'Without Prejudice... 'to Legal Certainty? Delineating the Scope of the UCP Directive and Its Relationship with Other Provisions of EU Law

In light of its broad scope, it is inevitable that the UCP Directive attempts to define how it interacts with other provisions of EU law. One therefore notes the phrase 'without prejudice to' in various places - a phrase which adds an extra layer of complexity to the existing and already particularly complex regulatory framework. Admittedly, complexity does not necessarily mean uncertainty. However, the case study discussed in this section, and which is by no means an isolated example,[1] shows that the relationship may render the regulatory landscape most uncertain for traders, consumers and Member States alike. It focuses on the relationship between the UCP Directive and Directive 89/552/EEC on television broadcasting (the TV Directive),[2] now replaced by Directive 2010/13/EU on audiovisual media services (the AVMS Directive).[3] More specifically, it attempts to untangle the extent to the European Union allows the use of product placement as a legitimate marketing technique.

The practice of product placement has given rise to a lot of controversies. When the UCP Directive was adopted, the Commission was firmly of the view that the practice should be allowed at the EU level. Thus, Recital 6 explicitly states: this Directive does not affect accepted advertising and marketing practices, such as legitimate product placement, brand differentiation or the offering of incentives which may legitimately affect consumers' perceptions of products and influence their behaviour without impairing the consumer's ability to make an informed decision.[4]

Similarly, in the first version of its proposal for an AVMS Directive,[5] the Commission took a clear stance in favour of liberalizing the practice of product placement across the European Union, subject to certain conditions being met.[6] During the consultation phase of the revision process of the TV Directive, the Commission argued that product placement should be allowed on two main grounds. Firstly, it claimed that the liberalization of product placement would allow European audiovisual media services to obtain an additional source of revenue by which to bolster diminishing revenue streams and which would facilitate the production of better quality programmes.[7]Secondly, the Commission argued that liberalizing product placement would render European audiovisual media services more competitive in that it would minimize the problems associated with dual regimes in which product placement would be allowed in programmes originating from outside the European Union but not in programmes originating from within the European Union.

Despite its clear position in favour of product placement, the Commission did meet some opposition not only from public health and consumer associations, but also from some Member States (not least northern countries and Germany). In particular, the argument was made that product placement was unfair to consumers: first, because it had a more insidious influence than traditional forms of advertising

On the grounds of data referring to the US market and statistics from the European Audiovisual Observatory, estimations indicate that such resources could amount to EUR 500 million': Impact Assessment of the Commission's Proposal of December 2005, COM (2005) 646 final, at paragraph 3.2.4. One cannot help but notice, however, the lack of precision of the figures put forward, both in terms of their geographical scope and the time period they cover insofar as viewers were not always aware of brand presence in the programmes they watched; and secondly, because it related the product to the situation in which it was used and arguably constituted a more aggressive marketing technique as a result.[8]

This did not affect the wording of the UCP Directive but it did affect the wording of the AVMS Directive when it was finally adopted in December 2007.[9] Indeed, Article 11 - which is exclusively devoted to product placement[10] - departs significantly from the original position expressed by the Commission in that it lays down a statement of principle prohibiting product placement: 'Product placement shall be prohibited.[11] Immediately afterwards, however, it provides for derogations: product placement is allowed in a range of programmes, on the conditions that certain requirements are respected and unless Member States decide otherwise.[12] The AVMS Directive therefore allows Member States to liberalize product placement in certain programmes, whilst they have the option of opting out and maintaining a prohibition of product placement in all programmes. Nevertheless, the AVMS Directive contains exceptions: irrespective of the programme genres concerned, no product placement is allowed either in children's programmes or for tobacco products and medicines or medical treatments available only on prescription. Article 11 thus lays down a prohibition on product placement, followed by an exception to the prohibition, followed by an exception to the exception to the prohibition.[13] Only Denmark has maintained a prohibition of principle against product placement.[14] Other Member States have liberalized it, but they have often exercised their discretion and added more conditions for such liberalization than the ones laid down in the AVMS Directive. For example, the United Kingdom has extended the list of products that cannot be placed on television to include alcoholic drinks; foods or drinks high in fat, salt or sugar; gambling services; infant formula (baby milk), including follow-on formula; all medicinal products; electronic or smokeless cigarettes, cigarettes lighters, cigarette papers, or pipes intended for smoking; and any product, service or trade mark that is not allowed to be advertised on television (including guns, weapons and escort agencies).[15]

