INTERNATIONAL MARKETING: Law and legislation

A combination of EC legislation and local developments is leading to marketing laws across different European countries gradually becoming more closely aligned. However there are still some marked differences between member states in their legislation in this area. Accordingly, for marketers seeking to roll out campaigns and initiatives on a pan-European basis, legal clearance can still be a significant challenge.

There are a number of areas of marketing practice where different European countries still have remarkably different legal regimes.

The most striking of these is the area of sales promotion. It remains the case that certain promotion mechanics are wholly illegal in some countries but completely acceptable in others. A free prize draw, for instance, is a common form of promotion in the UK for incentivising customers, resellers or distributors, or as a data capture mechanism. But in Norway and certain other countries this mechanic is not permitted.

Further to this, even where draws are permitted, some countries require the draw to be registered with a local government agency or official, regardless of whether the draw is consumer-facing or purely B2B.

Incentive schemes are also fraught with difficulties. A supplier may wish to put in place an incentive scheme across Europe to reward employees of distributors or resellers for reaching certain volumes of sales or achieving other goals. However, in Germany, for instance, it is not generally possible to structure the scheme to reward those employees directly – this is seen as contrary to German 'unfair competition' law. On top of this, the tax treatment applicable to rewards varies from country to country.

 

Country-specific laws

Some countries have specific rules governing the marketing of particular products. France has the Loi Evin, which places strict restrictions on where and how alcoholic products are marketed. Sweden has banned TV and radio ads aimed at children under the age of 12. Obviously, these are consumer marketing examples, but they illustrate the point that rules vary.

Certain countries also require marketing and promotional materials to be in a particular language. In France, it is mandatory for these materials to be provided in French (or with a French translation) both in a B2C and a B2B context.

To add to the confusion, the potential sanctions that marketers face for breaching advertising rules can vary significantly from country to country, and depend on the nature of the breach. An unlawful comparative claim in the UK may in many cases result in nothing more than the adverse publicity of an upheld adjudication from the ASA – the self-regulatory body has no power to fine or award damages. In Germany the same complaint could lead to an award of damages and legal costs. In Belgium, the court can order the defendant to publish (and pay for) corrective advertising. And while unlawful promotional mechanics can lead in some countries to little more than a minor fine, in the UK an illegal prize draw technically carries with it the risk of criminal proceedings and a custodial sentence!

Many marketers find it difficult to get reliable information on legal issues across Europe. Inhouse legal departments – even in the largest organisations – are often not geared up to provide detailed and up to date advice in this area. And only a very few external law firms have any real pan-European marketing law expertise.

 

Attempts to close the gap

Against this background of uncertainty and key legal differences, one might expect Brussels to take some action. Where different countries' laws lead to a significant barrier to cross-border trade, the EC has the power to step in and require European member states to sign up to harmonised legislation.

Indeed, Brussels has introduced new legislation in the marketing arena on a number of occasions and this has generally assisted in bringing European laws more closely in line with each other.

A good example is the Comparative Advertising Directive. Prior to the 1997 EC Directive, it was not possible to run a campaign across Europe if it involved an element of direct comparison between your products and those of one or more named competitors. Some countries, like the UK, allowed a level of comparative claim subject to certain restrictions. Others, like France, effectively prohibited comparisons with an identified competitor. Following the introduction of the directive, all EU member states are now required to permit comparative advertising if it complies with the eight key requirements set out.

Perhaps inevitably, the directive has not led to a completely uniform position across Europe. Directives do not have direct legal effect: each member state has to implement local legislation to give effect to the directive's requirement. This can lead to discrepancies in the way that a directive applies in different countries. Furthermore, the courts of different countries may interpret a directive's provisions differently when asked to enforce them.

This may particularly be expected where the language of the directive is open to interpretation. In the case of comparative advertising, decisions in Germany on the directive's requirement that a comparison must 'objectively compare one or more material, relevant, verifiable and representative features' of the product, suggest a rather stricter and more literal approach to that which one might expect in the United Kingdom.

A more recent piece of Brussels regulation illustrates another way in which supposedly harmonising legislation can still leave marketers frustrated. The 2002 Directive on Privacy & Electronic Communications required European member states to implement particular legislative provisions on email marketing in the context of marketing to individuals, but left it open to member states to choose whether to apply an opt-out, opt-in or so-called 'soft opt-in' approach with corporate customers/targets. As a result, the data capture tick-box requirements for B2B marketing across Europe are still not harmonised.

Of course, Brussels can also act to legislate on the marketing of particular product groups. Tobacco marketing, for instance, was restricted in Europe by virtue of the Tobacco Advertising & Sponsorship Directive 2003.

One of the other key trends in Europe is the move towards greater reliance on self-regulation to govern advertising, rather than on legislation and the courts. Poland is the latest European country to have recently launched a new self-regulatory organisation for marketing, making 22 countries in Europe now with self-regulatory systems. The effectiveness of advertising and marketing self-regulation has been endorsed recently by EU Commissioner Viviane Reding as well as by the EU's Single Market Observatory. For countries like Romania who wish to join the EU, an effective self-regulatory system is now seen as a key box to be ticked in the run-up to accession.

 

Changes for the future

The key European marketing law change over the next year or so is really one that is confined to the B2C area. The Unfair Commercial Practices Directive is required to be implemented by 12 December 2007 and will introduce a minimum level of consumer protection across Europe against certain misleading or aggressive selling techniques. However the directive will have no direct effect on business-to-business marketing.

Over the next few years many believe that we may also see new European legislation focusing on the marketing of particular products, and in particular those food products that are perceived as unhealthy or linked with obesity.

As for the possibility of harmonisation in the area of sales promotion law, it does not look like we will see anything coming out of Brussels in this regard in the next few years. The draft Sales Promotion Regulation was finally abandoned last year after something like 15 years of different drafts being batted backward and forward under different EU Presidencies. While it was essentially recognised across the board that this is an area where harmonisation is required, the different agendas of each group of member states led to a final draft that might actually have done little to address the underlying problems. Its extensive caveats and exceptions meant that many types of promotion would have fallen outside its remit, with one piece of Institute of Sales Promotion research indicating that roughly 75 per cent of UK promotions would not have been covered by the draft regulations.

However, for now at least, marketers will have to continue to grapple with a multitude of different regimes across Europe.

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2006-03-29T00:00