Over the last decade the coverage and significance of social media constantly increased, which has allowed for many, somewhat peripheral activities, also to grow in influence. An example of such activity is video blogging on video-sharing websites such as Youtube.com. The ever-increasing popularity of such activities affords vloggers to reach greater audience than standard advertising channels and more importantly - an audience that is much easier target. Further, vloggers are able to achieve higher conversion rate for a specific product than the one achieved through standard advertising channels. Therefore, many merchants are aiming to engage such vloggers to work to their benefit by promoting (even under-the-counter) their respective products/services. In light of that trend, the competent authorities pay more attention on such alternative advertising channels.
In recent proceedings, the Bulgarian Commission on Protection of Competition (the "CPC") held Laptop.BG, a Bulgarian online electronic gadgets retailer (the "Retailer"),liable for unfair competition practices under Article 29 of the Bulgarian Protection of Competition Act (the "PCA"). The CPC penalized the Retailer on the basis of latter's omission to disagree with insulting statements about one of its competitors presented in two vlogs, published on YouTube by a famous Bulgarian vlogger. The CPC ruled that the aim of the vlogs was to harm the reputation of the competitor Golden Green Stone Group ("GGSG"), while praising the products offered by the Retailer (CPC Decision no. 1244/02.11.2016).
The CPC investigation was initiated upon a complaint by GGSG, accusing the Retailer of various violations of the PCA, including, among others the following:
- Damaging GGSG's reputation by dissemination of false information and by misrepresentation of facts;
- Engaging in misleading and/or forbidden comparative advertisement;
- Violating the general prohibition not to harm competitors' interests by failing to observe diligent commercial practices.
The main arguments that the Retailer raised against the accusation were:
- First and foremost, the Retailer neither officially contracted the shooting and uploading of these vlogs, nor was an employer of the vlogger, so it should not be held liable for the vlogger's videos;
- Additionally, the opinions expressed in the vlogs cannot be classified as advertisement, because the Retailer did not commission the vlogger to shoot these vlogs or to make any statements in regard to the Retailer or against GGSG and the vlogs did not promote in any way Retailer's products;
- Despite certain degree of informal cooperation, comprising of provision of specific discount on Retailer's products for vlogger's followers, the Retailer did not have any control over the vlogger's channel and was not in a position to cancel or change in any way the respective vlogs.
In its decision, the CPC held that:
- The CPC dismissed GGSG's allegations for reputation damage, with the argument that such violation may be performed by means of specific actions only but not by omission. In order to trigger liability, such action should have been undertaken by a person possessing the power to represent the Retailer, which was clearly not the case with the vlogger;
- Regarding the allegation in misleading and prohibited comparative advertisement, although the CPC did not agree with the Retailer's argumentation, holding that the vlogger's videos might have the effect of promoting Retailer's products, no violation of the PCA was found, mainly because the Retailer was not associated in any way with the creation or publication of the vlogs;
- The CPC did hold the Retailerliable for violation of the prohibition for unfair competition practices, because it was aware of the respective vlogs, their negative impact on its competitor and the potential to attract new clients due to vlogger's statement, and nevertheless, did not expressly and publicly renounce the vlogger's behaviour and in particular the insulting negative claims made with respect to its competitor and the products it offers.
When analyzing the violation, the CPC held that even though the vlogger's expression of opinion was his inalienable right and the Retailer had no means to dictate his opinion, the Retailer was under an obligation to actively disagree with the contents of the videos, which undermined the trade reputation and goodwill of its competitor, as of the moment it became aware for these videos. The CPC defined this obligation as an expression of the diligent commercial practices, referred to in Article 29 of the PCA, thus justifying its decision to impose a penalty.
Currently the first instance appeal against the decision is pending before the Supreme Administrative Court.
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