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Thursday, May 23, 2024 | Back issues
Courthouse News Service Courthouse News Service

EU Slams Marketers That Tout Pricey Prizes

(CN) - Marketers that tell consumers they have "won" a prize, but require payment to transmit the winnings, violate European law, the EU Court of Justice said Thursday.

The United Kingdom's Office of Fair Trading sued five companies for using mail-marketing tactics in violation of consumer protection laws. The companies send individually addressed letters and placed scratch cards in newspapers and magazines, informing consumers that they have won a prize.

Prize values range from considerable to "merely symbolic," according to the Court of Justice.

The companies offer consumers several ways to claim their prizes: by calling a premium-rate telephone number, by text or - less prominently featured on the advertisement - by mail.

Though the mailers reveal the cost per minute and duration of the call for the telephone method, they hide the fact that the promotion companies take a portion of the call's cost.

In one example offered by the EU court, one marketer told consumers they had won a Mediterranean cruise. To claim the package, however, winners had to pay for trip insurance, supplements on one- or two-bed cabins, and food, drink and port fees while on the cruise. The "prize" would ultimately cost consumers nearly $500 per person.

Marketers told the court their practices are essential to keeping current databases of interested customers, which they then use to offer other products or sell to third-party companies.

But Europe's high court found that EU law already prohibits such aggressive tactics. It rejected marketers' claims that they avoid giving a "false impression" by disclosing costs upfront.

"There is a misleading practice where a product is described as 'gratis,' 'free,' 'without charge' or similar if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item," the decision states.

By dangling a prize in front of consumers, marketers seek to "exploit the psychological effect created in the mind of the consumer by the perspective of having won something and to cause him to take a decision which is not always rational and which he would not have taken otherwise," according to the court.

"It is, therefore, in order to protect the consumer that the concept of a true 'prize' should be preserved, by interpreting [EU law] as meaning that a prize in respect of which the consumer is obliged to make a payment of whatever kind cannot be regarded as a 'prize,'" the justices wrote.

The law "must be interpreted as prohibiting aggressive practices by which traders give the false impression that the consumer has already won a prize, while the taking of any action in relation to claiming that prize, be it requesting information concerning the nature of that prize or taking possession of it, is subject to an obligation on the consumer to pay money or to incur any cost whatsoever," they added. "[I]t is irrelevant that the cost imposed on the consumer, such as the cost of a stamp, is de minimis compared with the value of the prize or that it does not procure the trader any benefit; it is also irrelevant that the trader offers the consumer a number of methods by which he may claim the prize, at least one of which is free of charge, if, according to one or more of the proposed methods, the consumer would incur a cost in order to obtain information on the prize or how to acquire it."

National courts will have to assess marketing materials in their own countries in light of the ruling.

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