The Regulatory Framework for Advertising with Star Ratings
The use of average star ratings as an advertising element is becoming increasingly relevant in everyday business, not least due to the growing influence of digital consumer opinions on market behavior. Companies are increasingly turning to review portals and aggregated customer ratings to foster trust and positive purchase expectations. Nevertheless, there are specific regulatory and legal requirements that determine the permissible design of such advertising. Recent court decisions, particularly by the Federal Court of Justice (BGH, judgment of 25.07.2024 – I ZR 143/23), clarify the requirements for transparency and non-misleadingness in this context.
Legal Classification of Advertising with Ratings
Advertising Relevance of Star Ratings in the Business Context
Star ratings represent an effective tool for companies to communicate with consumers. The relevance of aggregated user judgments arises from the fact that potential customers are offered guidance based on experience values. From a competition law perspective, these indications are classified as business conduct aimed at promoting sales. This results in the obligation to comply with the principles of fairness – namely the prohibition of misleading information according to § 5 UWG.
Requirements for Transparency
For the legal admissibility of advertising with an average star rating, it is critical that the advertised information is presented sufficiently transparently for the addressed audience. A key criterion is the verifiability of the average rating: It must be clear how many individual ratings the average value is based on and the period from which they originate. Missing information here can, in an overall view, lead to an average consumer being misled about the significance and representativeness of the rating. The circumstances of the individual case and the design of the rating integration on the website or in a shop remain decisive.
Impact on the Risk of Misleading Information
The risk of legally relevant misleading information is particularly increased if the advertised average value is not based on a reliable or transparent data basis. The danger of deception exists both regarding the origin, timeliness, and number of ratings, as well as the question of whether rating opportunities are susceptible to manipulation. These aspects have recently been clarified by the aforementioned high court statements. It was stated that the mere absence of information on the number of individual ratings can, depending on the circumstances, be suitable to significantly influence the decision-making of market participants.
Judicial Specification by the BGH Decision of July 25, 2024
Central Reasons for the Decision
The central question in the BGH decision of 25.07.2024 (Az.: I ZR 143/23) was whether advertising with an average star rating is permissible if the number of underlying individual ratings is not specified. According to the court, it is generally not sufficient to merely communicate the average number of ratings without disclosing the rating scope on which it is based. The court emphasized that a relevant part of consumers assumes it is a representative data basis if no further information is available. Thus, full advertising effectiveness can only unfold if the addressed audience can objectively evaluate the content.
Specification of Transparency Requirements
The BGH clarified that in particular in cases where a small number of individual ratings underlie the average value, a lack of transparency can lead to significant misconceptions. This is particularly problematic if there is no easy way to access the exact number of ratings through an additional click or note. In the contested situation, the average rating could therefore not be used commercially in isolation without making the total number of submitted ratings apparent.
Balancing with the Interests of Advertising Companies
At the same time, the court emphasized that the interest of advertisers in an appealing and compact presentation of rating results is not of unrestricted priority. Rather, market-relevant information asymmetries must be avoided through sufficient transparency. Consequently, the obligation to disclose the underlying number of ratings cannot be entirely overridden by practical considerations of advertising effectiveness.
Practical Challenges in Designing Rating Advertising
Responsibility for Rating Systems
Companies that exploit the advertising effect of aggregated star ratings bear the responsibility to ensure that the ratings reflect not only a formal but an actually accurate and verifiable basis. Particularly important is ensuring that measures against abuse, such as artificially generated ratings or systematic manipulation, are in place. In the absence of such precautions, there is a further risk of misleading potential customers.
Cease and Desist Situation and Special Duty of Care
Competition watchdogs and competitors increasingly scrutinize advertising measures involving star ratings critically. The legislator has already made adaptations with the implementation of the “Omnibus Directive” that came into force in May 2022, which further increase the requirements for rating transparency. Against this backdrop, companies face an increased duty of care, which also concerns risks of cease and desist orders and potential claims for damages.
Summary and Legal Development
The highest court’s specification of the requirements for advertising with average star ratings significantly contributes to a new balance between effective customer information and market-related transparency. For companies, it remains essential to disclose all relevant information for comprehensibility of the advertising statement – particularly regarding the number, timeliness, and origin of the ratings used. Ongoing proceedings and further decisions may further clarify the legal situation in the future (cf. BGH, judgment of 25.07.2024 – I ZR 143/23). The presumption of innocence applies to proceedings not yet concluded.
Against this complex legal background, it is advisable to conduct an individual analysis of the respective situation when there is uncertainty regarding the design of rating advertising. MTR Legal Lawyers offers companies, investors, and wealthy private individuals international legal services to develop individual and reliable strategies in matters of market communication and fair competition. More information and contact options are available on the following page: Legal Advice in Competition Law.
