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04 June 2013
Every franchise agreement contains provisions about the extent of regional and supra-regional advertising. The franchisee is usually responsible for the conduct of regional advertising campaigns and the franchisor for supra-regional advertising campaigns. However, statutory information obligations and requirements of court judgments must also be observed irrespective of the form of advertising concerned, whether by prospectus, newspaper advertisement or Internet. In particular, it is sometimes overlooked in supra-regional advertising and advertising initiated by the franchisor that the identity (ie, the complete name, including legal form suffix and address of the system headquarters or head office) of the franchisor must be stated (imprint obligation). Failure to state this information is a breach of competition law and the franchisor risks a warning. The Hamm Higher Regional Court recently dealt with such a breach.
The judgment (October 30 2012, I-4 U 61/12) concerns the question of the extent of the statutory obligation to provide information on the identity and address of the company in an advertising prospectus. Ultimately, the court decided that a company's brochure must state accurately the company's name and address as entered in the Commercial Register.
The defendant, which operates hardware stores, advertised a product campaign in a brochure stating the product price. On the second-to-last page of the brochure the operators of stores participating in the promotion were shown, with address, email address and telephone number. There was no reference to the name (X – Die Profi Baumärkte GmbH & Co KG) entered in the Commercial Register or the address of the management, to which there is no public access.
Unfair misleading advertising
The court stated that the defendant conducted unfair and misleading advertising under the Act against Unfair Competition, since it breached its statutory obligations to provide information by failing to provide adequate data on its actual identity and by not stating its own address. These information obligations apply for offers of goods, placing the consumer in a position to make a purchase.
In the case of such offers, the company identity must be stated. Having regard to the goods offered in the brochure, the defendant was also the company making the offer. The defendant should therefore have stated its complete identity in the brochure (ie, its trade name and legal form, which must correspond with the entry in the Commercial Register).
The question of whether in all cases the trade name must be stated or whether the popular name is adequate was left open by the court. The assessment in the present case stated that such data would be inadequate because for an informed purchase decision, it could be important that the consumer is aware of matters in the Commercial Register. Due to the generally known fact that litigation may later result from the purchase of products, it is necessary that the consumer is aware of the registered name in order to initiate litigation.
It is inadequate to assume that the consumer can acquire such information from the defendant's website. The information should enable the consumer to contact the relevant company without any difficulties.
The court also found that the defendant had not properly stated its address. The defendant stated only the addresses of some sales outlets in Berlin and the surrounding area. However, since the defendant was the company offering the goods, it was also necessary that the consumer was given the address of a contractual partner for the purpose of the service of proceedings.
There was no need to decide whether the sales outlets stated in the brochure were branches under the meaning of the Code of Civil Procedure. Even if proceedings could be commenced where a branch was located, according to the code a consumer may not be prevented from also filing its claim with the court of general jurisdiction for the company. However, for this purpose, the consumer requires the address of the company headquarters or management.
Breach of obligation to provide information
Breaches of the obligation to provide information are in principle significant under the Act Against Unfair Competition. Relevant misconduct can be derived from such a breach. The lack of identity and address interfere with a consumer's commercial behaviour.
This judgment is significant for franchise systems, particularly if a dual franchise system is concerned. If a company headquarters intends to conduct a central advertising campaign for its branches, the obligation to provide information must be observed. It is therefore necessary that an actual reference to the trading name entered in the Commercial Register and the address of the management headquarters be provided, even if the advertised products are not sold there. Likewise, caution is indicated in the case of intending to comply with the information obligation only by referring in the brochure or newspaper advertisement by means of an asterisk to the homepage of the headquarters (Munich Higher Regional Court, March 31 2011 - 6 U 3517/10). Neither of these judgments expressly make any statement about the information obligations of independent franchisees which, in a dual franchise system, may possibly be covered under a uniform brand by a central advertising campaign.
For further information on this topic please contact Karl Rauser or Karsten Metzlaff at Noerr LLP by telephone (+49 30 20 94 20 00), fax (+49 30 20 94 20 94) or email (firstname.lastname@example.org or email@example.com).
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