules on marketing and other commercial practices that may harm the financial interests of consumers.

According to Article 5(4)(a) of the Directive, in particular commercial practices which are misleading as set out in Articles 6 and 7 are unfair. According to Article 6(1) of the Directive, a commercial practice shall be regarded as misleading if it contains false information and is therefore untruthful or in any way, including overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more of the elements presented in the Directive, and in either case causes or is likely to cause him or her to take a transactional decision that he or she would not have taken otherwise. Point (d) of said provision mentions as such an element the price, the manner in which the price is calculated, or the existence of a specific price advantage.

Since the Directive harmonises the laws of the Member States within the scope of its application, according to an established principle in Community law the relevant provisions of the Finnish Consumer Protection Act shall be interpreted as far as possible in line with Community law, as interpreted by the Court of Justice.

The Court of Justice has held that the criteria of misleading commercial practice had been drawn to an essential extent from the perspective of the consumer who is the focus of the unfair commercial practices. The benchmark to be used is that of an average consumer, who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors. The average consumer test is not a statistical test. National courts and authorities have to exercise their faculty of judgement in assessing the typical reaction of that consumer in a given case (judgment in Canal Digital Danmark, EU:C:2016:800, paragraphs 38 ja 39 and the case-law mentioned therein).

According to Article 6(1) of the Unfair Commercial Practices Directive, factually correct information may be misleading due for example to the manner in which it is presented. It has been held in the case-law of the Court of Justice that, due to the manner in which information is presented, this information may as a whole lead to a mistaken perception for example when one component of the information is emphasised and another component is completely omitted or is presented less prominently (Canal Digital Danmark, paragraph 43). In the judgment cited above, which dealt with an advertisement, the Court of Justice held that it is for the national court to determine, having regard to all the relevant circumstances, whether the commercial communication concerned has the effect of suggesting to the average consumer an attractive price which, ultimately, is proven to be misleading (paragraph 40).

The Court of Justice has also given judgments on the misleading nature of advertising where the trader had claimed in general that its price level is lower than that of its main competitors (for example Lidl Belgium, Grand Chamber, C 356/04, EU:C:2006:585). Such marketing may be misleading if the advertisement does not indicate that the comparison is not based on all of the advertiser’s products, This may result in the consumer having a mistaken belief about the amount that he or she will save, regardless of what products he or she purchasers from the advertiser. The consumer may also be misled to believe that for example all the advertiser’s products without exception are cheaper than those of its competitors (paragraph 83).

The concept of the average consumer and the need for the request for a precedent

The Consumer Ombusman had argued that the concept of the average consumer is not the same throughout the Union, since national social, cultural and linguistic factors should be taken into account. The Consumer Ombudsman had referred to the concept of the consumer accepted earlier in Finnish case-law and to research presented in economics on the conduct of consumers.

XXL had objected to the view of the Consumer Ombudsman that the concept of the average consumer could be interpreted so that the consumer in Finland would be a so-called ‘weak consumer’. XXL had requested that, should there be doubt about this, the Supreme Court should request a preliminary ruling from the Court of Justice on this question.

The Supreme Court held that the concept of the consumer cannot be assessed from a national standpoint and in a way that differs from Community law. According to Community law, there is no interpretative ambiguity in the concept of the average consumer. Nothing that had been shown in the case supported the view that social, cultural and linguistic factors would have a particular effect, in this case, on the impression formed by the average consumer regarding the content of the marketing.

The Court of Justice had not been asked, in respect of the Directive, to decide the question of marketing focused specifically on price advantages in the form of a ‘price commitment’. Earlier case-law, however, indicates the legal criteria that the national court is to apply in assessing whether or not price claims made in marketing were misleading. It was not necessary to request a preliminary ruling from the Court of Justice.

The perception given by XXL’s marketing

In its marketing, in which it used the heading “price commitment", XXL had described its pricing by saying that it seeks to always be the most inexpensive alternative in the market. Its marketing had included the statement that XXL will do its utmost so that its customers can feel confident that products could always be obtained for the lowest price from XXL. It had in addition stated that it constantly follows prices in the market and lowers its prices should it find that these were not low enough. The Supreme Court held that XXL had not claimed that it would always, and for every product, have the lowest prices. However, according to its advertisements, XXL undertook to compensate the difference in price for products that customers find at a lower price somewhere else, and emphasised that it will do everything in its power in order to always offer the best prices in the market.

In considering the possible misleading nature of a method used in marketing from the perspective of the average consumer, account shall be taken of the totality of all of the facts that have come up in the case. What is decisive is not the wording that is used in the advertisement, but the perception that the average consumer receives when he or she reads the advertisement in the normal manner. The Supreme Court held that the price commitment, with all of the accompanying text, was likely to instill in the consumer the belief that the other traders would only exceptionally and temporarily have lower prices than XXL for the same or for corresponding products, and that thus XXL was the ’trader with the lowest prices". From the point of view of the transactional behaviour of the consumer, the information regarding prices was a key element which could be measured. The claim made by XXL in its marketing was not a question only of general boasting, of something that the consumer could not be assumed to understand literally.

The trader had the obligation to verify in advance the validity of its claim regarding the advantageousness of its prices. If XXL was not able to show the truthfulness of its claim, this was a question of misleading information as referred to in Chapter 2, section 6 of the Finnish Consumer Protection Act.

Since the Market Court had held that XXL had not claimed to be the “trader with the lowest prices", the Market Court had not examined the evidence presented by XXL regarding the advantageousness of the prices of its products and had not examined whether or not the perception than XXL instilled in consumers through its marketing regarding it being “the trader with the lowest prices" was truthful. In order to examine the validity of the claims made by XXL in its marketing, the case should be returned to the Market Court.

The Supreme Court annulled the judgment of the Market Court and returned the case to the Market Court.

Report of the referendary and opinion of the dissenting justice

In her proposal, the referendary held that the trader had not claimed that its level of prices was in general lower than that of its competitors. From the perspective of the average consumer, the message conveyed through the marketing had been that XXL had sought to have the lowest prices. It could be concluded on the basis of the expressions used in the marketing that competitors might have had products for sale at lower prices than those of XXL. XXL had not therefore claimed that the prices of its products were the lowest, a claim that it should demonstrate to be correct. The referendary proposed that the appeal be dismissed. The dissenting justice supported the report of the referendary.