If assessed from the point of view of legal certainty, the regulatory situation is most peculiar. Looking at the Preamble of the UCP Directive, there is no doubt that product placement is a lawful marketing practice, provided that it is 'legitimate'. However, the Directive offers no guidance on what distinguishes 'legitimate' from 'illegitimate' product placement beyond the general unfairness clause and the two sub-clauses on misleading and aggressive commercial practices. By analogy with the AVMS Directive, one may argue that surreptitious advertising, which is defined as 'the representation in words or pictures of goods, services, the name, the trade mark or the activities of a producer of goods or a provider of services in programmes when such representation is intended by the media service provider to serve as advertising and might mislead the public as to its nature'[16] and which remains prohibited under the AVMS Directive,[17] would constitute an illegitimate marketing technique, as it would omit material information and may as a result significantly distort the economic behaviour of the average consumer. By contrast, product placement which is disclosed to the consumer via notices, logos or other means should perhaps not be considered unfair insofar as it would not satisfy the requirements of the general clause in Article 5 or those of the sub-clause defining a misleading practice.[18]

The boundary is all the more difficult to draw if the question is considered in light of the different starting point which the AVMS Directive takes that 'product placement shall be prohibited'. It is only if it is expressly authorized by a Member State and that it fulfils the conditions which the AVMS Directive lays down that product placement becomes 'legitimate'. However, such reasoning cannot apply to the UCP Directive which relies on a maximum harmonization clause, as opposed to Article 11 of the AVMS Directive which is an instrument simultaneously of optional, minimum and partial harmonization: optional in the sense that Member States can decide whether or not to liberalize product placement; minimum in the sense that Member States can decide to exceed the minimum level of protection provided in the AVMS Directive and extend the list of programmes where no product placement can take place or the list of products which cannot be placed;[19] and partial in the sense it leaves certain fields uncoordinated at the EU level, as discussed below.

One should also establish the scope of both instruments to determine the extent to which product placement is allowed at the EU level. The AVMS Directive deals specifically with audiovisual commercial communications, defined as images with or without sound which are designed to promote, directly or indirectly, the goods, services, or images of a natural or legal entity pursuing an economic activity. Such images accompany or are included in a programme in return for payment or for similar consideration or for self-promotional purposes. Forms of audiovisual commercial communication include, inter alia, television advertising, sponsorship, teleshopping and product placement.[20]

Thus, if a communication is not offered in return for remuneration or self-promotional purposes, and does not accompany a programme, then it falls outside the scope of the AVMS Directive. It is therefore arguable that communications which do not accompany a programme may fall within the scope of the UCP Directive, which is more broadly defined,[21] and similarly for media which are not covered by the AVMS Directive but may nonetheless contain product placement. As already stated above, it is all the more important to determine the respective scopes of application of the UCP and the AVMS Directives, as these two directives do not rely on the same harmonization techniques and, consequently, do not leave the same margin of regulatory discretion to Member States. The AVMS Directive is a measure of minimum harmonization which allows Member States to adopt more protective measures in the fields it coordinates, while the UCP Directive is not. One is therefore led to conclude that the objective of legal certainty pursued by the UCP Directive is significantly eroded as a result of a poor definition of its scope and its relationship with other provisions of EU law which also pursue consumer protection objectives.

