Regulation of Advertising in the European Community: an Overview

ABSTRACT - This paper summarizes and discusses provisions of the Treaty of Rome, directives issued by the EC and important decisions of the EC Court of Justice which are relevant to the regulation of advertising by the European Economic Community (EC).

Citation:

Gary T. Ford (1993) ,"Regulation of Advertising in the European Community: an Overview", in E - European Advances in Consumer Research Volume 1, eds. W. Fred Van Raaij and Gary J. Bamossy, Provo, UT : Association for Consumer Research, Pages: 559-564.

European Advances in Consumer Research Volume 1, 1993      Pages 559-564

REGULATION OF ADVERTISING IN THE EUROPEAN COMMUNITY: AN OVERVIEW

Gary T. Ford, Catholic University of Leuven, Belgium

[Professor and Chairman of Marketing, Kogod College, American University. This research was completed while the author was on sabbatical leave from American University and in residence at Catholic University of Leuven. The technical assistance of Jules Stuyck and the research assistance of Koen De Vos are gratefully acknowledged.]

ABSTRACT -

This paper summarizes and discusses provisions of the Treaty of Rome, directives issued by the EC and important decisions of the EC Court of Justice which are relevant to the regulation of advertising by the European Economic Community (EC).

INTRODUCTION

Over the past twenty years, the EC has been working towards the objective of a "harmonized common market," i.e., a market in which the free movement of goods and services is not hindered by differing policies of the Member States. With the long-awaited integration of the European Economic Community scheduled at the end of 1992, it is important for advertisers to be aware of the main components of a "harmonized" EC policy regarding the regulation of advertising. With that goal in mind, the purpose of this paper is to provide an introduction to, and overview of, the main factors influencing EC policy towards advertising. [Because several excellent reviews of the status of advertising regulation within the Member States are available (Reich and Micklitz 1980, Rijkeins and Miracle 1986, Schricker 1990, Maxeiner and Schotthofer 1992) this paper does not discuss advertising regulation within the Member States.]

REGULATION OF ADVERTISING BY THE EC

The authority of the European Community to regulate advertising within the Member States is provided in the articles of the Treaty of Rome which established the European Economic Community. The details of EC policy regarding the regulation of advertising are provided in "directives" issued by the EC, such as the "Directive on Misleading Advertising" and through decisions of the EC Court of Justice. Because the articles of the EC treaty represented the first attempt at enunciating economic policies with the European market, it is appropriate to begin here.

Articles of the EC Treaty.

In addition to specifying the administrative structure of the EC and time frame for establishing an internal market, the articles of the EC treaty provide the basis for EC regulation of economic activity. Reading the relevant portions of the treaty leaves little doubt that the economic issue of greatest concern at the time of writing was removing existing barriers to the free flow of goods and services between Member States and prohibiting Member States from erecting new barriers that had the same effect. This point is made quite explicitly in Article 2 which specifies establishment of a "common market" and the "harmonious development of economic activities" and Article 3f which states the activities of the Community shall include, "the institution of a system ensuring that competition in the common market is not distorted."

These Articles are quite important for two reasons. First, the treaty specifies a market-based system as opposed to a command or socialist economy. Second, the treaty explicitly states that competition within common-market is not to be distorted. How markets can be distorted is not mentioned but we can presume it includes through the actions of competitors as well as the through the actions of regulatory bodies within the Member States or at the EC level. It also seems safe to presume that the EC intended that all (legal) activities which enhance market performance such as non-misleading advertising generally not be restricted.

The treaty made no attempt to specify the details of regulating economic activity, realizing that such specification could only come through focussed policy statements and through case law. Thus, advertising is never mentioned in the treaty. Besides the statement noted above, advertising related implications, however, can be read into at least four other Articles, i.e.,:

Article 30: Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States.

Article 31: Member States shall refrain from introducing between themselves any new quantitative restrictions or measures having equivalent effect.

Article 36: The provisions of Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security . . . or the protection of industrial or commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between the member states. (emphasis added)

Article 100a, paragraph 3: The Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection.

In addition to these, Article 59 indicates restrictions on the free movement of services are not allowed. Also, Article 235 allows the EC to take on additional powers with the unanimous agreement of the Member States when such additional powers are necessary to realize the objectives of the EC. Article 235 thus, allows new powers that were not originally contemplated in the Treaty but that later are deemed necessary, to be assumed. Examples of such new powers include initiatives in environmental law and consumer protection.

