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Misleading promotion of zero-percent financing

News  >  Competition law  >  Misleading promotion of zero-percent financing

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Ruling of OLG München – Ref.: 6 U 3908/22


Advertisements that promote zero-percent financing have the potential to mislead consumers and hence to fall foul of competition law, according to a judgment of Munich’s higher regional court – the Oberlandesgericht (OLG) München – from October 19, 2023 (case no.: 6 U 3908/22).


Advertising is an important tool in business for drawing the attention of customers, motivating them to make a purchase, and differentiating oneself from the competition. And this rings all the more true the greater the competition. But advertisers are also constantly treading a fine line in trying to avoid making misleading claims that could give rise to formal warnings and claims for damages, notes MTR Legal Rechtsanwälte, a commercial law firm whose areas of expertise include competition law.


NRW consumer protection agency issues warning for misleading advertising


Advertisements for zero-percent financing, like other forms of advertising, have the potential to be misleading. And there are many examples of this both in e-commerce as well as in traditional business settings. As tempting as such an offer might seem, North Rhine-Westphalia’s consumer protection agency – the Verbraucherzentrale NRW – recently cautioned consumers to be wary. This is because an offer of this kind may be contingent upon concluding a framework loan agreement, with this potentially leading to an expensive end result for consumers.


It is for this reason that the Verbraucherzentrale NRW recently issued a warning to a company operating the online stores of two electronics store chains that was promoting various goods with zero-percent financing. The agency contended that it was not obvious to consumers that they were not merely receiving a credit line without an interest markup but were also concluding a framework loan agreement. When it comes to credit lines, it is only the first drawdown that incurs no interest, with potentially high interest rates being charged for subsequent uses.


OLG München grants agency’s legal action


After the operating company failed to react to the warning, the Verbraucherzentrale NRW went on to successfully file an action with the OLG München.


The court made it clear that businesses offering zero-percent financing must clearly and unambiguously indicate if a credit line is tied to the financing offer. The Munich court also pointed out that only companies that have permission from the competent authority are allowed to broker a credit line. The ruling imposes greater expectations on those offering these kinds of loans with respect to transparency.


Misleading advertising and breaches of competition law can potentially give rise to formal warnings and injunction suits. In order to avoid these outcomes, a lawyer who is well-versed in competition law ought to be consulted.


MTR Legal Rechtsanwälte advises on competition law.

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