Is delivery "free to destination" anti-competitive?

Delivery "free to destination" and advertising it on an online shop is generally unobjectionable. However, the Higher Regional Court (OLG) Hamm had to decide whether such advertising constitutes unfair competition if a surcharge is demanded for orders of small quantities, and this small quantity surcharge is only drawn to the customer's attention in the General Terms and Conditions.

Company A and B are online retailers and competitors in the distribution of advertising materials, in particular printed textiles for commercial customers for the purpose of further use by end consumers. Company B advertised on their web shop with the statement:

"For online orders, delivery within Germany and Austria is free to destination"

For orders below EUR 50.00 net, however, the defendant charged its customers a small quantity surcharge of EUR 4.80. The company B explicitly drew attention to this surcharge for orders worth less than EUR 50.00. Company A regarded this procedure as anti-competitive, sent a cease-and-desist letter to Company B and demanded a cease-and-desist order with penalty clause. Advertising with the delivery "free to destination" was misleading because the relevant consumers would not expect additional costs for delivery of the goods even for smaller orders.

Court decision
The Higher Regional Court (OLG) Hamm classified the advertising of Company B as anti-competitive in itsjudgment of 04.05.2010 – Az. 4 U 32/10and thus followed the assessment of the competitor. The advertising statement for delivery "free to destination" could only be understood by the consumer to mean that no further costs would be incurred, so that a surcharge on delivery of small quantities would be misleading.

Although Company B did point out the small quantity surcharge, this could not be altered by reference to these surcharges in Company B's General Terms and Conditions. This listing in a shipping cost table, which can only be noted upon studying the General Terms and Conditions, cannot remedy the original misleading statement. This is because the average customer evaluates the information on Company B's homepage as an initial signal of the value for money of the corresponding offers and is thereby prompted to take a closer look at their range of products.

Conclusion

When advertising cost advantages, restrictions must be positioned in such a way that it is clearly apparent to the average customer what total costs will be incurred. If these requirements are not met, the use of such advertising statements can quickly be classified as unlawful commercial conduct, which may result in costly cease-and-desist letters under competition law and demands for injunctive relief.