Three points can be noted about these Articles. First, similar to the statement about distortion of markets, these Articles also are quite general. For example, Article 30 prohibits "all measures" restricting trade between Member States without referring to any.

Second, although the treaty commits the EC to a market-based system, it also anticipated market failures and assumed consumers need be assured of consumer protection. Thus, although not specified, there appeared to an assumption that information markets (because of deceptive advertising, for example) would produce too little, and/or perhaps, the wrong kind of, information.

Finally, Article 36 provides a way for Member States to hedge on the elimination of restrictions. Thus, depending on how Article 36 is interpreted by the Court of Justice, barriers can be removed, continued or established.

Finally, it should be noted the Maastricht treaty contains an explicit statement regarding consumer protection that will, if it is implemented, render moot the necessity to search through the EC Treaty for items concerning consumer protection. Specifically, Article 129a states:

1. The Community shall contribute to the attainment of a high level of consumer protection through:

a.) measures adopted pursuant to Article 100a in the context of the completion of the internal market;

b.) specific action which supports and supplements the policy pursued by the Member States to protect the health, safety and economic interests of consumers and to provide adequate information to consumers. (emphasis added)

Thus, the objectives of consumer protection and adequate information are specified in the Maastricht treaty. Whatever the ultimate fate of Maastricht (this is being written shortly after Denmark voted "no"), the important point is the representatives of the Member States have recognized the importance of adequate information to the functioning of consumer markets.

The Treaty establishing a European economic Community is important because it provides a context for understanding the objectives and assumptions of the participants and because it is useful in interpreting Court of Justice decisions and EC Directives. Activities of the EC in the latter of those areas are discussed next.

Policy statements and EC Directives regarding advertising

According to Kramer (1986, at p. 42), "The most important instrument for the approximation of legal provisions in the area of consumer protection is the directive." This is because the directive, "is binding on each Member State as far as the final goal is concerned," although, "Member States are given the choice of the form for attaining the required result." (Kramer 1986, p. 43.) The EC has released two directives related to advertising and proposed two more. [It has in addition released (in 1975 and 1981) two policy statements concerning a program for, "A consumer protection and information policy." The policy statements enunciate five "rights of consumer," similar to Kennedy's list of consumer rights, discuss directives that are being worked on in specific areas, e.g., toys, textiles, cosmetics, etc, and briefly discuss advertising under the topic of protection of the economic interest of consumers. The statements regarding advertising indicate no advertising should be misleading, advertisers should have substantiation for claims and advertisements should be accurate. The second policy statement also recognizes the potential value for industry self-regulation. The text of each policy statement is included in Rijkeins and Miracle 1986, in Appendices 1 and 6 and is discussed at pages 58-64 and pages 152-55. The policy statements are not discussed here because there are no important implications for advertising regulation not contained in more specific directives.] Those that have been released are the directives on "misleading advertising" and on "television broadcasting." The proposed directive relevant to advertising concerns "comparative advertising." Each is discussed below. [The EC also has stated that it intends to develop a directive on unfair advertising but the status of the directive on "unfair advertising" is unclear. In the directive on misleading advertising further directives on comparative advertising and unfair advertising were promised. The draft proposal on comparative advertising states, "Although unfair advertising still has not been properly dealt with, some of its aspect have already been harmonized, at least with regards to television advertisements. The need to take some of those principles into account was recognized in Council Directive 89/552/EEC or 3 October 1989...concerning the pursuit of television broadcasting activities." Thus, no proposal on unfair advertising exists and it appears that none will soon be issued.]

The Directive on Misleading Advertising. The preamble provided several reasons why a directive on misleading advertising was issued including recognition that wide differences exist between the Member States in the laws regarding misleading advertising, these differences "lead, in many cases, to inadequate levels of consumer protection," and "hinder the execution of advertising campaigns beyond national boundaries and thus, affect the free circulation of goods and services." There was also the recognition that "misleading advertising can lead to distortion of competition within the common market." [Commission of the European Communities hereafter abbreviated as "COEC," 1984, p.17.] Thus, the directive indicated explicitly that both consumers and non-misleading advertisers were hurt by deceptive advertising and by the differences in the advertising law in the Member States.

Similarities between the EC definition of misleading advertising and the FTC definition of deception. The EC directive defines misleading advertising as advertising which, "deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behavior or which, for those reasons, injures or is likely to injure a competitor." (COEC 1984, p. 18.) Interestingly, this definition is quite similar to the revised definition of "deception" issued in 1983 by the United States Federal Trade Commission.

