The First Civil Senate of the Federal Court of Justice (BGH), which is responsible for, among other things, competition law, has to decide on the question of whether, and if so, up to what value limit, advertising with monetary credits as part of a bonus system for the purchase of medical devices is compatible with the German Drug Advertising Act (HWG) (Case No.: I ZR 43/24).
Factual Background
The plaintiff is the German Center for the Protection Against Unfair Competition. The defendant sells hearing aids from various manufacturers and other products for people with hearing impairments in its stores in Germany. The defendant cooperates with PAYBACK GmbH and advertised the granting of PAYBACK points on its website. Customers who presented their PAYBACK card at the checkout received one PAYBACK point worth 1 cent for every euro spent, credited to their PAYBACK account. Customers can redeem the collected points for cashless payouts or convert them into merchandise, vouchers, reward miles, or donations. The plaintiff believes that the challenged advertising violates the prohibition on promotional gifts under Section 7 para. 1 HWG and is therefore seeking an injunction against the defendant.
Decisive Provision: Section 7 HWG
According to Section 7 para. 1 sentence 1 HWG, it is prohibited, among other things, to offer, announce, or grant gifts or other promotional giveaways (goods or services) in the context of advertising in the healthcare sector. An exception to this strict prohibition on gifts exists under Section 7 para. 1 sentence 1 No. 1, first half-sentence, case 2 HWG, when the gifts or promotional giveaways are low-value items, and under Section 7 para. 1 sentence 1 No. 2 lit. a HWG, inter alia, when the gifts or promotional giveaways are granted in a specific or calculable monetary amount. The legislative purpose of Section 7 HWG is primarily to address the abstract risk of undue influence that may arise from advertising with gifts, through the extensive limitation of value-based advertising in the healthcare sector.
Previous Course of the Case
The Regional Court of Hamburg dismissed the claim in the first instance with a judgment on May 12, 2021 (Case No. 312 O 306/19), reasoning that the disputed advertisement was not product-related advertising but pure corporate advertising for a customer loyalty system.
The scope of the HWG applies exclusively to product- or service-related sales advertising. Corporate advertising and pure image advertising without a specific product reference are therefore not covered by the gift prohibition under Section 7 HWG.
The Regional Court of Hamburg further stated that there was no abstract risk to health interests. Additionally, in this case, the exception rule in Section 7 para. 1 sentence 1 No. 2 lit. a HWG applied, as it concerned a permissible cash discount.
The plaintiff appealed this judgment. The Higher Regional Court (OLG) of Hamburg then partially amended the lower court's judgment with a judgment on February 29, 2024 (Case No.: 3 U 83/21) and ordered the defendant, at the plaintiff's alternative request, to cease and desist from advertising or initiating the granting of PAYBACK points with a total value of more than 5.00 EUR. Regarding the main request, which aimed at the granting of PAYBACK points worth more than 1.00 EUR, the court rejected the appeal.
Decision of the Court of Appeal
The Court of Appeal affirmed the product-related nature of the advertising, as the defendant had advertised benefits that the customer could only receive when purchasing products. Although the advertising referred to the entire product range, since this also included hearing aids – thus medical products – the advertising was clearly product-related. The fact that the advertisement referred to a customer loyalty system did not lead to the conclusion that it was purely image advertising.
The granting of PAYBACK points was also considered a promotional gift under Section 7 para. 1 sentence 1 HWG, as the term should be broadly interpreted in light of the regulation's purpose, which is to mitigate the abstract risk of undue influence stemming from promotional gifts in the medicinal product sector. What mattered was that the benefit was granted free of charge from the recipient's perspective and was accordingly viewed as a gift. This was the case with PAYBACK points.
A promotional gift within the meaning of Section 7 para. 1 sentence 1 HWG exists only if its offering, announcement, or granting at least creates the abstract risk of undue influence on the recipient of the advertisement. In the present case, the OLG Hamburg stated that it could not be excluded that a consumer who needs a hearing aid might be prompted by the defendant's advertising to collect PAYBACK points with every purchase, leading them to buy the hearing aid specifically from the defendant for this reason. This circumstance was sufficient to establish the abstract risk of undue influence.
The conditions for the exception under Section 7 para. 1 sentence 1 No. 2 lit. a HWG, which permits promotional gifts or benefits granted in a specific or calculable monetary amount, were not met in this case because the PAYBACK points did not immediately reduce the purchase price due. The exception was to be interpreted as applying only to discounts and payments that directly affect the price, not vouchers for subsequent purchases of additional products that specify a monetary amount or percentage discount.
The OLG Hamburg also ruled that the conditions for the exception under Section 7 para. 1 sentence 1 No. 1, first half-sentence, case 2 HWG were not met in this case. The value limit for minor gifts under this provision should be set at 5.00 EUR as the sum of the PAYBACK points credited for the purchase of each individual medical product. The value limit of 1.00 EUR, which applies in the case of public advertising for price-regulated medicines according to the case law of the BGH, should not be applied to non-price-regulated remedies – particularly medical products.
The OLG Hamburg allowed an appeal, which both parties filed and are using to continue pursuing their respective claims.
Decision of BGH
The decision of the BGH is eagerly awaited in this case, as it will have to address the complex interpretative issues surrounding Section 7 HWG. This ruling will thus have significant implications for players in the healthcare market, particularly concerning future requirements for advertising medical products and other non-price-regulated remedies in connection with any incentives
