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GERMAN REPORT

by Prof. Dr. Susanne Augenhofer, LL.M. (Yale)1*

susanne.augenhofer@rewi.hu-berlin.de

“On what legal grounds could or should commercial practices, i.e. manufacturing,

marketing, distribution or advertisements, of items produced or services rendered in

violation of standards, statements, commitments or CSR voluntarily issued or adopted

by an undertaking, be sanctioned or prevented?”

I. Introduction

In 1970, Milton Friedman, the well-known American economist, said that “the business of

business is business”. The prevailing view of businesses was that the only purpose of a

business was to make a profit. The phrase “business ethics” was hardly known and close to

being an oxymoron. In many respects, such merely reflected the view that consumers placed

little or no importance in the 1970s on issues such as environmental and climate protection,

human rights, fair compensation for third world employees etc. However, nowadays, the

consumer has matured and the business which ignores such issues risks much. In an era of

brand image where the psychological message of a brand is all important, businesses cannot

risk their brands being seen as being insensitive and indifferent to the mature, well-informed

modern consumer’s concerns about environment, working conditions, discrimination, etc. As

has been said in the last decade by two well-known proponents of corporate social

responsibility (CSR), as a counter statement to Milton Friedman “Today the business of

business is everybody’s business”2. This phrase reflects the fact that the modern consumer

knows that a business can worsen man’s lot (industrial pollution, subsistence wages in third

world) or improve man’s lot. The modern consumer prefers the latter’s services and goods to

the former even if more expensive than the former’s. The speed of global communications

e.g. via the Internet means that the consumer is well-informed and businesses can no longer

hide their less ethical practices from the consumers. 1 Assistant Professor of Civil Law and European Private Law with a special focus on Consumer and Competition Law, Humboldt-University Berlin. * The author would like to thank Carmen Appenzeller, Michael Epping and Stephan Rauch for help with editing this report. 2 Grayson & Hodges “Corporate Social Responsibility” Greenleaf Publishing.

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Many businesses have responded to these concerns by voluntarily adopting a CSR policy into

their business practices. A CSR policy can have many dimensions from agreeing to only buy

commodities (e.g. coffee, cocoa) from traders who ensure that the farmers get a fair share of

profit (the Fair Trade initiative) to supporting local community initiatives. Depending on

one’s level of cynicism, this is either a realisation by businesses that without such a policy,

many consumers will not buy their goods or services or alternatively, symptomatic of a more

enlightened altruism at board level than existed in the past. In many cases, this altruism has

been encouraged by national legislation requiring businesses to have regard to environmental,

social and human rights concerns rather than merely the concerns of the shareholder.

CSR policies come in different shapes and sizes. For instance, CSR policies can be promoted

by Non Governmental Organisations (NGOs) which businesses are then invited to comply

with. Such CSR policies are usually provided under the umbrella of a registered trade mark

which may be a registered trade mark, collective mark or certification mark. These may

become so powerful that they become a CSR Standard, i.e. a business that does not adopt

such a standard risks being foreclosed from a particular market. In other cases, sui generis

CSR policies may be adopted unilaterally by businesses. CSR policies can be orientated

internally (e.g. commitment to working conditions of employees, use of dolphin-friendly

nets, etc.) or externally (commitment to donate x% of revenue to combating malaria, etc.).

A temptation for many businesses will be to exaggerate the extent of their CSR policy or

indeed not to comply with their own CSR policy. Such temptation arises because a well-

publicised CSR policy wins consumers but costs money. The broad issue for consideration is

whether commercial practices by a business that is in breach of its CSR policy is contrary to

the law of your country and if so what the remedies are. Furthermore, the paper examines

whether the law should be changed in your country to align itself with public concerns that

businesses should adhere to or not exaggerate their CSR policies. It is emphasised that one is

concerned only with CSR policies voluntarily adopted by a business and not those imposed

on businesses by the law of a country. However, this paper is concerned with the voluntary

adoption by businesses of CSR policies promoted by NGOs. In other words, it is concerned

with any CSR which is not the direct result of state legislation.

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II. THE LAW

1. Please summarise briefly the different types of CSR policies which exist in your

country and which types give rise to legal concerns?

In Germany there are various kinds of corporate social responsibility (CSR) policies. As the

introduction already suggests, CSR policies may be adopted by or together with NGOs,

business associations, or consumer organisations, and they may address questions of external

(e.g. eco/social-sponsoring, eco/social-friendly branding) or internal policy (e.g. treatment of

employees).

With regard to legal consequences, the main distinction depends on whether or not a CSR

policy falls within the definition of code of conduct (Verhaltenskodex) according to Section 2

subsection 1 No. 5 Act Against Unfair Competition (Gesetz gegen den unlauteren

Wettbewerb,3 UWG). This provision states that codes of conduct “shall mean an agreement or

set of rules which defines the conduct of entrepreneurs who have undertaken to be bound by

the code in relation to business sectors or individual commercial practices, without such

obligations having been imposed by statutory or administrative provisions”4. By contrast, the

definition of CSR is broader, encompassing any social or environmental issue a business

addresses without being legally obliged to do so.5 Consequently, while all codes of conduct

can be CSR policies, not all CSR policies are codes of conduct. For example, the statement

by an enterprise that a certain percentage of its profit is donated to charity can be qualified as

a CSR policy but not as a code of conduct.

Within these two main categories, CSR policies can be found in practice with different

variations, for instance codes of conduct can be adopted with or without the involvement of

public authorities or organisations. As an example of the former, we may consider the code

for quality and safety regarding the online sale of cars and motorbikes (Kodex für Qualität

und Sicherheit beim Fahrzeughandel im Internet). This code was developed jointly by the

Centre for Protection Against Unfair Competition (Zentrale zur Bekämpfung gegen 3 Gesetz gegen den unlauteren Wettbewerb i. d. F. der Bekanntmachung vom 3. März 2010 (BGBl. I p. 254). 4 In this country report the English translation of the UWG provided for by the German government is used. It can be found at http://www.gesetze-im-internet.de/englisch_uwg/englisch_uwg.html#UWGengl_000P2. 5 In this country report the definition of CSR provided for by the Commission in COM (2006) 136 final, p. 2, is used: “Corporate social responsibility (CSR) is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. It is about enterprises deciding to go beyond minimum legal requirements and obligations stemming from collective agreements in order to address societal needs. Through CSR, enterprises of all sizes, in cooperation with their stakeholders, can help to reconcile economic, social and environmental ambitions.”). Cf. also the new definition used in COM (2011) 681 final, p. 3, “the responsibility of enterprises for their society”.

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unlauteren Wettbewerb e.V., Wettbewerbszentrale), the German motor industry, the German

automobile club, and two online selling platforms. Other examples of CSR in the form of

codes of conduct are the advertising regulations published by the German advertising self-

regulation body (Werberat). Generally speaking, one can note that the reference to CSR

policies in commercial practices has increased over the last years. CSR policies are used

more often especially with regard to organic food and environmental issues. For example,

most supermarket chains in Germany refer on their homepage to the social and ecological

factors under which their products are manufactured. But one can also find CSR policies

involving donations to charities or other external activities, e.g. a supermarket claiming that it

will plant a tree for every 10 EUR spent by a customer.

In addition, CSR policies are more frequently the subject of public statements in the

aftermath of crises. As an example, one can refer to the collapse of factory buildings in

Bangladesh in May 2013. Soon after, clothing companies – including German enterprises –

published statements and / or codes of conduct aiming to ensure that their clothes are

produced respecting the fundamental rights of their workers, particularly regarding adequate

safety and working hours. Once again, we can observe the above-mentioned distinction

between CSR in the (narrow) form of codes of conduct and CSR policies more broadly: some

businesses have signed a code of conduct, the Bangladesh Safety Accord6, which was

developed i.a. by IndustrieALL and UNI Global Union,7 while others have developed their

own CSR policies with regard to worker safety. As will be analysed in the following

paragraphs, the UWG is capturing all CSR policies – or rather their violation – regardless of

their specific form as long as they can be qualified as “commercial practices” (cf. Section 2

subsection No. 1 UWG).

