In a ruling dated April 5, 2016 (case reference: 103 O 125/15), the Regional Court of Berlin decided that advertising with the term “perfume outlet” gave consumers the false impression of a factory outlet. The buyer expects particularly good bargains, but receives normal retail prices. This is misleading and, above all, has relevance under competition law.
“Outlet” promises affordable factory outlet
The trend towards low-cost shopping is no longer a phenomenon of yesterday. Companies such as Amazon, Zalando and Co. play their part every day. Customers are encouraged to buy by special bargains and temporary discount campaigns and are happy to take advantage of them.
Above all, the trend of “outlet villages” or “factory outlets” adopted from the USA promises customers a sale “ex works” at unbeatable prices.
To differentiate “outlet” from “sale”
The term “sale” is to be distinguished from permanently low-cost factory sales. The term “sale” refers to the clearance sale of a retail store for the purpose of changing the collection. Depending on the season, the customer receives a discount on goods from the last collection, while the retailer makes space for new goods.
Misleading due to the term “outlet”
However, if an online store advertises with the term “outlet”, this can lead to consumers making a big mistake. Because if there is actually no factory outlet and the online store turns out to be a “normal” retail store, the consumer is simply being misled:
In this case, the court assumed a violation of Section 5 para. 1 UWG. In its reasoning, the court referred to the understanding of the target public and the Duden dictionary:
According to the understanding of the relevant public, an “outlet” or “factory outlet” is a factory outlet by the manufacturer, where a lower price can be offered than in the retail trade, because the sale at the manufacturer eliminates the wholesale and intermediate trade […].
The Duden dictionary contains the three terms “outlet”, “factory outlet” and “designer outlet”. According to Duden, the term “outlet” means “factory outlet” (duden.de/rechtschreibung/Outlet). “Factory outlet” means “point of sale of a company in which its goods are sold (at a discount) directly to the consumer” (duden.de/rechtschreibung/Factory_Outlet) and “designer outlet” is a “direct sales outlet of one or more designer companies” (duden.de/rechtschreibung/Designer_Outlet).
No misleading competition
There is no question that the growing number of online stores is increasing the pressure on the competition. However, the LG’s decision once again makes it clear that misleading consumers can quickly backfire. The term “outlet” should therefore not be used if a third party comes between the manufacturer and the consumer.
As a rule, operators of mere online stores are advised to refrain from using the term “outlet”. Although there are a large number of such alleged “outlet” online stores, you must not allow yourself to be misled. This does not make a misleading action legal and can result in costly proceedings.