The case is the first to be brought under the Injunctions Directive of 1998, which allows a consumer body from one Member State to sue in the courts of another in order to enforce European-based consumer protection legislation.
It is possible that similar actions could be taken by other European regulatory authorities against UK companies – a fact that may be of concern to e-commerce businesses.
The OFT took the action against Belgian company D Duchesne SA, which trades as TV Direct Distribution and Just 4 You, in March, hoping to stop the mail order company sending what the OFT considers to be misleading mailings to UK consumers, contrary to the 1984 Misleading Advertising Directive.
The Directive provides protection against misleading and unacceptable comparative advertisements. In particular it states that an advertisement is misleading if it "in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor."
In this case D Duchesne had been sending unsolicited mail order catalogues to UK residents along with notification of a large prize win, typically £10,000. According to the OFT, many consumers were led to believe that they had to make a purchase from the catalogue in order to secure their alleged win. However, prize winners were pre-selected and the vast majority of recipients were unlikely to receive the cash prize they thought they had won.
Following complaints, the Advertising Standards Authority adjudicated against TV Direct Distribution in July 2001 and formally referred the case to the OFT in June 2003. Hampshire Trading Standards Department also referred the case to the OFT.
The OFT claimed that D Duchesne SA's prize notifications were misleading and were used to induce consumers to purchase its products. Approximately a million mailings a month were sent to UK consumers, with D Duchesne SA receiving 4,000 orders a day from its TV Direct Distribution and Just 4 You catalogues.
Welcoming the judgment, John Vickers, OFT Chairman, said:
"This is a ground-breaking court action. Consumers in the UK are increasingly being targeted from abroad and this case demonstrates the OFT's commitment to using its cross-border powers to protect the interests of consumers."
The Injunctions Directive was brought into force in the UK through the Enterprise Act 2002. It gives the OFT, other general enforcers and designated enforcers which are public bodies, the power to take action against businesses in certain other European countries that are infringing certain European-based consumer protection legislation.
This includes Directives relating to misleading advertising, consumer credit, unfair terms in consumer contracts and timeshares.
When a business based in another EU country harms the collective interests of UK consumers in relation to these specific Directives, the OFT will normally ask the relevant community enforcer to take enforcement action. However, the OFT is able to take action in other EU member states if no community enforcer can act.
The same rights are granted to these community enforcers in relation to UK businesses.