6 Accord on Fire and Building Safety in Bangladesh of May 13, 2012, available at: http://www.laborrights.org/creating-a-sweatfree-world/resources/bangladesh-fire-and-building-safety-agreement. 7 Cf. for a list of participating companies, mostly from Europe: http://www.industriall-union.org/bangladesh-accord-on-fire-and-building-safety-released.

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2. Does the law in your country permit the prevention or sanctioning of a business

which carries out commercial practices that breach a CSR policy voluntarily

adopted by the business? In particular

2.1. Please set out the relevant legislation and its material aspects. Does the law

differentiate between different types of commercial practices that breach a CSR

policy? In particular, please distinguish between sui generis laws and those laws

which are more general in nature but can be applied to such practices? For

instance, if a business breaches its own self-imposed CSR policy, are consumer

protection laws applicable? Are there sui generis laws dealing specifically with

breaches of CSR policy?

a) The UWG – general remarks

The law applicable to breaches of CSR policies – as long as they can be qualified as

commercial practices (Section 2 subsection 1 No. 1 UWG)8 – in Germany is the above-

mentioned UWG. As the first act against unfair competition was already enacted in 18969, it

is fair to say that the law against unfair competition / commercial practices has a long

tradition in Germany. The current UWG was adopted in 200410 but amended in 200811 when

Germany had to implement the Unfair Commercial Practices Directive (UCPD)12. The UWG

generally applies to B2C and to B2B commercial practices as it aims at the protection of

competitors, consumers and other market participants as well as at the protection of the

8 “‘Commercial practice’ shall mean any conduct by a person for the benefit of that persons or a third party’s business before, during, or after, the conclusion of a business transaction, which conduct is objectively connected with promoting the sale or the procurement of goods or services, or with the conclusion or the performance of a contract concerning goods or services; ‘goods’ shall be deemed to include immovable property as well, and ‘services’ also rights and obligations”. As result of this broad definition it is hard to imagine CSR policies which do not fall within this definition as all CSR policies aim at the creation of a positive impression of a business and thereby the enhancement of sale. For a different view, pointing out that CSR policies are made on a voluntary basis and therefore should not cause any legal consequences, cf. the references in Balitzki, Werbung mit ökologischen Selbstverpflichtungen,GRUR 2013, 670-675 (671, fn. 16). 9 Gesetz gegen den unlauteren Wettbewerb, 27.5.1896, RGBl. p. 145. 10 Gesetz gegen den unlauteren Wettbewerb neugefasst am 3.7.2004, BGBl. I, p. 1414. 11 Bekanntmachung der Neufassung des Gesetzes gegen den unlauteren Wettbewerb, BGBl. I 2008, p. 2949 ; cf. e.g. Köhler, Die Umsetzung der Richtlinie über unlautere Geschäftspraktiken in Deutschland, in Augenhofer (ed.), Die Europäisierung des Kartell- und Lauterkeitsrechts, 2009, pp. 101-116. 12 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), OJ L 149 of 11.6.2005, p. 22-39.

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public’s interest in undistorted competition (cf. Section 1 UWG). However, as a result of the

implementation of the UCPD – which applies to B2C commercial practices only – there are

slightly different rules applicable to B2C relations. For example, Annex I of the UCPD was

implemented only with regard to B2C relations (cf. Section 3 subsection 3 UWG).

It is important to note already at that point that a violation of CSR policies – regardless

whether it can be qualified as code of conduct or not – is not per-se unfair.13

While today references to CSR policies are allowed in commercial practices unless they are

misleading, aggressive or unfair under the general clause of Section 3 subsection 2 UWG (for

details cf. the following paragraphs), such statements were considered unfair – and

consequently prohibited – under the German law of unfair competition for a long time.

Courts held that statements referring to facts that were not directly connected to the

characteristics of the advertised product or service would influence consumers in an

inappropriate way by putting them under pressure, thus deterring competition on the merits.14

As an example of a CSR policy held unfair under this former approach, one can name an

advertisement by McDonald’s, stating that a certain percentage of profits from all Big Macs

sold on a specific date would be donated to a German charity organisation.15

b) CSR in the form of codes of conduct

As stated above, the main distinction – regarding the legal consequences of a breach of a

business that breaches its CSR policy – has to be drawn between codes of conduct and CSR

policies which do not fit into the definition of codes of conduct provided for in Section 2

subsection 1 No. 5 UWG. The definition in this provision was adopted from Article 2

lit. f UCPD when the directive was implemented into German law. As a result, Section 2

subsection 1 No. 5 UWG has to be interpreted in light of the UCPD. To be qualified as code

of conduct, a CSR policy consequently must meet the following criteria:

• agreement or set of rules

Codes of conduct under Section 2 subsection 1 No. 5 UWG require an agreement or a set of

rules. It has been disputed whether there must be more than one party to a code of conduct.

13 Cf. BGH GRUR 2011, 432 – FSA-Kodex. 14 Cf. e.g. BGH GRUR 1991, 545 – Tageseinnahmen Mitarbeiter; BGH GRUR 1995, 595 – Kinderarbeit; BGH GRUR 1995, 742 – Arbeitsplätze bei uns. 15 BGH GRUR 1987, 534 – McHappy-Tag.

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From the term “agreement” it is concluded that indeed there must be more than one party to a

code of conduct.16 However, it is sufficient that one party has already undertaken to be bound

by the code as long as other businesses have the possibility to sign the code as well.17 It has

rightly been pointed out that for the qualification as codes of conduct, it is of no importance

what kind of legal nature an agreement or set of rules has and how it is labelled.18 In addition,

the qualification as a code of conduct has to be made regardless of the process by which the

agreement was developed.19

It has been discussed whether the definition in Section 2 subsection 1 No. 5 UWG requires

the code of conduct to have external effects. This discussion seems to be rather hypothetical

as codes of conduct used as CSR policy will always have external effects in the sense that it

will be made available to the public. Consequently, the German Corporate Governance

Code20 – as long as a business is referring to the fact that it has adopted it – has to be

regarded as code of conduct as well.21

• in relation to commercial practices

The code of conduct must regulate the behaviour of businesses with regard to commercial

practices. The term commercial practices is defined in Section 2 subsection 1 No. 1 UWG

and has been introduced into the UWG when implementing the UCPD. It follows from this

definition as well as from the jurisprudence of the CJEU that the term ‘commercial practices’

has to be understood in a broad sense.22 Consequently, the scope of application of codes of

16 Cf. e.g. Birk, Corporate Responsibility, unternehmerische Selbstverpflichtungen und unlauterer Wettbewerb, GRUR 2011, 196 (199). 17 Cf. e.g. Alexander, Verhaltenskodizes im europäischen und deutschen Lauterkeitsrecht, GRUR-Int. 2012, 965 (967). 18 Cf. e.g. Alexander, Verhaltenskodizes im europäischen und deutschen Lauterkeitsrecht, GRUR-Int. 2012, 965 (967). 19 Cf. Keller, in Harte-Bavendamm/Henning-Bodewig (ed.) Gesetz gegen den unlauteren Wettbewerb, 2013, § 2 Rn. 165. The term “code owner” (Article 2 lit. f UCPD) was not implemented into German law but still has to be considered. According to Article 2 lit. f UCPD also authorities or organisations, e.g. consumer organisations, can be code owners. However, as pointed out earlier, it is not required that such organisations are involved in the adoption of a code. 20 With German Corporate Governance Code we refer to the Corporate Governance Code which was adopted by the Governance Commission introduced by the German Ministry of Justice, cf. http://www.corporate-governance-code.de/index-e.html. 21 For a different opinion cf. Alexander, Verhaltenskodizes im europäischen und deutschen Lauterkeitsrecht, GRUR-Int. 2012, 965 (968); Bornkamm, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 5 Rn. 5.163 (in the view of this author the corporate governance code is not a code of conduct as it is not the result of an agreement between businesses. However, according the definition used in the UCPD as well as in the UWG a set of rules developed by a code owner – which can be any entity – can be a code of conduct as well. 22 CJEU, 23.04.2009, C-261/07 – VTB-VAB; CJEU, 23.04.2009, C-299/07 – Galatea BVBA; CJEU, 14.01.2010, C-304/08 – Plus Warenhandelsgesellschaft.