The FTC indicates that for deception to occur three elements must be present: 1.) "there must be a representation, omission or practice that is likely to mislead the consumer," 2.) the practice is examined "from the perspective of a consumer acting reasonably in the circumstances," and 3.) the "representation, omission or practice must be material, " e.g., likely to affect the consumer's conduct or decision." (FTC, 1983, pp. 689-90.)

Comparing the two definitions, it is apparent the both the FTC and EC definitions of misleading advertising include the "likely to deceive" component. In addition, "affecting their economic behavior" in the EC directive is close to the "likely to affect their conduct or decision" in the FTC statement regarding "materiality." Finally, the statement regarding "those to whom the advertising is addressed or whom it reaches" appears to be less narrow than the FTC's "reasonable consumer" criterion, but both represent a statement about consumers.

In contrast, to the similarity between the FTC and final EC directive, the prior two drafts of the EC definition of misleading advertising were quite different from the final version. Specifically, the 1978 and 1979 versions stated, "misleading advertising means any advertising which is entirely or partially false or which, having regard to its total effect, including its presentation, misleads or is likely to mislead persons addressed or reached thereby, unless it could not be foreseen that these persons would be reached thereby." (Rijkeins and Miracle 1986) Thus, the earlier versions of the EC definition focussed on objective falsity rather than on whether consumers were likely to be deceived. In addition, prior definitions did not include any statement about affecting consumer behavior. In sum, the directive released by the EC in 1984 regarding misleading advertising is more similar to the FTC statement on deception issued in 1983, than it is to definitions used in prior drafts. [See Ford and Calfee 1986, for more detail on the FTC deception statement and Rijkeins and Miracle 1986, at pages 104-113 for a side-by-side comparison of the last four drafts of the EC directive on misleading advertising.]

Substantive characteristics of the directive on misleading advertising. From a regulatory perspective the most important characteristic of the directive is it identifies three areas in which advertising will be judged in determining misleadingness: 1.) claims about the nature and features of goods or services; 2.) claims about prices and contracts and 3.) claims about the nature, rights and attributes of the advertiser. (COEC 1984, p. 18.) In this attempt to provide an exhaustive list of areas in which advertisements might be "materially" misleading is included claims about the availability, composition, nature, geographical or commercial origin of goods and services, claims about the results to be expected from their use, claims about tests or checks carried out on the goods and services and other claims. No recognition is given, however, to whether consumers are more likely or less likely to be misled by certain types of claims. Thus, the directive provides no guidance about regulatory priorities.

There are also five other important points in the directive that can affect advertiser behavior. First, each Member state is required to establish judicial or administrative bodies so that persons or organizations can take action against allegedly misleading advertising. Second, the statement indicates the advertiser should have substantiation for factual claims. Third, the statement allows for corrective advertising as a remedy. Fourth, self-regulation is allowed to supplement but not replace the legal/administrative system. Fifth, Member States are allowed to adopt provisions, "with a view to ensuring more extensive protection of consumers, persons carrying on a trade, business, craft or profession and the general public."

Four of the five items listed above are similar to FTC standards. The latter provision, however, may provide more protection to competitors than to competition, depending on the interpretation within Member States and by the EC Court of Justice. That is, advertising regulation could erect barriers to information flows (for example, through rules which have the effect of banning comparative advertising) and thus distort competition in the name of protection.

One final point should be noted about the directive on misleading advertising. The directive mentions nothing about penalties for violations. Instead each Member State is allowed the flexibility of imposing the penalties that are built into its existing legislation regarding misleading advertising. As might be expected there is wide variation among the Member States in this regard, ranging from civil penalties (e.g., Belgium, Italy) to criminal proceedings (France). The types of civil also vary tremendously by country and include cease and desist orders, damages, corrective advertising, publication of the judgement, recovery of court costs and other monetary damages. (See Maxeiner and Schotthofer (1992) for more details on penalties.)

In sum, the Directive on Misleading Advertising establishes that advertising should be accurate and that advertisers should be able to substantiate claims. Neither provision should affect most advertisers and could deter some potential violators. The greatest impact of the directive, however, is likely to be that it establishes a definition for "misleading advertising" that is standard throughout the Member States. This should at least provide advertisers with guidance for the minimum criteria their advertising must meet and thus, make it easier to implement advertising campaigns that cross national borders. This point is especially important when considered in the context of the directive on television broadcasting.

