"German Company": Competition Law Violation in Foreign Manufacturing

The Higher Regional Court (OLG) Frankfurt decided in urgent proceedings that the advertising "German Company – we guarantee the quality of the modules we manufacture" constitutes a competition law violation if the essential manufacturing steps take place abroad.

A manufacturer of solar modules was sued before the Regional Court (LG) Frankfurt a. M. for injunctive relief (Beschl. v. 17.08.2020, Az. 6 W 84/20). The entrepreneur advertised, among other things, with the following slogans:

"GERMAN – A – QUALITY STANDARD"

"German Company – we guarantee the quality of the modules we manufacture"

"(…) Since 2004, (…) has manufactured solar modules with German engineering quality. From its headquarters in Stadt1, A supplies and installs solar elements worldwide …"

The reason for the lawsuit was the alleged unlawfulness of the advertising under competition law. In the opinion of the competing claimant, the advertising created the impression among consumers that the solar modules were manufactured in Germany.

In fact, the manufacturer had the solar modules manufactured in countries within and outside Europe. The Regional Court (LG) Frankfurt a. M. (Beschl. v. 26.05.2020, Az. 2/6 O 153/20) however rejected an application for an interim injunction against the manufacturer. An appeal against this decision was subsequently heard before the Higher Regional Court (OLG) Frankfurt a. M.

Decision of the Higher Regional Court (OLG) on advertising with "German Company"

The Higher Regional Court (OLG) Frankfurt a. M. (Beschl. v. 17.08.2020, Az. 6 W 84/20) identified an infringement of competition law and granted the competitor a claim for an injunction against the manufacturer of the solar modules. The court determined that the average consumer understood the statements at issue as an indication that the solar modules are produced in Germany. He thus did not understand the statements merely as a reference to the manufacturer's place of business.

The statement "German – A – Quality Standard" creates the impression in consumers' minds in the context of the advertising that the solar modules are manufactured in Germany. The application of such quality seals in connection with the statement "German" creates the impression of a special quality guarantee by the undertaking as a German manufacturing company. In the court's view, the relevant public does not understand this statement as a mere reference to the place of business, but as a reference to the location of production.

The statement "German company – we guarantee the quality of the modules manufactured by us" also creates the impression in consumers' minds that the solar modules are manufactured in Germany. The combination of the statements "German company" and "manufactured by us" is understood in the context of the advertising as a reference to the production location. The same applies to the statement "(…) Since 2004 (…) manufactures solar modules in German engineering quality. From its headquarters in Stadt1, A supplies and installs solar elements worldwide …".

The court determined that the impression created by the statements in question did not correspond to the truth, from which the infringement of competition law resulted. The manufacturer of the solar modules had its solar modules manufactured in countries both within and outside Europe.

The judges referred here to the case law of the BGH. What is necessary and sufficient for the accuracy of statements designating Germany as the place of manufacture is that those services have been performed in Germany by means of which the industrial product to be produced obtains its foreground quality-relevant components or essential product-specific properties. The view of the relevant public is decisive in this assessment.

Contrary to the manufacturer's view, the "essential steps" of manufacturing were not performed in Germany.

Consumers are (somewhat) sensitized

The court did not overlook in its decision that consumers do not always take statements regarding the place of production at face value. Since the relevant public is aware of the phenomenon of international division of labour, it generally does not expect all production processes to take place at the same location. In the case of an industrial product, the relevant public generally relates a statement of origin to the place of manufacture where the industrial product obtains its quality, which is decisive from the perspective of the relevant public,essential quality and characteristic properties is obtained.

Conclusion

Creating a (false) impression that the "essential steps" of manufacturing a product take place in Germany, such as through advertising with "German company", is contrary to competition law.