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conduct is rather wide, basically comprising all activities before, during, or after the

conclusion of a business transaction, connected with the promotion, the sale, or the

procurement of goods or services.

Regarding the subject of codes of conduct, they can have rather different contents. As it has

to go beyond the already legally binding standard, a code of conduct may deal with subjects

not within the scope of application of the UCPD. For example, codes of conduct may regulate

commercial practices in B2B relations23 or questions of taste or decency24, which are not

addressed by the UCPD. It has been discussed whether Codes of conduct must not contain

commercial practices violating the law.25 Especially their relationship with the Act Against

Restraints of Competition (Gesetz gegen Wettbewerbsbeschräkungen,26 GWB) was disputed.

It has to be pointed out that Section 24 GWB allows for the establishment of competition

rules. Codes of conduct may be qualified as such competition rules under Section 24 GWB,

but the concept of competition rules is narrower compared to the definition of codes of

conduct, as the former can be published only by trade and industry associations as well as

professional organisations. Competition rules are furthermore restricted in their scope to the

regulation, as they have to promote fair and effective competition (cf. Section 24

subsection 2 GWB).

• voluntariness

It follows from the very nature of a code of conduct that it is not sufficient to merely

reproduce the state of the law, but that it must go beyond that. The definition also seems to

require that a business has undertaken to be bound by the code of conduct. However, this

requirement is not fundamental for the qualification as a code of conduct, but rather for the

legal consequences applicable.

c) Codes of conduct under Annex I UWG No. 1 and No. 3 of Annex I of the UWG especially address codes of conduct. Annex I of the

UWG lists the 31 commercial practices of first Annex of the UCPD which are to be regarded

23 Cf. Article 2 UCPD. 24 Cf. Reasoning 7 UCPD. 25 Cf. e.g. Hoeren, Das neue UWG und dessen Auswirkungen auf den B2B-Bereich, WRP 2009, 789 (793); for a different view cf. Alexander, Verhaltenskodizes im europäischen und deutschen Lauterkeitsrecht, GRUR-Int. 2012, 965 (970). 26 Gesetz gegen Wettbewerbsbeschränkungen i. d. F. der Bekanntmachung vom 15. Juli 2005 (BGBl. I S. 2114; 2009 I S. 3850), geändert durch Artikel 2 Absatz 13 des Gesetzes vom 6. Juni 2013 (BGBl. I S. 1482).

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as unfair under any circumstances.27 Under No. 1 of Annex I, the false statement by an

entrepreneur that she is a signatory to a code of conduct is prohibited. It is argued that the

business must indeed make such statement and that it is not enough that such impression is

created by the business as No. 1 of Annex I of the UCPD uses the term “claiming” whereas

e.g. No. 7 explicitly encompasses “creating the impression”.28 However, the false creation of

such impression will be covered by Section 5 UWG in any case.

In addition, according to No. 3 of Annex I it is also prohibited to make “the false statement

that a code of conduct has an endorsement from a public or other body”. An example of such

an unfair commercial practice would be where a business claims that the signed code was

endorsed by the German Federal Consumer Organization (Verbraucherzentrale

Bundesverband e.V.) or the German Centre for Protection Against Unfair Competition

(Verbraucherschutzverein gegen unlauteren Wettbewerb e.V.).29

Besides these two provisions which directly refer to codes of conduct, No. 2 of Annex I

might also be of relevance for CSR policies, including those which cannot be qualified as

codes of conduct. No. 2 of Annex I refers to commercial practices related to quality signs and

trademarks, and prohibits the display of “a trust mark, quality mark or the equivalent without

having obtained the necessary authorization”. This provision may capture situations in which

a business falsely refers to a quality sign which promotes e.g. sustainability or the eco-

friendliness of a product. One might also think of applying No. 2 of Annex I to the

misleading use of test results, especially of Stiftung Warentest and Öko-Test, two German

foundations carrying out tests which shall provide consumers with objective information on

product quality and safety. However, it is said in German literature that No. 2 of Annex I only

refers to trust marks and quality marks conferred by organisations, but not test results.30

Misleading advertising with such test results is prohibited by Section 5 subsection 1 UWG.

Indeed, Section 5 UWG, which prohibits misleading commercial practices generally, is of

great importance for the regulation of CSR.

27 However, it has included No. 26 of Annex I of the UCPD into Section 7 subsection 2 UWG, thus the Annex of the UWG only contains 30 practices. 28 Bornkamm, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, Anhang zu § 3 Abs. 3 Rn. 1.4 29 It has to be noted that none of the organisations referred to actually endorses codes of conduct. 30Cf. e.g. Dreyer/Weidert, in Harte-Bavendamm/Henning-Bodewig (ed.) Gesetz gegen den unlauteren Wettbewerb, 2013, Anh. § 3 Abs. 3 No. 2 Rn. 3.

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d) CSR policies under Sections 3, 5 UWG31

According to Section 5 subsection 1 sentence 2 UWG, any commercial practice containing

information that is untruthful or otherwise liable to deceive regarding the circumstances

enumerated in No. 1-7 leg. cit. shall be deemed misleading. Consequently, all CSR policies

which are containing untruthful statements are prohibited under Section 5 UWG, regardless

of whether they were made in connection with a code of conduct or not. Examples of CSR

statements prohibited under this provision would be a declaration that 10% of the daily

profits are donated to charity when the donation is only 5%.

The second alternative of Section 5 subsection 1 sentence 2 UWG especially addresses codes

of conducts as No. 6 refers to deceptive information regarding “compliance with a code of

conduct by which the entrepreneur has undertaken to be bound when he makes reference to

such commitment”. As Section 5 subsection 1 sentence 2 No. 6 UWG – as well as especially

Article 6 subsection 2 UCPD – requires that the business declared to be bound by a code of

conduct, it is assumed that such declaration is not part of the definition of a code of conduct

but only a requirement for Article 6 subsection 2 UCPD / Section 5 subsection 1 sentence 2

No. 6 UWG.32

It has been questioned if this provision is in line with the UCPD as Article 6 subsection 2

UCPD in contrast to Section 5 subsection 1 sentence 2 No. 6 UWG only requires that the

non-compliance with a code of conduct causes the consumer to take a transactional decision

that he would not have taken otherwise, but not that the commercial practice be deceptive.33

Aside from No. 6 leg. cit. Section 5 subsection 1 sentence 2 variation 2 UWG also addresses

CSR policies which cannot be qualified as codes of conduct. Of special importance in that

regard will be No. 1 leg. cit., which refers to the essential characteristics of the goods or

services, including, inter alia, test results. The same is true for No. 4, which refers to “any

31 It has to be noted that where commercial practices towards consumers are concerned, Section 5 UWG has to be applied in conjunction with Section 3 subsection 2 UWG (instead of in conjunction with Section 3 subsection 1 UWG). Sentence 1 of Section 3 subsection 2 UWG reads as follows: “Commercial practices towards consumers shall be illegal in any case where they do not conform to the professional diligence required of the entrepreneur concerned and are suited to tangible impairment of the consumer’s ability to make an information-based decision, thus inducing him to make a transactional decision which he would not otherwise have made.” To ensure that the UWG is in line with the UCPD, the first requirement of Section 3 subsection 2 UWG (breach of professional diligence) may not be applied to Section 5 UWG; cf. Bornkamm, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 5 Rn. 5.164 32 Cf. Birk, Corporate Responsibility, unternehmerische Selbstverpflichtungen und unlauterer Wettbewerb, GRUR 2011, 196 (198). 33 Köhler, Richtlinienumsetzung im UWG – eine unvollendete Aufgabe, WRP 2013, 403 (407).