Another way to look at the problem may be to consider the interests that the UCP Directive and the AVMS Directive respectively purport to protect. Whilst the UCP Directive focuses exclusively on the economic interests of consumers,[22] the TV and now the AVMS Directives are intended to ensure the protection of other concerns, including health and safety.[23] Article 9(1) of the AVMS Directive prohibits audiovisual commercial communications which encourage 'behaviour prejudicial to health or safety', and in particular those which cause 'physical or moral detriment to minors', for tobacco products, as well as for medicinal products and medical treatments available only on prescription. The AVMS Directive also requires that 'audiovisual commercial communications for alcoholic beverages shall not be aimed specifically at minors and shall not encourage immoderate consumption of such beverages.[24] Furthermore, it provides that 'Member States and the Commission shall encourage media service providers to develop codes of conduct regarding inappropriate audiovisual commercial communications, accompanying or included in children's programmes, of [unhealthy] foods and beverages.'[25] Such concerns are explicitly excluded from the scope of the UCP Directive, which is 'without prejudice to [EU] or national rules relating to the health and safety aspects of products'.[26] Member States are therefore able to 'retain or introduce restrictions on grounds of the protection of the health and safety of consumers in their territory wherever the trader is based, for example in relation to alcohol, tobacco or pharmaceuticals'.[27] The UK rules, which have extended the ban on product placement to a range of products and services whose consumption should be limited, clearly rest on a public health rationale. Consequently, even under the UCP Directive regime, a Member State should not be prevented from adopting rules banning the placement of products whose consumption is detrimental to the health and safety of consumers.

The issue is further complicated by the fact that the AVMS Directive is (as was the TV Directive) a measure of partial harmonization. As such, it does not cover all matters relating to the regulation of audiovisual media commercial communications but leaves certain areas either unregulated or subject to other EU law provisions, including the UCP Directive. Thus, when called upon to assess the relationship between the TV Directive and the Misleading Advertising Directive (the predecessor to the UCP Directive),[28] the Court held in its De Agostini judgment:

The TV Directive does not preclude a Member State from taking, pursuant to general legislation on the protection of consumers against misleading advertising, measures against an advertiser in relation to television advertising broadcast from another Member State, provided that those measures do not prevent the retransmission, as such, in its territory of television broadcasts coming from that other Member State.[29]

The Court therefore confirmed that the Misleading Advertising Directive rather than the TV Directive applied to misleading commercial practices. This judgment remains relevant to the relationship between the AVMS and UCP Directives. Thus, in the event that the form of marketing under consideration raises concerns because it may be a commercial practice likely to materially distort consumer behaviour, then it seems that Member States are prevented from introducing an outright ban on 'legitimate' forms of product placement, due to the explicit wording of Recital 6 of the UCP Directive. Furthermore, as the UCP Directive is a measure of maximum harmonization, Member States no longer have the freedom which they had under the Misleading Advertising Directive to adopt stricter national rules banning such a form of marketing: the Court's case law interpreting the scope of the UCP Directive is unequivocal in this respect. Nevertheless, the ambiguous wording of Recital 6 is likely to give rise to difficult questions of interpretation for both EU and national authorities when carrying out assessments on what kind of product placement is 'legitimate' and does not, as such, fulfil the requirements of unfairness laid down in Article 5 or Articles 6 to 9 of the UCP Directive.

This raises the question of how measures pursuing simultaneously the dual objective of protecting the economic interests of consumers and their health should be assessed. The two rationales will often co-exist. The wording of Article 11 itself is very revealing in this respect and clearly shows that the reasons for banning product placement may be several: the condition that the presence of product placement should be disclosed to the public illustrates that the economic interests of consumers should be protected, so that they are not led into making a transaction they would not have made otherwise; whilst the ban on the product placement for tobacco or medicines or medicinal treatments only available on prescriptions or any other good or service whose excessive consumption is detrimental to public health clearly shows that health considerations may be at the heart of the restrictions imposed. How should a measure pursuing both objectives be assessed? Should it fall within the scope of the UCP Directive, even though public health considerations may be paramount? Applying the Mediaprint case law by analogy,[30] the conclusion would seem to be that it does.[31] This would lead to the paradoxical situation that Member States wishing to protect the economic and health interests of their citizens simultaneously would be well advised to argue that any ban on product placement they would be minded to impose and which would exceed the scope of the AVMS Directive is based on public health grounds. This may have the disadvantage of limiting the scope of the ban to specific products whose consumption does impact negatively on public health. However, it would also have the advantage of falling within the public health exception of the UCP Directive, thus allowing the laws of the Member States to escape the scrutiny of the EU legislature and the argument that the measure is contrary to the UCP Directive. The fact remains that such a line of reasoning has a very strong potential to frustrate simultaneously both objectives pursued by the UCP Directive: firstly, it would be somewhat paradoxical to argue that consumer protection is better ensured if the measure adopted to protect consumers falls outside the very text of EU law which is intended to grant a high level of protection to consumers with a view to increasing their confidence in the internal market. Secondly, and very obviously, these tactics which Member States may, in time, be led to develop, cannot be conducive to legal certainty.[32]

