Counter-advertising as an antidote to abuse

Practice shows that the mechanism of imposing liability for a violation of advertising legislation in accordance with article 14.3 of the Russian Code of Administrative Offences can no longer fully perform its preventive function. Against this backdrop, the antitrust agency has revived an obligation to issue a retraction of inaccurate information as a measure to influence offenders. Pepeliaev Group’s partner Elena Sokolovskaya will tell you how this tool is applied.

Most often, violations of Federal Law No. 38-FZ dated 13 March 2006 “On advertising” (the “Law on Advertising”) are encountered in advertising of financial services, which contains incomplete information about the conditions, or in materials that are distributed over electronic communications networks without the subscriber's consent.

Strengthening control over the advertising of financial services is becoming one of the agency's main objectives in this area of regulation. It is completely obvious how it will be implemented. We believe that an integrated approach is indispensable.

On the one hand, a clear trend can be traced towards improving legislation.

Thus, 23 October 2023 saw the entry into force of Federal Law No. 359-FZ dated 24 July 2023 “On amending the Federal Law ‘On consumer credit (loans)’ and specific legislative instruments of the Russian Federation”. According to the amendments, the advertising of services that involve the granting of consumer credit or a loan, including under which the borrower's obligations are secured by a mortgage, the use of such credit or loan and its repayment must also contain information on the ranges of values of the full cost of the credit (loan) as a percentage per annum If, under Federal Law No. 353-FZ dated 21 December 2013 “On consumer credit (loans)”, the range of figures for its full cost is calculated as a percentage per annum with respect to the consumer credit (loan)..

On the other hand, advertising legislation already makes provision for a significant number of mechanisms to fight against the dissemination of inappropriate advertising. However, it is extremely rare for the regulator to have recourse to some of these.

A striking example is the antitrust authority’s power to file a claim with a court for counter-advertising if the fact is established that inaccurate advertising has been disseminated and an order has been issued to cease the violation (article 38(3) of the Law on Advertising).

When this is done, the court decides on the form, location and timeframes for such a retraction to be posted, and the infringer bears the cost of producing and disseminating it.   

However, the antitrust service does not fully exercise its right, meaning that the court practice in cases on counter-advertising is not very extensive. Thus, over the past few years we have become aware of only a single case wh ere the supervisory authority has applied to a court with a statement of claim to this effect. The outcome of the court's consideration of the case was that the company was obliged to publicly retract the inaccurate advertisement on its website (the Decision of the Commercial Court for the city of Moscow and the Resolution of the Ninth Commercial Court of Appeal, dated, respectively, 15 October 2019 and 27 January 2020 in case No. А40-199745/19-12-1582).

In February 2023, the FAS of Russia again made use of its right and applied to the Commercial Court for the city of Moscow with a request that JSC Raiffeisenbank (“Raiffeisenbank” or the “Bank”) be compelled to undertake counter-advertising. Let us examine the facts of the case.

The Bank’s inaccurate advertisement appeared for the first time when screened by the television networks Channel One, TNT and STS in January and February 2021. It was a video clip featuring a girl dancing and singing a song.   “Cashback on everything. On this and this and this and this and this and that. On what you dream about and on what you’ve grown used to. And on much more, forever, anywhere and everywhere”. In the closing frames of the video sequence, the following statements were posted: “Cashback on everything”, “1.5% in roubles, not points”, “Service is free of charge”. On the audio track, we hear: “The Raiffeisenbank card offers cashback on everything with no conditions or restrictions”. In addition, throughout the whole advertisement in the lower part of the frame, there were changing disclaimers with information that cashback does not accrue for any money transfers, when any commissions are debited, when telecommunications, utility or insurance services are paid for, and so on.

In September 2021, the antitrust authority deemed this clip to be inappropriate advertising owing to the small font of the disclaimers and the short time for which they were displayed (no more than 3-4 seconds) and issued an instruction to the company to cease its violation of advertising legislation (the FAS of Russia’s Decision dated 7 September 2021 in case No. 08/05/5-76/2021).

Despite this, in January and February 2022, the same advertisement appeared on the channel REN TV. The antitrust authority recognised it to be inaccurate, in violation of article 5(3)(2) of the Law on Advertising (the FAS of Russia’s Decision dated 12 December 2022 in case No. 

08/05/5-85/2022) and issued an order to the Bank to cease the violation. The antitrust authority subsequently applied to the Commercial Court with a claim for the public retraction of the above inaccurate advertising (for counter-advertising).

The outcome of the consideration of the case by the Commercial Court for the city of Moscow was that Raiffeisenbank was compelled to place counter-advertising on REN TV at prime time (between 6 pm and 10 pm) once a day for seven successive days. In this clip, the Bank had to state that the antitrust service had recognised the advertisement for the cashback debit card to be inaccurate and that cashback did not accrue on all types of transactions. The Bank was instructed to implement the court's decision and to supply the FAS of Russia with a report on the placement of the counter-advertising.

Raiffeisenbank appealed against the decision, but the appeal and cassation courts came down on the authority’s side (the Resolutions of the Ninth Commercial Court of Appeal and the Commercial Court for the Moscow Circuit dated, respectively, 20 July 2023 and 11 October 2023 in case No. А40-17982/2023).

On the whole, we believe that the sequence of the antitrust authority's actions is logical and understandable: the frequency and regularity with which banking services are improperly advertised gives rise to a need to protect consumers from the harmful effect of this, which is the goal of counter-advertising. Thus, not only do offenders have an order issued with the aim of eliminating the violations that have been identified, but they also have an obligation imposed on them to retract the inaccurate advertising at their own expense.

This cannot be said to be a radically new approach of the antitrust authority; rather, it is a largely forgotten old one. After all, until 2015, the practice of filing such claims was beginning to take shape, although in most cases not in the regulator’s favour (Rulings of the Russian Supreme Commercial Court dated 16 March 2013 in case No. A19-10728/2012, and dated 5 September 2013 in case No. A19-19028/2012 refusing to refer the case to the Presidium of the Russian Supreme Commercial Court).

We take the view that the additional burden being imposed on the offender to place counter-advertisements will be instrumental in financial institutions taking a more thoughtful and conscientious approach to advertising their products.

The source: Competition and Law journal