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statement or symbol in relation to direct or indirect sponsorship or approval of the

entrepreneur or of the goods or services”.

e) CSR policies under Sections 3, 5a UWG In addition to the provisions already named, the prohibition of misleading omissions in

Section 5a UWG may be relevant for CSR policies. While Section 5a subsection 1 UWG

applies to B2C as well as B2B relations, Section 5a subsection 2-4 UWG implement

Article 8 UCPD and are restricted to B2C relations. Prior to the implementation of the

UCPD, it had been ruled by the German Supreme Court (Bundesgerichtshof, BGH) that a

business’ promise to support a charity in exchange for the purchase of its goods or services

does not oblige the business to inform customers about the donation in detail unless the

advertisement causes a misconception.34 While it seems to be the prevailing opinion that

there is still no general and absolute duty to inform unless a – legal or contractual – duty of

disclosure exists,35 it has been disputed whether businesses have to inform consumers about

their CSR policies under Section 5a subsection 2-3 UWG. Such a duty may especially be

discussed under Section 5a subsection 3 UWG. This provision specifies which information

has to be regarded as material for commercial practices qualifying as an invitation to

purchase. Inter alia, a business has to inform about “all main characteristics of the goods or

services to an extent appropriate thereto and to the communication medium used” (Section 5a

subsection 3 No. 1 UWG). In the view of some authors, CSR policies fall under “main

characteristics” and they will also influence a consumer’s ability to take a decision, making

Section 5a subsection 2 UWG applicable.36 In our view, the wording of Section 5 UWG and

Article 8 UCPD do not force businesses to inform about their CSR policies unless they want

to do so. However, the UCPD only states – even with regard to commercial practices which

establish an invitation to purchase – that information about the main characteristics of the

good or service has to be given “to an extent appropriate to the medium and the product”.

This means that there is no absolute duty to inform about every aspect of the advertised

product or the environment unless there do exist legal obligations to provide such

34 BGH GRUR 2007, 247 – Regenwaldprojekt I. 35 Birk, Corporate Responsibility, unternehmerische Selbstverpflichtungen und unlauterer Wettbewerb, GRUR 2011, 196 (203); Bornkamm, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 5 Rn. 4.176. 36 Wiebe, in Fezer (ed.), Lauterkeitsrecht – Kommentar zum Gesetz gegen den unlauteren Wettbewerb, Band 1, 2010, § 4-S2 Rn. 38.

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information.37 Therefore, neither the wording of Section 5 UWG nor Article 8 UCPD

requires businesses to provide information about their CSR policies unless they choose to do

so.

However, as soon as a business refers to its CSR policies, it has to ensure that consumers are

given all the information necessary to take an informed decision. This might seem harsh as it

requires businesses actively referring to their CSR policies and thereby providing information

to give more information than businesses which remain silent in the first place. However,

those businesses referring to CSR also enjoy the advantage of attracting customers with their

CSR policies. Eventually, the full potential of Section 5 UWG – or rather the underlying

Article 8 UCPD – will only be discovered over time, when it is interpreted by the CJEU.38

f) Other relevant provisions of the UWG

Other relevant provisions of the UWG with regard to CSR policies are Section 4 No. 1 and

No. 2 UWG in conjunction with Section 3 UWG as well as the general clause of Section 3

subsection 1 UWG. Section 4 No. 1 UWG states that “commercial practices that are suited to

impairing the freedom of decision of consumers or other market participants through

applying pressure, through conduct showing contempt for humanity, or through other

inappropriate, non-objective influence” shall be regarded as unfair. According to Section 4

No. 2 UWG, also “commercial practices that are suited to exploitation of a consumer’s

mental or physical infirmity, age, commercial inexperience, credulity or fear, or the position

of constraint to which the consumer is subject” are prohibited. Section 4 No. 1 UWG was the

main provision applied to CSR policies before the implementation of the UCPD. As stated

earlier, German jurisprudence used to regard commercial practices referring to CSR policies

without direct link to the characteristics of the advertised product as unfair, as it was argued

that such commercial practices unduly influenced the ability of a consumer to make a rational

choice. The BGH abandoned this jurisprudence already in 2007, holding that such

commercial practices are not per se establishing a violation of Section 4 No. 1 UWG. Within

the scope of application of the UCPD, any other view would contradict the model of the

37 For a different view cf. Fezer, Das Informationsgebot der Lauterkeitsrichtlinie als subjektives Verbraucherrecht WRP 2007, 1021 (1029); Wiebe, in Fezer (ed.), Lauterkeitsrecht – Kommentar zum Gesetz gegen den unlauteren Wettbewerb, Band 1, 2010, § 4-S2, Rn. 94. 38 So far there is only one decision by the CJEU regarding the interpretation of Article 8 UCPD, cf. CJEU, 12.05.2011, C-122/10 – Ving Sverige.

13

rational average consumer as defined in the jurisprudence of the CJEU – since a reasonably

circumspect consumer should be able to recognise CSR policies as commercial practices. In

addition, the UCPD aims at full harmonisation (Article 3 subsection 5 UCPD). Accordingly,

only the commercial practices listed in Annex I of the UCPD can be regarded as unfair

without considering any further circumstances.39 Consequently, Section 4 No. 1 UWG cannot

render all CSR policies unfair, but is applicable only to situations in which pressure was put

on the consumer in a way that can be qualified as aggressive under Article 9 UCPD.40

In addition, CSR policies might also fall under the general clause of Section 3

subsection 1 UWG or – with regard to B2C relations – Section 3 subsection 2 UWG, which

prohibits any commercial practice that is contrary to the requirements of professional

diligence and is “suited to tangible impairment of the consumers ability to make an

information-based decision, thus inducing him to make a transactional decision which he

would not otherwise have made”. Even though this general clause has the function of a safety

net it does not seem likely in practice that many CSR policies fall under Section 3

subsection 2 UWG as No. 1-3 of Annex I as well as Section 5 and Section 5a UWG are the

more specific – and therefore prevailing – provisions. As pointed out earlier, the violation of

a CSR policy as such is not per-se unfair, but only if it is misleading, aggressive or can be

deemed unfair under the general clause. On the other hand, codes of conduct do not provide

for a safe harbour. CSR policies in the form of codes of conduct, however, can help to

interpret the general clause.41

g) Other laws

aa) Provisions within the framework of unfair competition law

There are laws outside the UWG which also establish bans on misleading practices. For

instance rules regarding food can be relevant within the context of CSR when food is

39 CJEU, 14.01.2010, C-304/08 - Plus Warenhandelsgesellschaft; CJEU, 09.11.2010, C 540/08 – Mediaprint. 40 Cf. Köhler, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 4 Rn. 1.7. But cf. also Scherer, WRP 2013, 143-146. In her view from the decision of the CJEU in Purely Creative concluded that former view of the German jurisprudence can be reactivated to a certain extent. 41 First Report on the application of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), COM (2013) 139 final, p. 23; it is disputed in Germany, whether the violation of a code of conduct can have indicative effects or not, cf. Köhler, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 2 Rn. 115.

