Advertising is undeniably a very effective and direct way of communicating with consumers. Through advertising, a company promotes the sale of goods or services to a target audience and, by creating certain associations and impressions, also aims to achieve better service or product recognition.
At the same time, advertising is a highly regulated activity, in particular because of its impact on consumers’ economic behaviour. Consumer protection in advertising is mainly regulated by the Consumer Protection Act (ZVPot-1),[1] which transposes EU rules on advertising practices into Slovenian law and will be the focus of this article. Companies[2] must also pay attention to sector-specific legislation regulating advertising of particular activities or particular services or products.[3]
One of the main rules is that advertising shall not contain inaccurate or untrue information, nor shall it contain or omit information in a way that causes or is likely to cause consumers to be misled and thereby unduly influence or is likely to influence their economic decisions. As will be shown later in this article, failure to do so may constitute a misleading and thus unfair business practice.
Green advertising is also becoming more and more common, and in some cases can turn into greenwashing. This article will outline the key new developments that companies can expect in this area and provide advice on how companies can prepare in advance for possible changes.
Companies may face prohibitive administrative decisions and possible fines in infringement proceedings if they breach the prohibition of misleading or unfair business practices. In addition to the legal sanctions described above, by misleading advertising a company risks losing the trust, loyalty and respect of its consumers or end customers.
Compliance with the legal rules on advertising is crucial to the success of any business. In order to avoid such consequences, companies should therefore always pay attention to the legal (theoretical) aspect of advertising, in addition to the marketing (practical) aspect, when formulating their advertising claims.
1. Misleading advertising as an unfair business practice
Business-to-consumer (B2C) business practices are all acts, omissions, conduct, statements or marketing communications of undertakings, including advertising and marketing, which are directly related to the promotion, sale or supply of a product to consumers (Article 46(4) of the ZVPot-1).
Advertising, as a sub-category of business practices, shall not be misleading, as this would constitute an unfair business practice (Article 38(1) in conjunction with Article 47(4) of the ZVPot-1).[4] Case law has already established that misleading advertising is, in particular, “advertising which gives the average consumer a false impression of a fact which is important to him before the conclusion of a transaction”.[5] It causes or is likely to cause the average consumer to take a transactional decision that they would not otherwise have taken.
This can occur in a number of ways, which will be explained in practical terms below:
- the company provides erroneous (i.e. untrue) information or information (even if partially accurate) in any way, including the entire presentation, which misleads or is likely to mislead the average consumer (“misleading acts”) (point 1);
- the company omits material information or provides it in a concealed or unclear, incomprehensible or ambiguous manner or at the wrong time (“misleading omissions”) (point 2).
Erroneous (untrue) information and misleading presentation of information
Article 49(1) of the ZVPot-1 lists the specific elements to which inaccurate information refers, or information which is presented in a way that misleads or is likely to mislead the average consumer, who makes or is likely to make a decision that they would not otherwise have taken.
This includes claims relating to the existence of the product, its main characteristics (e.g. its composition, method of manufacture, geographical or market origin, risks and results to be expected from its use), its price or the way in which it is calculated or the existence of a particular price advantage (e.g. promotional reductions or discounts), and the nature, characteristics and rights of the merchant.
In its case law, the CJEU also confirmed that it is a misleading commercial practice if a company provides erroneous and untrue information to only one single consumer in a single act.[6]
Advertising claims should be assessed as a whole, in the light of the overall impression of the advertisement.
Omission and inadequate presentation of essential information
Essential information is all the information that the average consumer needs to make a purchasing decision knowing all the relevant facts. This information must already be provided in the advertising message in a clear and readable way, i.e. not just in small print.
In assessing whether essential information has been omitted or inadequately presented, account must be taken of all the features and circumstances of the commercial practice in question, including the limitations of the medium of communication used (e.g. whether it is a television advertisement, a billboard, etc.).
For example, in the case Canal Digital Danmark, the CJEU assessed an advertising practice concerning the price of a subscription, where the consumer is required to pay both an ongoing monthly charge and an ongoing six-monthly charge. According to the CJEU, such a practice must be considered a misleading omission if the price of the monthly charge is specifically emphasised in the marketing, while the price of the six-monthly charge is omitted altogether or presented in a less distinctive way, if such omission leads the consumer to make a transactional decision that they would not have taken otherwise.[7]
2. Sanctions
In the context of an inspection, the Market Inspectorate of the Republic of Slovenia may issue a prohibition decision. In this case, this means prohibiting the use of unfair commercial practices.
However, a prohibition decision in administrative proceedings is not the only sanctioning option available to the inspector. The Inspector may also initiate infringement proceedings if, in the course of an inspection, they find that an act also constitutes an offence and issue an infringement notice.
The possible fines for a legal person range from EUR 5,000 to EUR 50,000 and for the responsible person of a legal person from EUR 1,500 to EUR 5,000.
Coming: new rules on the prohibition of misleading green claims
A specific example is the so-called greenwashing, where a company suggests or otherwise creates the impression that a good or service has a positive impact on the environment, does not have an impact on the environment, or is less damaging to the environment than competitive goods or services.[8] Where such claims are not true or cannot be verified, the practice is often referred to as false green advertising.[9]
Green claims may already be misleading under current Slovenian legislation,[10] and more specific regulation is foreseen. Two EU Directives are key in this respect, namely the already adopted Directive (EU) 2024/825 as regards empowering consumers for the green transition and the proposal for a directive on the substantiation and communication of explicit green claims (Green Claims Directive), which is still in the pipeline.