The Directive on Television Broadcasting activities. With the widespread diffusion of satellite broadcasting and cable television technologies throughout the EC, consumers frequently are exposed to programming and advertising that originates in another Member State. Although the directive was primarily concerned transmission of programming among the EC countries, it also included several important statements regarding advertising including:

1. Providing a maximum for the amount of transmission time that can be devoted to advertising (normally 15 percent) and minimums for the uninterrupted programming time between commercial breaks (normally 45 minutes).

2. Banning advertising of tobacco products and prescription drugs and sponsorship of programming by those whose principal business activity concerns those products.

3. Establishing guidelines for advertising for alcoholic beverages.

4. Establishing guidelines for advertising to children and minors.

5. Requiring that sponsored programming be clearly identified as such (COEC 1989).

In addition to these specific concerns about products and target markets, the directive included three general statements that are very important. First, it stated that, "it is necessary and sufficient that all broadcasts comply with the law of the Member States from which they originate" (COEC 1989). Second, it stated, "Member States shall ensure freedom of reception, (COEC 1989)" and finally, that the Member States, "must maintain the right to set more detailed or stricter rules (COEC 1989)" for programming and advertising which stays within its borders.

The implication of these statements is that, if comparative advertising is allowed in the country from which the transmission originates but not in the country in which it is received, the rules of the originating country take precedence. Furthermore, the receiving country is not allowed to block such transmissions. Since, borders are so close and cable programming is so ubiquitous, it seems likely that advertisers will be able to do some "shopping" for Member States that allow the kind of advertising they want to use. Nonetheless, the advertising must meet the criteria for misleadingness discussed previously and of course, this does not imply that it will be easy to find programming that attracts the type and numbers of viewers they want to reach.

The bans on tobacco and drug advertising are similar to bans on these products in the United States, while the guidelines for advertising for alcoholic beverages that are similar in spirit to self-regulation guides used by network television. The bans on advertising, however, reflect an apparent belief within the EC that these particular markets will not provide adequate information for consumers.

The proposed directive on comparative advertising. In this directive the EC recognizes comparative advertising can improve consumer information and stimulate innovation and competition, recognizes some Member States allow comparative advertising (e.g., Portugal, Spain, Ireland, United Kingdom and soon to allowed in France) while others prohibit it (e.g., Belgium, Germany) and recognizes much advertising crosses country borders (COEC 1991). Since the directive on Television Broadcasting states advertisers need only comply with the regulations from which advertising originates, comparative advertising will regularly be viewed in countries that prohibit it. This can put domestic competitors in the same industry at a disadvantage since they cannot respond with comparative advertising touting their brand.

While recognizing the pro-competitive affects of comparative advertising the proposal also cautions, "Unless it meets a number of restricting conditions, comparative advertising too can become misleading or unfair." (COEC 1991, p. 6) Thus, the proposal indicates the comparisons must:

1. be "only be the material ones,"

2. be "chosen fairly," e.g., be along comparable attributes and not be "silent about other potentially material elements of a significant comparison,"

3. be "objectively verifiable,"

4. be "not misleading" (according to the criteria of claims regarding nature and characteristics of goods, their prices and characteristics about the advertiser as discussed in directive on misleading advertising),

5. not cause "confusion in the marketplace between the advertiser and his competitors,"

6. "not denigrate competitors," meaning, "the advertiser must not cause discredit, disparagement or contempt of competitors; ; ; except for the unavoidable effects of its advertising action," and

7. not be a means of capitalizing on the reputation, trademarks or trade name of others. (COEC 1991, p. 10, all underlining in original.)

Many of these limitations probably are not needed because of the incentives of advertisers, competitors and consumers. For example, advertisers are unlikely to be successful making comparisons are non-material attributes and competitors can respond with their own advertising or through the judicial system if the comparison cannot be verified or is misleading. Nonetheless, except for numbers 2 and 6, the affects on advertiser incentives are likely to be minimal. Item 2, however, may cause competitors to complain whenever their brand is not "dominated" on every relevant attribute. If so, this would have a chilling affect on comparative advertising. The interpretation of "denigration" also could have an adverse impact on comparative advertising. After all the purpose of comparative advertising is to show that the advertiser's brand is better than his competitors' and this can be broadly interpreted as denigration. Thus, when and if the directive on comparison advertising is issued, the real impact on advertising will have to be determined in case law. As is discussed next, so far the court of Justice seems to be reaching decisions that increase the free flow of goods, services and information within the common market.