14

promoted as organic or sustainably harvested. Those laws, like Section 11 of the German

Law on Food and Feed Safety (Lebensmittel- und Futtermittelgesetzbuch, 42 LFGB) or

Article 16 of the General Food Safety Regulation43, are applicable beside

Sections 5, 5a UWG.

bb) General civil law

CSR policies which influence the decision of the buyer (not necessarily a consumer) to

purchase a certain product or service which then does not live up to the statements made can

be qualified as defective under Section 434 German Civil Code (Bürgerliches Gesetzbuch,44

BGB). Misleading CSR policies may also create a mistake or violate the precontractual

obligation not to infringe upon the other party’s interests. However, the law on the sale of

goods precedes the law of mistake (at least with regard to Section 119 subsection 2 BGB) and

precontractual duties.45 Finally, Section 826 BGB can be taken into account, which states that

a “person who, in a manner contrary to public policy, intentionally inflicts damage on another

person is liable to the other person to make compensation for the damage”. However, due to

the exigent requirement to prove the intentional infliction of harm, Section 826 BGB will not

be of great importance in practice with regard to CSR policies.

2.2. Enforcement of the relevant laws

a) Public authorities and private organisations

Firstly, it has to be noted that in Germany, there is no public authority in charge of the

enforcement of the UWG (in contrast to the law against restraints of competition, where such

a public authority – the Bundeskartellamt – does exist). Rather, enforcement lies in the hands

of competitors and those private organisations which were granted standing in Section 8

UWG. According to Section 8 subsection 3 No. 1 UWG, competitors, business associations

meeting the criteria set out in Section 8 subsection 3 No. 2 UWG46, entities meeting the

42 Lebensmittel- und Futtermittelgesetzbuch i. d. F. der Bekanntmachung vom 3. Juni 2013 (BGBl. I S. 1426). 43 Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety, OJ L 31 of 1.2.2002, p. 1. 44 Bürgerliches Gesetzbuch i.d.F. der Bekanntmachung vom 2. Januar 2002 (BGBl. I S. 42, 2909; 2003 I S. 738). 45 Cf. e.g. Armbrüster, in Münchener Kommentar zum BGB, Band 1, 2012, § 119 Rn. 29. 46 “Associations with legal personality which exist for the promotion of commercial or of independent professional interests, so far as a considerable number of entrepreneurs belong thereto, and which distribute goods or services of the same or similar type on the same market, provided such associations are actually in a position, particularly in terms of their personnel, material and financial resources, to pursue the tasks, under

15

criteria set out in the Injunctions Directive47, as well as the chambers of commerce and

industry or craft chambers may bring a claim for elimination48 and for an injunction. It has to

be noted that Section 8 UWG requires that Section 3 UWG or Section 7 UWG have been

violated. Consequently, Section 8 UWG is applicable to all the above-stated provisions of the

UWG which can be of importance for CSR provisions. Before bringing an action before court

plaintiffs will try to get an undertaking signed by the business to amend or cease the unfair

commercial practice. The organisations which in practice are most likely to bring a claim

under Section 8 UWG are the Wettbewerbszentrale and the German federal consumer

organisation (Verbraucherzentrale Bundesverband) or one of the 16 consumer centres of the

German federal states (Verbraucherzentralen).  

Those organisations will not have standing to bring a claim under civil law if

Section 434 BGB is violated as they are not a party to a contract. However, under Section 4

No. 11 UWG commercial practices infringing “a statutory provision that is also intended to

regulate market behaviour in the interest of market participants” are unfair and consequently

prohibited. It has been discussed whether remedies for defective goods according to civil law

are statutory provisions in the sense of Section 4 No. 11 UWG.49 The German Supreme Court

ruled that the laws of warranty may be qualified as such statutory provisions.50 However, it is

questionable whether Section 4 No. 11 UWG is in line with the UCPD as it basically

introduces additional per se prohibitions.51 As long as Section 4 No. 11 UWG is upheld in

German law, the organisations named in Section 8 UWG as well as competitors will have the

possibility to sue for an elimination and injunction when warranty claims are violated. In

addition, those organisations – but not competitors – may sue for an injunction under

Sections 2, 3 of the German Injunctions Act (Unterlassungsklagengesetz,52 UKlaG).

their memoranda of association, of promoting commercial or independent professional interests, and so far as the contravention affects the interests of their members”. 47 Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers' interests, OJ L 110 of 1.5.2009, p. 30. 48 Elimination means a claim to stop the unfair commercial practice (Beseitigungsanspruch). 49 Lorenz, in Münchener Kommentar zum BGB, Band 3, 2012, § 477 Rn. 15; cf. Ohly, in Piper/Ohly/Sosnitza, Gesetz gegen den unlauteren Wettbewerb, 2010, § 4 Rdnr. 11/7. 50 BGH GRUR 2011, 638 – Werbung mit Garantie. 51 Köhler, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 3 Rn. 8e; cf. Köhler, Richtlinienkonforme Gesetzgebung statt richtlinienkonforme Auslegung: Plädoyer für eine weitere UWG-Novelle, WRP 2012, 251 (257). 52 Unterlassungsklagengesetz i. d. F. der Bekanntmachung vom 27. August 2002 (BGBl. I p. 3422, 4346), geändert durch Artikel 5 des Gesetzes vom 3. April 2013 (BGBl. I p. 610).

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b) Consumers

The German UWG does not explicitly grant consumers standing. In 2004, when a new

German act against unfair competition law was adopted, there was discussion on whether a

right to redress for the individual consumer should be introduced.53 It has been disputed

whether the UWG can be qualified as protective law (Schutzgesetz) which would give

consumers at least the right to sue for damages under Section 823 subsection 2 BGB in

conjunction with the UWG. However, the prevailing opinion does not qualify the UWG as

such a protective law,54 despite the fact that Section 1 UWG states that it aims at the

protection of consumers as well.  

Consumers, however, have remedies under civil law when a good or service is defective as

defined in Section 434 BGB. They have the right to have the defective good repaired or

exchanged, or – as repair or exchange will most likely not be possible when a CSR policy is

misleading – to reduce the price or to revoke the contract if the defect is not only minor, and

rescind the contract (Section 437 et sequ. BGB55).

c) competitive businesses? For instance, can a business which competes with the

offending company bring an action e.g. unfair competition?

As stated above, competitors56 can sue for elimination and bring an injunction under

Section 8 UWG as long as they are direct competitors of the business infringing the UWG. In

addition, competitors may sue for damages under Section 9 UWG if the business violating

the UWG acted with intent or negligence. Competitors may also sue for injunctions or

damages when a business violates other statutes than the UWG and those statutes fall under

Section 4 No. 11 UWG (cf. above 2.2 a)).

53 Cf. e.g. Fezer, Das wettbewerbsrechtliche Vertragsauflösungsrecht in der UWG-Reform, WRP 2003, 127-147. 54 Köhler, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, Einleitung Rn. 7.5; Ahrens, in Harte-Bavendamm/Henning-Bodewig (ed.) Gesetz gegen den unlauteren Wettbewerb, 2013, Einleitung G Rn. 135. 55 Westermann, in Münchener Kommentar zum BGB, 2012, § 437 Rn. 1; Westermann, in Münchener Kommentar zum BGB 2012, § 434 Rn. 19. If the seller acted with fault the buyer can also claim damages. 56 According to Section 2 No. 2 UWG “‘Competitor’ shall mean any person who has a concrete competitive relationship with one or more entrepreneurs supplying or demanding goods or services”.

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d) suppliers to and purchasers of the goods or services of the business (e.g. the supplier

of Fair Trade coffee to a business that fails to, contrary to its well publicised CSR

policy, buy Fair Trade coffee)

As suppliers and purchaser are not competitors, they do not have standing under the UWG. A

purchaser – regardless of whether she is a consumer or another business – will have

contractual rights when a misleading CSR leads to a defect (Section 434 BGB) of the product

or service.

