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Anna Khrisanfova published “Flexible approach: On the courts’ interpretation of advertisement content” in The Lawyers’ Newspaper

Source: The Lawyers’ Newspaper

In the following commentary on the article by Julia Sevastianova titled “Protection of depositors’ rights,” the author, paying attention to the differences between advertising and offerings, the definition of unfair advertising, and the difficulty of proving a consumer’s mistake when signing a contract, concludes that the regulation of advertising activities in the field of financial services should focus on preventing consumers from entering into contracts with terms that differ from those contained in an advertisement. She also considers examples of the courts’ flexible approach to evaluating conformity.

According to Russian legislation, by default, advertisements only serve the function of informing and are not offers. According to Article 437 of the Civil Code of the Russian Federation, an offer is a proposal containing all the essential terms and conditions of a contract that demonstrates the will of the person making the proposal to conclude a contract, based on the terms and conditions specified in the proposal, with anyone who will respond. So, in order to advertise a bank deposit account, the bank is bound to enter into a contract, subject to the terms it has specified, and it must contain certain essential conditions, such as the subject matter of the contract, the interest accrued on the amount of the deposit, the terms and procedure for the payment of interest, as well as the terms and procedure for returning the deposit (Article 834 Civil Code). That is quite a lot of information, and in reality, it is unlikely to appear in a short commercial. Nevertheless, to protect the rights of consumers, who accept information from advertising at face value, the legislature provides special requirements for bank deposit account advertising that the article discusses.

The cornerstone of the problem associated with advertising banking products is advertising that is silent on the essential conditions of the proposed product and that gives consumers a certain impression that does not coincide with the actual terms of the services. As the FAS of Russia noted in a letter dated 13 August 2010, No. AK/26483, “On strengthening control over the advertising of financial services,” advertising that misleads investors or deceives consumers by creating false expectations is unfair.

In such circumstances, recognizing a signed contract as null and void, after confirming the presence of a misunderstanding and a distortion of the actual will of the depositor (Article 178 of the Civil Code) is quite difficult because, most likely, an inattentive consumer signed the contract that contains all the essential conditions that define, in detail, the transaction and the resulting mutual rights and obligations of the parties[1]. In such a case, the courts deny the possibility of recovering any losses resulting from concluding a contract with an advertiser that contains unfavorable terms (in accordance with Article 38 of the Federal Law of 13 March 2006, No. 38-FZ, “On Advertising” (hereafter the Federal law on advertising))[2].

It seems that, if the courts recognize an advertisement as improper or dishonest, the only real consequences are the collection of a fine and the issuance of an order to stop violating advertising legislation, that is, to stop future false advertising. In no way does this contribute to protecting the rights of depositors who already have incurred losses.

Accordingly, the purpose of regulating advertising activities in the field of financial services should be to prevent the involvement of consumers in contracts on terms other than those contained in the advertisement.

In the article, the author lists the existing legislative measures in the area of advertising that pertain to banking services and are aimed at protecting consumers’ interests, namely, the regulation of advertising content and its manner of distribution. The legislation also outlines the approach of the antimonopoly authorities for interpreting the relevant rules. There are a number of other considerations to add to the above information.

Court practice expands upon the requirements of Article 28 of the Federal Law on advertising. In the ruling dated 8 August 2017, No. 305-KG17-9832, in case No. A40-175192/2016, the Supreme Court of the Russian Federation supported the lower courts, which agreed with the antimonopoly authority that the outdoor advertising of bank deposit accounts did not meet the legal requirements because it did not contain all the information that was essential for the consumer. At the same time, the appeals court considered that the advertisement appeared on an advertising structure located on the highway, therefore, it was aimed at impulsive perception by consumers from a long distance and for a limited time. The consumer, therefore, was unable to absorb fully the text of the advertisement. The court also pointed out that the absence of any requirements, in the current advertising legislation, regarding the size of the font, color scheme, and other details for advertising did not indicate that the findings of the competition authority were incorrect.

So, in assessing the compliance of advertising with the law, the courts take into account the design of advertising, the way it is placed, and other factual circumstances affecting the average consumer’s perception of the advertising.

In ruling No. 305-KG18-11649 of 16 August 2018, in case No. A40-146628/2017, the Supreme Court of the Russian Federation agreed with the lower courts that, if an advertisement on the Internet includes a hyperlink with full information about the advertised product, the advertisement meets the requirements. At the same time, when advertising on the Internet, the presence of a hyperlink directly to the bank’s website is sufficient[3], even if the text of the advertisement itself does not specify the name of the financial services provider and conditions that determine the borrower’s full cost of a loan.

For advertising on the radio, “the link in the advertisement that additional information is available on the Internet or by phone does not constitute a proper disclosure of information because the advertisement creates an incentive for the consumer to use the services in the absence of all necessary information.” The courts, in this case, consider the advertising as improper (see, for example, the decision of the Ninth Arbitration Court of Appeal dated 6 February 2015, No. 09AP-57082/2014, in case No. A40-131767/2014, and the decision of the Moscow City Court dated 2 March 2015, in case No. 7-1743/15).

We believe the approach of the courts in deciding whether or not there are conditions for a real acquaintance with all essential conditions pertaining to financial services is quite flexible and not restricted to the requirements the law lists. In this regard, consumers should be more attentive and should not rely entirely on advertising distributed solely for the purpose of attracting clients. Similarly, they should not only depend on legislation and the antitrust authorities, whose sphere of influence has reasonable limits, based on court practice.

[1] See, for example, the appeal ruling of the Nizhny Novgorod Regional Court, dated 16 December 2014, in case No. 33-10983/2014, and the ruling of the Moscow City Court dated 8 September 2011, in case No. 33-28479.

[2] See, for example, the ruling of the Second Arbitration Court of Appeal of 14 December 2015, No. 02AP-9771/2015, in case No. A31-4618/2015.

[3] Similarly, in the definition of 6 March 2013, No. BAC-1680/13, in case No. A65-11399/2012, the Supreme Arbitration Court of the Russian Federation considered it sufficient to have an advertising banner posted on the Internet tab “Legal Information” that contained all the necessary details, the transition to which was not difficult for the consumer.