Watch Out for Written Warnings: 10,000 Euros for Errors in Advertising
The written warning is one of the biggest agitators of the digital business. If a violation of a cease-and-desist letter with a penalty clause is added to this, it can get really expensive. Our two real exali damage events show that even small mistakes can put a company in the sights of interest groups keen on issuing written warnings, and why an SUV and a Bratwurst led to a contractual penalty of 10,000 euros.
The real damage event in our video:
SUV Without Fuel Consumption Values: Car Dealership Receives Written Warning
Shiny bodies, powerful engines, lots of horsepower and exciting photo shots: Social networks provide the ideal place to advertise the latest car models using powerful emotions. The car dealership in our first case also wanted to seize on this opportunity. In the past, the company had commissioned an advertising agency to create a Facebook post for a new vehicle model.
It advertised the new SUV with the model name and performance data (horsepower and kilowatts). And this is exactly what bothered an environmental association, who sent the car dealership a written warning for a violation of competition law.
The reasoning? According to German law, an advertisement for a specific car model (new car, demonstration car and one-day registrations) must also contain information about fuel consumption (in l/100km) and CO2 emissions (in g/km) as well as a reference to the guideline for consumption and emissions. This information was missing from the Facebook ad. Eventually, the dealership signed a cease-and-desist letter pledging to add this information to each of its posts in future.
Advertising Agency Falls into the Warning Trap
The cease-and-desist declaration from the earlier case turned out to be a fatal problem for the car dealership’s new advertising agency, which is insured through exali. They were supposed to advertise the proprietary brand’s new SUV on Facebook. But the agency repeated its predecessor’s mistake and forgot to add the important consumption data. The environmental association noticed the error immediately and now demanded payment of the contractual penalty of 6,000 euros agreed in the cease-and-desist declaration from the car dealership.
However, because the Facebook post was created by the advertising agency (the exali policyholder), the car dealership took recourse against the agency for the damage and demanded the 6,000 euros back, because the agency should have checked the ad before publication and added any missing information.
How Much Is the Bratwurst? Warning for Missing Base Price
This second real damage event is also about an incorrect notification. A German online retailer for meat products sells Bratwurst (fried sausages) on eBay. The retailer had its sales profile there managed by an advertising agency. Because the base price was missing in the advertisement, the retailer received a legal warning from an interest group known for its mass warnings.
A base price means the price of the goods per unit of quantity including VAT and other price components. The unit of measure for the base price is 1 kilogram or 1 litre or 1 cubimetre, 1 square metre or 1 metre of the goods. In Germany, traders must indicate this basic price for goods such as fruit, vegetables, meat or cheese products, cloth or liquids in addition to the actual selling price for the goods if the goods are more or less than the unit of measure for the base price.
The dealer paid the costs for the legal warning and signed a cease-and-desist declaration in which they undertook to pay a contractual penalty of 4,000 euros in the event of another violation. The retailer later entrusted their eBay shop to another agency insured with exali, commissioning them to revise the ad to make it legally compliant and to create a shopping ad on Google. The advertising agency added the missing basic price in the eBay ad and placed the corresponding ad on Google.
But the agency made a fatal mistake. The Google Shopping ad was also missing the basic price for the sausage. And the interest group that issued the first warning reacted again and demanded the agreed contractual penalty of 4,000 euros. The online retailer took recourse against the agency in this case too, demanding compensation due to the defective service.
Caution with Declarations to Cease and Desist with a Penalty Notice
Every legal warning also includes a so-called cease-and-desist declaration. With this, you undertake vis-à-vis your warning party to refrain from the warned conduct in the future. If you violate the terms of the cease-and-desist declaration, you must pay the agreed contractual penalty.
When you sign a cease-and-desist letter, you are admitting that you committed the violation of the law of which you are accused. You are also promising that you will not commit the violation again in future. That is why you should never sign a cease-and-desist declaration prematurely and always have it checked in advance by a specialist lawyer and adjusted if necessary. The party issuing the legal warning will always try to make the cease-and-desist declaration as broad as possible. This makes it more difficult for you to comply with the terms and increases the risk that you will violate the cease-and-desist declaration despite taking precautions.
No Insurance Coverage: More Expensive than Lack of Information in Advertising
The two damage events once again show that mistakes can happen quickly in everyday work. Whether freelancers, companies or agencies – even minor oversights can become a financial risk for your business. Fortunately, the agencies were covered by Professional Indemnity Insurance through exali. In both cases, the insurer covered the claims for damages.
You don't have Professional Indemnity Insurance yet? Protect your agency now in the event of claims for damages. Whether it’s trademark infringement or violations of copyright and competition law, your Professional Indemnity Insurance is always by your side. You have questions about the right insurance for your business? Give us a call! Our experts from customer service will be happy to advise you, without any waiting queues or call centres. You can reach us by telephone from Monday to Friday from 9 a.m. to 6 p.m. (CET) on +49 (0) 821 80 99 46 – 0.
Jan Mörgenthaler has worked a lot with freelancers in various TV formats since 2017. He is regularly in front of and behind the camera, took care of the marketing of a gaming association on a voluntary basis and, due to this experience, knows exactly which topics freelancers are concerned about.
When he contributes articles to exali, they usually revolve around IT and cyber risks.