Suppliers may have specific distribution agreements in their contracts, stating that purchasers

are only allowed to buy Fair Trade coffee if they are serving it in an eco-friendly

environment. Without such specific agreement suppliers may be eligible to sue under

Section 826 BGB. However, it will be difficult to prove causation, intent and also the amount

of damage suffered.

If CSR policies are part of a code of conduct, suppliers, purchasers, competitors, and also

consumers may be able to report the breach of a CSR policy to the self-regulation body

established in the framework of the code of conduct. For example, a breach of the advertising

rules published by the German advertising self-regulation body (Werberat) can be reported to

the Werberat itself which then will start a “name and shame” procedure. However, it has to

be noted that self-regulatory enforcement cannot substitute the enforcement of the UCPD by

Member States (Article 10 UCPD). It is also important to point out that codes of conduct are

not qualified as statutory provisions in the sense of Section 4 No. 11 UWG57 and that not all

codes of conduct set out a self-regulatory body in charge of its enforcement.

2.3. If enforceable by regulatory authorities, what are the causes of action and range

of remedies available to regulatory authorities? In particular

2.3.1. Can a regulatory authority obtain injunctive relief against the business

that markets goods or services that breach its own CSR policy?

Cf. above

57 Köhler, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 4 Rn. 11.30; BGH GRUR 2006, 773 – Probeabonnement.

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2.4. Can a regulatory authority impose fines or imprisonment on businesses that

breach their voluntary CSR policies by way of punishment? If so, what are the

criteria to be taken into account to determine the size of that fine or period of

imprisonment?

As noted above, the UWG is not enforced by a regulatory authority. In addition, criminal law

does not play a major role in unfair competition law. From the few provisions of the UWG

dealing with criminal law, only Section 16 subsection 1 UWG may be of importance with

regard to CSR policies. Section 16 subsection 1 UWG provides for imprisonment of up to

two years or a fine. While there are some overlaps with Section 5 UWG as both provisions

address misleading commercial practices, Section 16 subsection 1 UWG is the narrower

provision capturing only commercial practices directed towards a wider audience which

contains false information, thereby creating the impression of a favourable offer, and in

addition requires intent.58 In practice, Section 16 UWG is not applied very often. Unlike the

rest of the UWG, Section 16 subsection 1 UWG is regarded as a protective law, enabling

parties suffering a loss to sue for damages under Section 16 subsection 1 UWG in

conjunction with Section 823 subsection 2 BGB.59

In this context, Section 263 Penal Code (Straftgesetzbuch,60 StGB), fraud, is also applicable

as long as all its prerequisites are met. In addition, Section 59 LFGB also establishes a

criminal sanction for the violation of Section 11 LFBG.

Finally, while consumer organisations and business associations (Section 8 subsection 3

No. 2-4 UWG) may not impose fines, they may bring a claim for disgorgement of profits

under Section 10 UWG. In practice, however, Section 10 UWG is not of great importance,

inter alia because the infringing business must have acted with intent, which may be difficult

to prove. Furthermore, the suing organisation bears the full risk of losing in court, but will not

profit if it wins because the ill-gotten gains have to be surrendered directly to the Federal

budget.61

58 Bornkamm, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, § 16 Rn. 7. 59 Bornkamm, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, Einleitung Rn. 7.5. 60 Strafgesetzbuch i.d.F. der Bekanntmachung vom 13. November 1998 (BGBl. I S. 3322), zultzt geändert durch Artikel 6 des Gesetzes vom 26. Juni 2013 (BGBl. I S. 1805). 61 For a detailed analysis of Section 10 UWG cf. e.g. Alexander, Nutzen und Zukunft der Gewinnabschöpfung in der Disskussion, WRP 2012, 1190 -1197; Goldmann, in Harte-Bavendamm/Henning-Bodewig (ed.) Gesetz gegen den unlauteren Wettbewerb, 2013, § 10 Rn. 5.

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2.5. If enforceable by private undertakings (e.g. competing businesses), what are the

causes of action and remedies available to private entities? e.g. competing

businesses where another business has failed to comply with its CSR policy? In

particular,

2.5.1. Can undertakings obtain financial compensation against competing

businesses that breach their CSR policies? If so, what are the criteria for

determining the level of compensation? For instance, where a business can

prove that it has lost substantial business to a business promoting chocolate

sourced from Fair Trade farmers, can it recover compensation if it is

proven that in fact, the business was not selling chocolate so sourced? What

about a collective e.g. the Fair Trade cocoa farmers themselves? Will they

have locus standi to bring an action and if so, what type of action?

As pointed out above, competitors may sue for damages under Section 9 UWG, provided that

the business violating Section 3 or Section 7 UWG acted with intent or negligently. The

amount of damages is established in accordance with Sections 249-252 BGB and includes

lost profits (Section 252 BGB). In practice, competitors sue for damages less often than for

injunctive relief, as the suing competitor bears the burden of proof and despite

Section 287 Code of Civil Procedure (Zivilprozessordnung,62 ZPO) – which allows for the

judge to estimate the damage – this requirement is often difficult to meet.

2.5.2. If so, how close must the connection be (nexus) between the commercial

practice which breaches the CSR policy and the goods produced or services

supplied by the business with the CSR policy for the private business to be

able to obtain relief (whether injunctive or financial). In this regard,

imagine three situations by way of example,

2.5.2.1. coffee marketed with a Fair Trade label on it which was not

sourced from Fair Trade coffee farmers;

2.5.2.2. coffee marketed by a business which has imported coffee using

ships which emit excessive carbon dioxide and do not comply with the

business’s “green” CSR policy;

62 Zivilprozessordnung i. d. F. der Bekanntmachung vom 5. Dezember 2005 (BGBl. I p. 3202; 2006 I p. 431; 2007 I p. 1781), zuletzt geändert durch Artikel 2 des Gesetzes vom 25. April 2013 (BGBl. I S. 935).

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2.5.2.3. Coffee marketed by a business which advertises its CSR policy of

providing 2% of all sales revenue to educating children in the third

world but upon audit, is found not to have complied with that policy.

Will the remedies differ in such circumstances? E.g disgorgement of profit

or compensatory damages.

In all three cases a competitor would be able to sue for an injunction (Section 8 UWG) as

well as for damages (Section 9 UWG), provided that the business acted with intent or

negligently and the competitor can prove that the damage suffered was caused by the

violation of the UWG. However, in practice the link between the commercial practice and the

damage will be easier to prove in the first and in the third example. Under German law,

businesses cannot ask for a disgorgement of profits (for Section 10 UWG cf. above).

2.6. What powers do private or public concerns have to obtain information from

businesses with CSR policies to prove or disprove that they have complied with

or are complying with such policies?

The UWG only explicitly addresses information issues in Section 8 subsection 5 UWG,

referring to Section 13 UKlaG. According to Section 13 UKlaG, the organisations and

associations allowed to bring a claim under Section 8 subsection 3 UWG (but not the

competitor) have a right to obtain information from telecommunication services. However,

this right encompasses only the name and address of a business and exists only if the

information cannot be obtained through other means.63

In addition, jurisprudence grants a right to obtain information based on Section 242 BGB.64

However, this right depends on the main claim for injunction or damages and consequently

exists only once the suing party has been able to show that the sued business violated the

UWG.65

63 Köhler, in Köhler/Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 2013, UKlaG § 13 Rn. 4. 64 For details cf. Bergmann/Goldmann, in Harte-Bavendamm/Henning-Bodewig (ed.) Gesetz gegen den unlauteren Wettbewerb, 2013, Vorbemerkungen zu §§ 8 ff. Rn. 13. 65 For details cf. Bergmann/Goldmann, in Harte-Bavendamm/Henning-Bodewig (ed.) Gesetz gegen den unlauteren Wettbewerb, 2013, Vorbemerkungen zu §§ 8 ff. Rn. 13.