  • [1] For a similar analysis focusing on the regulation of marketing to children, see A Garde, 'The Unfair Commercial Practices Directive: A Successful Example of Legislative Harmonisation?', in P Syrpis (ed.), The Judiciary, the Legislature and the Internal Market (Cambridge University Press, 2012) 118.
  • [2] [1989] OJ L 298/23.
  • [3] [2010] OJ L 95/1. For more information on the AVMS Directive (in English), see A Harcourt and S Weatherill (eds), 'Special Issue on the Consumer and EU Audiovisual Policy' (2008) 31 Journal of Consumer Policy, O Castendyk, E Dommering and A Scheuer, European Media Law (The Hague: Kluwer Law International, 2008); J Harrison and L Woods, European Broadcasting Law and Policy (Cambridge: Cambridge University Press, 2007); I Katsirea, Public Broadcasting Standards and European Law (The Hague: Kluwer Law International, 2008); M Burri-Nenova, 'The New Audiovisual Media Services Directive: Television Without Frontiers, Television Without Cultural Diversity' (2007) 44 CMLRev. 1689.
  • [4] Emphasis added.
  • [5] COM (2005) 646 final. See in particular at Recital 40: 'product placement should be allowed under certain circumstances'; Recital 46: 'Product placement is a reality in cinematographic works and in audiovisual works made for television, but Member States regulate this practice differently. To ensure a level playing field, and thus enhance the competitiveness of the European media industry, it is necessary to adopt rules for product placement'; and art 3h laying down the conditions at which product placement should be allowed.
  • [6] Even though there were controversies regarding whether the TV Directive should be interpreted as prohibiting product placement in television programmes produced in the European Union (the TV Directive does not mention product placement), the general view seemed to be that product placement was banned as a result of the separation principle enshrined in the directive that 'television advertising shall be readily recognizable as such and kept quite separate from other parts of the programme service by optical and/or acoustic means' (art 10(1) of the TV Directive).
  • [7] The Commission estimated that 'product placement, in particular, could generate substantial additional resources for the audiovisual value-chain, starting from linear service providers.
  • [8] The consultation documents are available at ec.europa.eu/avpolicy/reg/history/ consult/index_en.htm. The European Parliament argued in favour of prohibiting unduly prominent placement as well as informing viewers of the presence of product placement in programmes. For the legislative history of the AVMS Directive, see: ec.europa.eu/avpolicy/ reg/history/codecision/index_en.htm.
  • [9] Directive 2007/65/EC [2007] OJ L332/27. The Commission then proposed to codify the AVMS Directive, and a new directive was adopted to this effect in March 2010: Directive 2010/13/EU [2010] OJ L95/1. The AVMS Directive expands the scope of the TV Directive to all audiovisual media services, including the internet and on-demand services.
  • [10] Art 11 must be read in light of art 9 which contains the rules applying to all forms of audiovisual commercial communications.
  • [11] Art 11(2).
  • [12] Art 11(3) provides a list of programmes in which product placement may be used (except if Member States decide otherwise), as well as a list of the minimum requirements any programme containing product placement shall meet.
  • [13] O Castendyk, E Dommering and A Scheuer (n 65) 912.
  • [14] For an overview of the implementation of art 11 in the Member States, see Product Placement (European Audiovisual Observatory, 2010).
  • [15] See Rule 9.13 of Ofcom Broadcasting Code on commercial references featuring within television programming, which entered into force on 28 February 2011 and which should be read in light of paragraphs 1.109 to 1.116 of Ofcom's interpretative (non-binding) guidance. For a discussion of the relationship between the UK rules on product placement and the AVMS Directive, see A Garde, 'Towards the Liberalisation of Product Placement on UK Television?' (2011) 16 Communications Law 93. More generally, on the regulation of product placement across the EU Member States, see C Angelopoulos, 'Product Placement in European Audiovisual Productions', in Product Placement (European Audiovisual Observatory, 2010).