Decisions from the Court of Justice. As noted above Article 30 of the Treaty of Rome banned, "Quantitative restrictions on imports and all measures having equivalent effect." (COEC 1958.) In 1974, in the Procureur du Roi v. Dassonville case, the Court stated that "measures having equivalent effect" meant "all trading rules enacted by Member States, which are capable of hindering directly or indirectly, actually or potentially, intra-community trade." (Vandencasteele 1986, pp. 243-44.) The Court has affirmed this broad interpretation in a number of cases involving for example, discrimination among national producers based on whether they use domestic or imported raw materials (Vandencasteele 1986, p. 244), restricting goods which bear a trademark symbol not registered in a State in which it is being distributed, although the trademark is registered in another Member State (Stuyck 1991) and requirements that a certain percentage of public contracts be reserved for firms located in a specific area (Wytinck 1990) Although these decisions would appear to indicate that advertising related restrictions would meet a similar fate, until three recent decisions, advertising has not been the focus of Court of Justice decisions. The decisions in the GB-INNO-BM, the "Catalona" and the Society for the Protection of Unborn Children (SPUC) are directly relevant to advertising regulation.

In the GB-INNO-BM (GB) case, GB, a retailer with outlets throughout Belgium and a store in Arlon, a town near the border of Luxembourg, distributed advertising leaflets in Luxembourg which contained notices about price reductions on certain goods. The advertising mentioned the duration of the sale prices and previous product prices and conformed to the Belgian Trade Practices Act. A trade association in Luxembourg brought suit in a Luxembourg court on the basis that the leaflets violated Luxembourg law on unfair competition, which bans advertising mentioning the duration of sale prices or the previous prices (Wytinck and Stuyck 1990).

The Luxembourg trade group obtained an injunction to stop distribution of the leaflets and the order was confirmed on appeal. GB went to the Luxembourg Supreme Court, which asked the Court of Justice, whether the matter fell within Articles 30, 31 and 36 of the EEC treaty (Wytinck and Stuyck 1990).

Both the logic of the Court and the ultimate decision in the GB case are of interest. The Court indicated that consumer policy in the EC established a strong link between consumer protection and consumer information. "Article 30 of the Treaty should thus not be interpreted in such a way as to imply that national legislation, "denying consumers access to certain information could be justified . . . by consumer protection." (Wytinck and Stuyck 1990, p. 33.) Following this logic, the court ruled, "Under Article 30 and 36 of the EEC Treaty, properly interpreted, an advertising campaign lawfully conducted in another Member State, cannot be made subject to national legislation prohibiting the inclusion, in advertisements relating to a special purchase offer, of a statement showing the duration of the offer or the previous price." (Wytinck and Stuyck 1990, p. 33.)

This decision is important for at least three reasons: First, it focused on consumers' rights to gain the benefits from open markets. Heretofore, the emphasis had been on firm's ability to enter markets rather than consumers' abilities to shop across borders.

Second, the Court focused on the salutary effects that information can have on the functioning of markets. The Court indicated that information was to be accurate and also that governments had no right to deny consumers access to information about the availability of goods in a neighboring State.

Third, the GB decision indicated that advertising and sales promotion fell within "measures having equivalent effect" to restrict competition. Previously, the Court had ruled that labeling, packaging and other requirements could hinder trade. Restrictions on advertising methods such s those imposed by Luxembourg on GB may have the effect of compartmentalizing national markets and hence should be disallowed under Article 30. This may ultimately mean that the part of the television broadcasting directive dealing with compliance advertising with the laws of the State in which the advertising originates has been extended to other forms of advertising such as leaflets. That is, Member States are limited in their rights to block information to consumer as long as the advertising complies with the law where it originates. (Wytinck and Stuyck 1990).

The Cataluna case is of interest because it provides an example of the way in which Article 36 can be used to limit the impact of Article 30. In an earlier section it was noted that Article 36 allows restriction of the free movement of goods for other than economic reasons such as public morality or health as long as these were not a means of arbitrary discrimination. In Catalona, local law "bans all advertising for drinks with more than 23 percent alcohol along roads and highways, in cinemas and in means of public transport." (Roos 1991, p. 651.) Two Spanish firms violated this law and were ordered to pay a fine.