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POLICY

3. Do you consider that the laws in your country deal satisfactorily with commercial

practices where a business commits a breach of its own CSR policy? In particular,

3.1. In your country, is there a significant issue with businesses not complying with

their own CSR policies or exaggerating their effect?

According to the Wettbewerbszentrale, hardly any violations of CSR policies are reported. In

the view of the Verbraucherzentrale Bundesverband, on the contrary, violations of CSR

policies do play some role in practice. However, making a precise statement seems tricky as

violations of CSR policies are difficult to detect. In our view it is safe to state that CSR

policies are becoming increasingly important as consumers are paying more and more

attention to them. As evidence for this assumption, one can refer to the protests against

clothing companies not willing to sign the Bangladesh Safety Accord mentioned above.66

While it has to be emphasized again that it is difficult to determine to what extent businesses

are violating their CSR policies, we are under the impression that there are no significant

policy issues arising from businesses not complying with their own CSR policies.

3.2. What concerns do consumers/businesses have about non-compliance? How

serious do consumers/businesses in your country view a business who fails to

adhere to its CSR policies? Do consumers feel that breaches of CSR policy

should be a matter of legal sanction or simply be a combination of adverse

public comment (e.g. in the press) and the commercial sanction of consumers

moving their custom to other businesses seen as a sufficient deterrent? Does this

latter view only work where there is sufficient transparency about a business’

commercial practices i.e. there is sufficient confidence that breaches of a CSR

policy by a business can be detected?

Generally speaking, consumers and businesses as well as consumer organisations and trade

associations will be concerned about violations of CSR policies. But as we already noted it is

often difficult to monitor whether businesses are obeying their CSR policies or not.

66 Cf. e.g. http://www.cbc.ca/news/canada/toronto/story/2013/06/29/toronto-bangladesh-protest.html.

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Consumer awareness – and the call for imposing stricter sanctions – tends to be higher in the

aftermath of an event that makes the need for efficient CSR visible. This may either be a

(well-publicised) discovery of a violation of a CSR, or even a disaster such as happened in

the Bangladeshi garment industry. The publication of judgement can be part of the legal

sanctioning process in Germany (cf. Section 12 subsection 3 UWG), so we would assume

that consumers prefer to have a combination of legal sanctions and commercial sanctions. It

also has to be noted that consumers these days are expressing their view on the behaviour of

businesses via modern media, e.g. Facebook and companies like “rank a brand”67 are trying

to give consumers information about CSR policies of businesses.

3.3. In what ways (if at all) do you consider that your country’s laws fail to meet

those private and public concerns?

We do not think that German substantive law is failing to meet private and public concerns

with regard to CSR policies. One might consider the fact that No. 1 of Annex I of the UWG

applies only to situations in which an explicit reference to a code of conduct was made as

unsatisfying. The same is true for the fact that No. 2 of Annex I of the UWG is not applied to

the misleading use of test results. However, these situations are easily captured by

Sections 3, 5, 5a UWG. If there are any shortcomings, they concern remedies and

enforcement. In our view it is unsatisfactory that consumers do not have standing under the

German UWG. In addition, as already pointed out, it is difficult to discover violations of CSR

policies because extensive monitoring – which is costly and difficult68 – would be necessary.

The injunction system of the German UWG is regarded as highly effective. However, with

regard to damages only competitors have standing, while consumer organisations and trade

associations can only apply Section 10 UWG. As we already noted, Section 10 UWG,

67 http://rankabrand.org/. 68 Even Ökotest points out that it is not able to take CSR policies fully into account as it is not able to monitor compliance, cf. http://www.oekotest.de/cgi/index.cgi?artnr=10591&gartnr=91&bernr=04.

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unfortunately, is not effective in practice. Consequently, as suggested elsewhere,69 other

forms of collective redress should be considered70.

3.4. How should the law be changed to meet those failings? Please differentiate

between failings as to substantive law and failings as to remedies.

Cf. above.

3.5. Do you consider that the laws of your country deal satisfactorily with the ability

of consumers or regulatory authorities to police the compliance of businesses

with their CSR? What powers of investigation/disclosure of documents and/or

internal information/examination of key employees exist?

Neither consumers nor consumer organisations, trade associations or competitors have a

general power to investigate or ask for the disclosure of documents and/or internal

information. Aside from a general duty to inform based upon Section 242 BGB (cf. above)

which complements Section 8 and Section 9 UWG, and Section 8 subsection 4 UWG which

refers to Section 13 UKlaG there are no specific discovery provisions. However, under the

general rules of civil procedure (Zivilprozessordnung, ZPO71), the court may ask the parties

to provide the court with certain documents (cf. Section 142 ZPO). As this possibility only

exists after legal proceedings have been initiated, it does not help at the pre-trial stage.

CSR STANDARDS

In some cases, a particular CSR policy (e.g. dolphin-friendly tuna) becomes so

important to consumers that a company that does not accede to such a policy risks

losing substantial business. In short, such a policy becomes a de facto “standard” which

69 Augenhofer, Some questions on enforcement and individual redress - the example of Regulation (EC) No 261/2004, in Geimer/Schütze/Garber (Eds.), Europäische und internationale Dimension des Rechts, Festschrift für Daphne-Ariane Simotta, LexisNexis, 2012, pp. 39-56. 70 Cf. in this regard the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “"Towards a European Horizontal Framework for Collective Redress", COM(2013) 401/2, published on June 11 2013. 71 Bekanntmachung vom 5. Dezember 2005 (BGBl. I S. 3202; 2006 I S. 431; 2007 I S. 1781), die durch Artikel 22 des Gesetzes vom 26. Juni 2013 (BGBl. I S. 1809) geändert worden ist.

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if a business does not comply with, it is unable compete effectively in the market (e.g. for

tuna). In most cases, there can be no concerns about market foreclosure because any

fishing business can adopt dolphin-friendly fishing techniques and any supplier of tuna

can choose only to buy from such businesses. However, sometimes these CSR

“standards” are protected by IPRs e.g. certification marks which are in the control of

NGOs and without the ability to display them, a business may not be able to stay in the

market despite otherwise complying with the CSR standard. Equally, in some cases, a

CSR “standard” may be strongly supported by Governmental legislation (which may

give preferential treatment e.g. tax breaks to adopters of the CSR Standard) that

although a business may choose not to adopt it, such a business will suffer as a result.

In relation to the following questions, it may be of assistance to consider the following

example:

50% of suppliers of fresh fish into your national market are persuaded by a NGO to

agree to only buy fish from fishing fleets that abide by a CSR code promoted by an

NGO. The code is intended to ensure that those fleets only use environmentally-friendly

sustainable fishing practices including e.g. not fishing for certain endangered species,

not using banned equipment (e.g. nets with very small mesh or boats which are painted

with certain chemicals), etc. In general, the perceived wisdom is that this CSR code is

good for the marine environment and should be encouraged. However, there are certain

concerns that the CSR Code is “over the top” and that some requirements are too

onerous with little benefit to the environment (e.g. some of the so called endangered

species are considered by many fishing experts to be actually plentiful). The CSR Code

has a logo which is protected as a collective registered mark72. Only those who agree to

abide by the whole of the CSR Code are licensed by the NGO to display the logo.

Market research surveys show that intense marketing campaigns by the NGO have

resulted in consumers showing a marked preference for fish which displays the logo

despite the extra cost and that suppliers of fish who are not licensed to use the logo are

experiencing very considerable reduction in business. Indeed, there has developed a

“shame culture” amongst the buying public about those who buy fish which do not

display the logo.

72 NB A collective mark is not, unlike a certification mark, free for use by all those who comply with certain conditions.

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4. In your country, what issues are raised by competition law in your country where a

number of undertakings in a horizontal relationship (e.g. fish wholesalers) agree

voluntarily to commit to a CSR policy? In particular,

4.1. Is the position different if those undertakings have a substantial market share?

In a collectively dominant position?