  • [16] Art of the AVMS Directive.
  • [17] Art 9(1) of the AVMS Directive provides that 'audiovisual commercial communications shall be readily recognisable as such. Surreptitious audiovisual commercial communication shall be prohibited.' On surreptitious advertising, see also the Court's decision in Case C-52/10 Eleftheri tileorasi and Giannikos [2011] ECR I-3239.
  • [18] Recital 90 of the AVMS Directive provides that 'surreptitious audiovisual commercial communication is a practice prohibited by this Directive because of its negative effect on consumers. The prohibition of surreptitious audiovisual commercial communication should not cover legitimate product placement within the framework of this Directive, where the viewer is adequately informed of the existence of product placement. This can be done by signaling the fact that product placement is taking place in a given programme, for example by means of a neutral logo.'
  • [19] Art 4 provides that 'Member States shall remain free to require media service providers under their jurisdiction to comply with more detailed or stricter rules in the fields coordinated by this Directive provided that such rules are in compliance with Union law.' However, the freedom of Member States to exceed the minimum standard of protection is subject to two limits: the State of Establishment principle and the general Treaty provisions and more specifically arts 34 and 56 TFEU on the free movement of goods and services respectively. This mechanism set up is illustrated by the Court's decision in Case C-34/95 De Agostini [1997] ECR I-3875. See also O Bartlett and A Garde, 'Time to Seize the (Red) Bull by the Horns: The EU's Failure to Protect Children from Alcohol and Unhealthy Food Marketing' (2013) 38, no 4 EL Rev 498.
  • [20] Art 1(h).
  • [21] This would be the case, for example, of advergames which contain a lot of ingame advertising and therefore constitute a form of product placement. On advergames, see A Nairn and H Hang, Advergames, It's Not Child Play (Family and Parenting Institute, London, 2012).
  • [22] Recital 8 of the Preamble provides that the Directive 'directly protects consumer economic interests from unfair business-to-consumer commercial practices' and ensures, as stated in particular in art 1 of the Directive, 'a high level of consumer protection by approximating the laws, regulations and administrative provisions of the Member States on unfair commercial practices harming consumers' economic interests'. See also the Court's case law: e.g., Order of 4 October 2012 in Case C-559/11 Pelckmans Turnhout, at paragraph 19 (and the case-law cited), and Case C-206/11 ockjudgment of 17 January 2013, at paragraph 29.
  • [23] See also A Bakardjieva-Engelbrekt (n 6), 58.
  • [24] Art 9(1)(e).
  • [25] Art 9(2).
  • [26] Art 3(3).
  • [27] Recital 9 of the Preamble. The list is not exhaustive and could extend to the marketing of food high in fat, salt or sugar, to gambling services, as well as to other goods and services whose excessive consumption is similarly detrimental to public health.
  • [28] Council Directive 84/450/EEC of 10 September 1984 Relating to the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Concerning Misleading Advertising [1984] OJ L250/17, as amended by Directive 97/55/EC of the European Parliament and of the Council of 6 October 1997 Amending Directive 84/450/EEC Concerning Misleading Advertising to Include Comparative Advertising [1997] OJ L290/18.
  • [29] Case C-34/95 De Agostini [1997] ECR I-3875, at paragraph 38.
  • [30] Case C-540/08 Mediaprint [2010] ECR I-10909, in which the Court held that the Austrian government could not legitimately argue that its legislation fell outside the scope of the Directive because it essentially envisaged objectives relating to other goals than the protection of consumers (at paragraphs 25 to 28).
  • [31] On this case law, see Keirsbilck in this volume.
  • [32] However, the Commission considers in its First Application Report that 'the derogation should not be further extended. Whilst a few Member States signalled a need for such an extension, this need to apply certain rules at national level can be met by virtue of other EU legislation' (n 1) 5.
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