Directive (EU) 2024/825 regarding empowerment of consumers for the green transition
On 26 March 2024, the new Directive regarding empowerment of consumers for the green transition (“Directive 2024/825”) entered into force. Member States shall transpose Directive 2024/825 into national law by 27 March 2026 at the latest and apply it from 27 September 2026 at the latest.
Directive 2024/825 introduces two key innovations, namely a new definition of commercial practices that are considered to be misleading in certain cases and an extension of the so-called black list, the list of practices that are considered unfair in all circumstances.
The following elements are now included in the definition of misleading commercial practices:
- misleading consumers regarding the environmental and social characteristics of a product or service, and regarding circularity aspects, such as durability, reparability or recyclability of a certain product;
- making environmental claims regarding future environmental performance without clear, objective, publicly available and verifiable commitments;
- advertising benefits to consumers that are irrelevant and do not derive from any feature of the product or business (e.g. Claiming that a particular brand of bottled water is gluten-free or that paper sheets are plastic-free).
There are 12 new examples added to the blacklist of advertising practices, including that the sustainability label will not be allowed to be used without an established certification scheme, and that a company will not be allowed to use generic environmental claims (e.g. eco-friendly) unless it can prove them against certain standards.
Green Claims Directive
A proposal for a Directive on the substantiation and communication of explicit green claims (“Green Claims Directive”) is currently being adopted. The Green Claims Directive builds on the aforementioned Directive 2024/825 as regards specific (explicit) environmental claims (e.g. packaging made of 30% recycled plastic).
The Green Claims Directive provides for, inter alia, three key innovations:
- clear criteria on how companies should prove their environmental claims and labels (e.g. use of scientific methods and verifiable data/information to carry out analyses to support their claims);
- requirements that these claims and labels are verified by an independent and accredited verifier (i.e. an officially accredited body: an independent body with the appropriate expertise, equipment and infrastructure to carry out verifications);
- – new rules on the governance of ecolabelling schemes (i.e. minimum criteria for ecolabels, which will ensure greater transparency and credibility). However, the Green Claims Directive does not apply to ecolabelling schemes or claims covered by the regulations mentioned in the Directive or other EU rules, for example in the area of financial services.
The Green Claims Directive will introduce an important rule, i.e. companies will have to undergo a verification process of the claim by an officially accredited body before using explicit environmental claims.
The maximum penalty foreseen for a breach of the rules under the Green Claims Directive can amount to 4% of a company’s annual turnover in EU Member States.
Although the Green Claims Directive is still in its infancy, companies can use this time to consider whether their current advertising claims meet the upcoming standards. Advance preparation is also useful in terms of adapting future marketing strategies in time.
3. Key guidelines for companies when creating advertising messages
The development of advertising campaigns in a company should always include at least the following considerations:
- the advertisement shall not contain erroneous or untrue statements or claims that could create a false impression;
- the advertisement shall not omit or disclose in a vague, incomprehensible, ambiguous or untimely manner information essential for the consumer to make an informed purchasing decision;
- the advertiser shall be able to confirm the truth of the advertising claim and it is therefore prudent to carefully collect and store all relevant material;
- the designers of the advertisement should keep the average consumer and the overall impression of the advertising campaign in mind;
- any sector-specific legislation relevant to the products or services the company intends to advertise should be checked;
- green claims shall be truthful and presented in a clear, precise, correct and unambiguous manner, and companies shall be particularly careful when using general claims such as: environmentally friendly, eco, green, environmentally correct, climate friendly, etc.
Author: Iza Senčar, Junior Associate
[1] Consumer Protection Act (in Slovene: Zakon o varstvu potrošnikov, Official Gazette of the Republic of Slovenia, No. 130/22, “ZVPot”).
[2] By definition, the term company “shall be any legal or natural person engaged in a gainful activity, irrespective of their legal and organisational form or ownership status, including other organisations or other natural persons, which provide goods, services and digital content to consumers in lieu of payment. That person is considered to be a company even if it acts through a person acting in its name or on its behalf.
[3] For example, in relation to the media, restrictions on alcohol, tobacco and related products, pharmacy and health services, etc.
[4] If the advertising is aimed at businesses (B2B), the assessment of misleading advertising is carried out according to the elements contained in Article 38(2) of the ZVPot-1: “Advertising addressed to companies or that could reach companies shall be considered misleading when by any means, including its presentation, it misleads or could mislead companies and, by reason of its deceptive nature, is likely to influence their economic behaviour or which, for the same reasons, injures or is likely to injure competitors.” The focus of this article will be on misleading advertising directed at consumers.
[5] Judgment of the Administrative Court of the Republic of Slovenia I U 1461/2020-2014 of 1 September 2015.
[6] Judgment of 16 April 2015 in the case UPC Magyarország Kft., C-388/13, point 60.
[7] Judgment of 26 October 2016 in the case Canal Digital Danmark A/S, C-611/14, points 46– 49.
[8] COMMISSION NOTICE, Guidance on the interpretation and application of Directive 2005/29/EC of the European Parliament and of the Council of 29 December 2021 concerning unfair business-to-consumer commercial practices in the internal market of 29 December 2021, 2021/C 526/01 (“Guidance”), page 72.
[9] Ibid.
[10] For example if they consist of vague, ambiguous and over-generalised claims about alleged benefits without adequate justification of these benefits, and in any case it is prohibited to claim that a company is a signatory to a code of conduct when it is not, or to display, for example, a trust mark, quality mark or similar without having obtained the relevant authorisation.