As mentioned before, competition law is regulated in Germany in the GWB, the Act against

Restraints of Competition. The GWB, however, is based on European competition law and

resembles to a large extend Article 101, Article 102 TFEU.73

The European Commission has analysed standardisation agreements in its guidelines on the

applicability of Article 101 of the Treaty on the Functioning of the European Union to

horizontal co-operation agreements.74 These guidelines also help to interpret the relevant

provisions of the GWB.75 According to para. 280 of the guidelines “where participation in

standard-setting is unrestricted (1) and the procedure for adopting the standard in question is

transparent (2), standardisation agreements which contain no obligation to comply (3) with

the standard and provide access to the standard on fair, reasonable and non-

discriminatory terms will normally not restrict competition within the meaning of Article

101(1).”76 According to the Commission, the third requirement is not met, “if the standard-

setting agreement binds the members to only produce products in compliance with the

standard, the risk of a likely negative effect on competition is significantly increased and

could in certain circumstances give rise to a restriction of competition by object.”77 This

means that CSR policies may result in a restriction of competition, leading to market

foreclosure as it will be rather difficult for some, especially small and medium sized

businesses to meet the standards set by the NGO. The high standards set in the CSR policy

73 Cf. e.g. Immenga/Mestmäcker, in Immenga/Mestmäcker, Wettbewerbsrecht: GWB, 2007, Einleitung, Rn. 3. For the relationship between antitrust law and CSR cf. Lübbig, Nachhaltigkeit als Kartellthematik, WuW 2012, 1142-1155. 74 Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ C 11 of 14.1.2011. 75 Bechtold, Leitlinien der Kommission und Rechtssicherheit – am Beispiel der neuen Horizontal-Leitlinien, GRUR 2012, 107 (108). It also has to be taken into account that according to para. 310 of the guidelines, “Agreements for testing and certification go beyond the primary objective of defining the standard and would normally constitute a distinct agreement and market.”. 76 For a critical assessment of the non-application of Article 101 TFEU cf. Schweitzer, Standardisierung als Mittel zur Förderung und Beschränkung des Handels und des Wettbewerbs, Anm. zu EuGH 12.07.2012, C-171/11, EuZW 2012, 765 (770). 77 Guidlines para. 293.

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are also likely to lead to a price increase for consumers, as other means of fishing will have to

be applied which are more costly compared to the forbidden ones. These negative results of

such behaviour are more likely to occur when the companies involved have a substantial or

even a dominant market share.78 On the other hand, the CSR policy regards only one feature

of the product which means that competition in regard to other features – e.g. packaging of

the tuna, taste of tuna, price – will remain possible. In addition, while we agree that CSR

policies are influencing the decisions of consumers, there are most likely a lot of consumers

who are not willing or able to buy more expensive tuna.

Furthermore, a standardized agreement which violates Section 2 GWB or Article 101

subsection 1 TFEU might be justified under Article 101 subsection 3 TFEU

(Section 2 GWB), provided that it “contributes to improving the production or distribution of

goods or to promoting technical or economic progress, while allowing consumers a fair share

of the resulting benefit” and the counter-exceptions of Article 101 subsection 3 lit. a and b

TFEU do not apply. The CSR policy may lead to the development of new fishing means,

thereby facilitating innovation within the fishing industry, which in the long run could lead to

more competition and cheaper prices. While in the meantime prices for consumers probably

will increase (at least for Tuna sold by undertakings which have adopted the CSR policy),

consumers may be provided with more choice because of the CSR policy.79

It has been discussed whether reasons outside competition itself – e.g. the protection of the

environment – can be taken into account under Article 101 subsection 3 TFEU or

Section 2 GWB.80 While the Commission in an earlier decision has weighted the protection

of the environment as an important factor,81 the guidelines seem to have abandoned that

opinion.82 Also, the German Bundeskartellamt seems to refrain from such a broader approach

to Section 2 GWB.83

78 Cf. also guidelines para. 296. 79 On the other hand, CSR policies may also lead to less choice due to the fact that those companies not complying with the CSR will be forced out of the market as the majority of the consumers won’t buy their products anymore given this non-compliance with environmental standards set in the CSR. 80 Cf. e.g. Ellger, in Immenga/Mestmäcker, EU Wettbewerbsrecht, 2012, Art. 101 Abs. 3 AEUV, Rn. 513ff; Nordemann, in Loewenheim/Meessen/Riesenkampff (ed.), Kartellrecht, 2009, § 2 GWB, Rn. 138f. 81 Komm., 24.01. 1999, EC 2000 No. L 187/47, Rn. 52  ff. CECED. 82 Cf. Guidelines para. 18, Fn. 14, These guidelines do not contain a separate chapter on "environmental agreements" as was the case in the previous guidelines. Standard-setting in the environment sector, which was the main focus of the former chapter on environmental agreements, is more appropriately dealt with in the standardisation chapter of these guidelines. In general, depending on the competition issues "environmental agreements" give rise to, they are to be assessed under the relevant chapter of these guidelines, be it the chapter

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To sum up, whether CSR policies will lead to a violation of Article 101 subsection 1 or not

and whether such agreements are still justified under Article 101 subsection 3 has to be

decided on a case-to-case basis.

Besides Sections 2 and 3 GWB, which as noted resemble Article 101 TFEU,

Section 20 subsection 6 GWB especially refers to inter alia quality mark associations and

states that such associations “shall not refuse to admit an undertaking if such refusal

constitutes an objectively unjustified unequal treatment and would place the undertaking at an

unfair competitive disadvantage.” Consequently, Section 20 subsection 6 GWB only

establishes a duty to not discriminate which can be already deduced from Article 101,

Article 102 TFEU.

4.2. Where that CSR policy becomes a de facto or de jure standard (private or

government-encouraged) for trade in goods or services, what is the position

under the competition law of your country? Please consider the position in

particular where the CSR standard is protected by IPRs (e.g. a logo which

indicates to the consumer compliance with the CSR Standard and which is a

registered trade mark or collective mark). In such circumstances, can those

IPRs be subject to FRAND-type (Fair, Reasonable and Non-Discriminate)

licences, and if so on what domestic legal basis?

In our view the example stated in the FRAND-jurisprudence – while generally accepted in

Germany84 – does not apply as the fact pattern of the example given in the question in 4.2. is

not the one which can be found in FRAND-cases: In the given example businesses are –

unlike in FRAND-cases – still free to either create their own standard or to accept the CSR

standard provided by the NGO and to join it. Consequently, businesses already have access to

the CSR policy at fair, reasonable and non-discriminatory conditions while in FRAND-cases

on R&D, production, commercialisation or standardisation agreements. Also making that point, Lübbe, WuW 2012, 1142 (1153). 83 Cf. e.g. Bundeskartellamt, WuW/E DE-V 1392, 1402 – Altglas. 84 Cf. e.g. Nägele/Jacobs, Zwangslizenzen im Patentrecht, WRP 2009, 1062-1074; cf. also OLG Karlsruhe 23.03.2011, 6 U 66/09 – UMTS Standard.

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or in cases dealt with under the essential facilities85 doctrine the question is whether the

patent owner or the owner of the essential facility has to grant a licence or access in the first

place.86

85 For the application of the essential facilities doctrine by the CJEU cf. e.g. CJEU, 06.04.1995, C-241/91 – Magill, 29.04.2004, C-418/01 – IMS Health; for the application by the BGH cf. e.g. BGH 11.12.2012, KVR 7/12 – Fährhafen Puttgarden II. 86 One might also have to contrast the facts in the decision CJEU 16.07.2009, C-385/07 – Der Grüne Punkt from the example given in 4.2. as in the case before the CJEU the undertaking was charging a service fee which was disproportionate with regard to the economic value of the service provided.