New Approach to breaches in the Advertising Law
Recently the Latvian Competition Council adopted a decision that lays the foundation for new practices in the council's exercising its rights as spelled out in the Advertising Law.
One of the Competition Council's tasks is to supervise the conformity of actions of market players to the rules of the Advertising Law in order to promote fair competition in the field of advertising. It is provided that:
1) comparative advertising is permitted, insofar as it pertains to a comparison and if it "objectively compares one or more materials, related to verifiable and characteristic features of the relevant good or service";
2) advertising, which is in any manner, including presentation, directly or indirectly misleading or may be misleading and due to its misleading character, may affect the economic behaviour of a person, or is harmful or may be harmful to a competitor, is prohibited.
The Advertising Law entitles the Competition Council to impose an obligation on market players to eliminate the breach of the Advertising Law - for example, to exclude some elements from the advertisement (information, visual representations, sound or other special effects), to prohibit the distribution of advertisement, to impose an obligation to recall the advertisement, and to initiate an administrative case and to impose an administrative fine.
The administrative fine on legal entities for breaching the procedures for provision or distribution of advertising may reach 500 lats (720 euros), but the fine imposed for the provision or distribution of prohibited advertising (including misleading advertising and advertising that does not conform to the requirements of comparative advertising) may reach 10,000 lats.
Until now the Competition Council never imposed administrative fines on market players who breached the Advertising Law, as the Competition Council did not have such rights pursuant to the Administrative Misdemeanour Code of Latvia. This legal measure was first applied by the council when it reviewed the case of a commercial for Lay's potato chips with the provisions of the Advertising Law. The Competition Council ruled that the slogan "six of 10 people choose Lay's" used in the commercial is untrue and its objectivity not sufficiently justified by the research conducted by the advertising provider, which was regarded to be substantially narrower than the information presented in the commercial.
Accordingly, the Competition Council decided that the product testing and checking results represented in the commercial were not clear and could be misunderstood. Thus the advertising is misleading. In addition to the sanctions usually applied by the Competition Council - to prohibit further advertising and to recall the commercial - a decision was adopted to initiate an administrative case on the imposition of an administrative fine.
Recently, the Competition Council passed a resolution regarding establishment of the amount of a fine for a conducted breach, evaluating the duration, scope, territory and manner of distribution of a misleading commercial - i.e., evaluating the possible impact of advertising on economic activities of consumers. So there are grounds to believe that the Competition Council has started a new practice with a view to apply administrative measures (fines) in order to ensure that the provisions on fair competition are followed in the advertising sector.