Based on the Cataluna law and Articles 30 and 36 of the EC Treaty, three questions came before the Court of Justice: [This summary relies on Roos, (1991) "National rules on advertising for alcoholic beverages," Free movement of goods-cases, pp.651-657.]

1.) was the Catalan law banning advertising for drinks over 23 percent in certain places a measure having equivalent effect to a restriction on the free movement of goods and service within Article 30? In other words, did Article 30 apply to the local law?

2.) If yes to #1, should Article 36, which allows restrictions for reasons of public health apply?

3.) If yes to #2, could the Catalan law be a means of arbitrary discrimination under Article 36?

The Court indicated the Catalan law constituted a measure having equivalent effect under Article 30; that is, it restricted free trade and referenced the GB case. The Court also indicated the Catalan law was reasonable in the struggle against alcoholism. It was argued that the law protected home-based industry (since almost all drinks it produces have less than 23 percent alcohol) and discriminated against industries producing drinks that have more than 23 percent alcohol. Since 23 percent is the limit between fermented and distilled drinks, and the limit, "corresponds to the different habits of alcohol consumption," (Roos 1991, p. 657), the Court reasoned the limit was not discriminatory within the meaning of Article 36. Thus, the Catalan law was allowed to stand.

There are three important implications from this case. First, the case shows that Article 36 can indeed be used to justify restrictions that normally would fall under Article 30. Thus, the impact of Article 30 becomes a two-step affair, i.e., does Article 30 apply?; and if so, can the restriction be justified under Article 36? (Vandencasteele 1986.) Second, the Court indicated that although Catalan law also disadvantaged other products produced in Spain as well as products produced in other Member States does not mitigate the violation of Article 30. If trade between Member States is effected Article 30 applies. (Then of course, it must be determined whether Article 36 applies.) Third, the reference by the Court to the GB decision gives more weight to the ideas expressed there and make it less likely that GB is an outlier decision regarding the free flow of information.

The cases involving The Society for the Protection of Unborn Children Ireland Ltd is important for two reasons: one practical and the other hypothetical. In this case, a students' associations in Ireland distributed information about the identity of legally operating abortion clinics located in Great Britain. The students' associations were unaffiliated with the abortion clinics. SPUC brought suit charging that the distribution of such information was unlawful in Ireland, which has a constitutional amendment protecting the rights of the unborn.

In reaching a decision the Court decided that medical activities such as termination of pregnancy, represent an economic activity within the meaning of the EC Treaty. This has the practical or substantive effect of extending distribution of information to services as well as to products.

The Court ruled that it is, "not contrary to Community law for a Member State . . . to prohibit . . . distributing information about . . . clinics in another Member State where voluntary termination of pregnancy is lawfully carried out . . . where the clinics in question have no involvement in the distribution of the said information." (Court of Justice, Case C-159/90, p. 11-12.) The hypothetical issue raised by the case is this: suppose the clinics themselves had advertised their service in Ireland in newspaper or through television broadcasts originating in Great Britain.

In a hypothetical situation such as this, the television broadcasting directive which allows advertising that meets local regulations and limits receiver States' ability to block transmission would appear to be conflict with Article 36 which allows Member States to prohibit the distribution of information to protect public health and morality. It is not clear how the Court would rule in such a situation, although this appears to be a good example of a situation where Article 36 would apply, especially considering the Catalona decision.

Conclusions regarding Court of Justice decisions. Over the last 18 years the Court of Justice has shown quite clearly that measures having the effect of restricting the free movement of goods and services between Member States will not be allowed. Court decisions have made clear that restrictions on information flows including issues associated with labeling and advertising fall under Article 30 and that the rights under Article 30 apply to consumers as well as to business. Nonetheless, in some situations, Article 36 can be used by States to restrict information flows to consumers.

CONCLUSIONS ABOUT EC REGULATION OF ADVERTISING

It is clear from the Articles of the Treaty of Rome the EC desires a barrier-free internal market and recognizes that the free flow of information is necessary for markets to function effectively. The directives on misleading advertising and television broadcasting and the proposed directive on comparative advertising are designed to support the increased flow of useful information to consumers (with the possible exception of the prescription drug and tobacco markets). In addition, decisions from the Court of Justice are supportive of the use of advertising to help markets function effectively by providing useful information to consumers. Nonetheless, when the comparative advertising directive is implemented, it could be interpreted by the Court of Justice in a manner which restricts this technique or alternatively, causes it to become used frequently throughout the EC. Which it will be cannot yet be determined.

BIBLIOGRAPHY

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