Office of Fair Trading (OFT) closed consumer enforcement case.
Complainant: Office of Fair Trading (OFT) (own-initiative investigation)
Case Reference: CRE-E/18299
Investigation into: Agence de Marketing Appliqué trading as Vital Beauty and Swiss Home Shopping, Company registration number: 0866.619.675, with a registered office address at Europole, 1 Dreve Gustave Fache, 7700 Mouscron, Belgium
UK consumers were receiving unsolicited prize draw mailings under the names 'Vital Beauty' and 'Swiss Home Shopping'. The OFT were concerned that the mailings were misleading in that they appeared to notify consumers of a major prize win and linked claiming the 'prize' to the making of a purchase from an enclosed catalogue which offered household goods and health remedies. In fact the small print revealed that recipients were merely being invited to participate in a prize draw with a very small chance of winning the major prize.
Directive 2005/29/EC on Unfair Commercial Practices and the Consumer Protection from Unfair Trading Regulations 2008.
In September 2007 the OFT obtained a signed undertaking from Agence de Marketing Appliqué (AMA), a Belgian mail order company trading under the names 'Vital Beauty' and 'Swiss Home Shopping', that it would not continue to publish misleading prize draw mailings and would make various changes to its future mailings. For further details see press release OFT obtains undertakings from Belgian mail order company that was issued at that time.
However, following the undertaking, the OFT received further consumer complaints regarding AMA's mailings and the OFT concluded that these mailings were still misleading. As such, in September 2008 the OFT made a referral against AMA to our Belgian counterparts, the Directorate-General Enforcement and Mediation ('DGEM') of the Federal Public Service for Economy, SMEs, Self-Employed and Energy, under the EU Consumer Protection Co-operation Regulation ('CPC Regulation').
The OFT considered Vital Beauty and Swiss Home Shopping mailings to be misleading and in breach of the EU Unfair Commercial Practices Directive 2005/29/EC ('UCPD'). In particular, the OFT considered these mailings to be misleading as they appeared to notify UK consumers of a major prize win and linked claiming the prize, or receiving it more quickly, to the making of a payment when in fact no purchase was necessary.
The CPC Regulation established a network of public enforcement agencies in every EU member state to facilitate effective cross-border co-operation on infringements of consumer law. The aim of the CPC Regulation is to provide a formal mechanism which allows designated enforcement bodies to refer cases to their European counterparts for appropriate action. Under the CPC Regulation all member states have a duty to consider taking action to protect the collective interests of consumers when they are requested to do so.
Belgian Commercial Court hearing
An interim injunction procedure was filed by the DGEM on 14 June 2010 before the Presiding judge of the Tournai District Commercial Court and the full hearing took place on 16 February 2011. The Presiding judge ruled on 16 March 2011 that AMA's advertising disseminated in both Britain and France under the brand names Vital Beauty and Swiss Home Shopping were illegal and in breach of the law (namely articles 5, 6 and 7 and practices 19 and 31 of Annex I of the UCPD) for the following reason:
- they give recipients the false impression that the recipient is the winner of the first prize in a lottery, or a large sum, and that placing an order in the accompanying catalogue is mandatory or is likely to speed up the process of receiving the prize when in fact the prize won is merely a discount voucher to be redeemed exclusively on purchases of AMA's products. This is unfair and misleading because it obliges consumers to spend money to obtain information on whether they have definitely won the amount and in so far as AMA refrains from awarding the prizes described or a reasonable equivalent whilst claiming to offer a competition.
The ruling prevented AMA from continuing to send misleading mailings under the names of Vital Beauty and Swiss Home Shopping to UK and French consumers. Failure to comply with the injunction would result in a €2,500 fine for each offending mailing sent, to a maximum of one million euros. AMA were also required to place a summary of the judgment in two national British and French newspapers.
Mons Court of Appeal- First Chamber hearing
AMA appealed this decision on 30 March 2011 and the appeal was heard by the Mons Court of Appeal. The Mons Court of Appeal issued a judgment on 15 November 2011 in which it allowed AMA's appeal and set aside the original order. However it ruled that AMA's mailings were illegal under regulations 5 and 6 of the Consumer Protection from Unfair Trading Regulations 2008 and article L.121-1 of the French Consumer Code as they were likely to give the misleading impression that:
- the recipient of the mailing is the winner of the first prize, which is a large sum, in the lottery that it organises, when in fact there is only one chance out of the number of pre-drawn numbers that the recipient is the winner
- placing an order is likely to have a positive influence over the process of paying out the first prize.
The Court of Appeal ordered the cessation of these practices within three months of the ruling, and ordered the payment of a reduced penalty of €100 for each offending mailing sent in breach of the judgment, to a maximum of one million euros. The judgment came into force on 14 February 2012. AMA have lodged an appeal but the judgment remains in force whilst the appeal process progresses. AMA have advised the DGEM that they have ceased sending the mailings to the UK and France.