Supreme Court: Circumventing the withdrawal right regarding the digital toll badge (DiVi) is unfair competition plus infringement of DiVi marks

In its preliminary injunction issued in favor of GEISTWERT’s client ASFINAG against German website-operators, the Austrian Supreme Court (OGH 19 December 2019, 4 Ob 96/19z – link, available in German only) held that the Defendants’ business model desiring to exclude the consumers’ withdrawal right when purchasing digital toll badges (digital vignette, respectively a digital vignette for one route) is unlawful and thus unfair competition.

Furthermore, the Defendants used ASFINAG’s distinctive trademarks for designating their offer and the Supreme Court qualified this as a trademark infringement.

The German Operators‘ unlawful Business Model

Firstly, the Supreme Court assessed the German Defendants’ (unlawful and unfair) business model as an entirety following the principle of an overall assessment of each case’s individual circumstances.

The Defendants exploited the fact that ASFINAG must subject the consumers’ acquisitions of a digital toll badge to a waiting period of 18 days under ASFINAG’s Terms of Use for avoiding the risk of consumers abusing the statutory right of withdrawal warranted by the EC Consumer Protection Directive, respectively the Austrian Distance Selling Act (Fern- und Auswärtsgeschäftegesetz, briefly “FAGG”). For this reason, ASFINAG’s Terms of Use equally prohibit the resale of digital toll badges.

In contrast to this, the Defendants operate a website that, as the Supreme Court noted, is confusingly similar to ASFINAG’s website “procuring” an “instantly valid” digital toll badge to its customers for a (higher) flat fee. These customers (likely predominantly consumers, because no waiting period exists when entrepreneurs acquire a digital toll badge) input their (number plate) data, which the Defendants’ website subsequently automatically relays to ASFINAG’s web-shop, where the Defendants’ automatic process always uses ASFINAG’s “acquisition by entrepreneurs”-option so that any digital toll badges procured via the Defendants’ website are always instantly valid. For their „service“, the Defendants ask for a (intransparent) flat fee comprising the actual price of the concerned digital toll badge and a “service fee”. With their business model, the Defendants, by their own account, generate profits in the amount of EUR 30.000,00 per month.

Consumers who noticed that they paid a higher price when using the Defendants service or whose exercise of their statutory withdrawal right (where the Defendants also failed to provide proper, respectively complete, information on this right) was refused by Defendants were complaining about this at ASFINAG.

Breach of Consumer Protection and Unfair Competition Law

With a practical orientation, the Supreme Court assumes a competitive relationship in case two entrepreneurs essentially target the same audience. Hence, the Supreme Court does not split the market into different distribution hierarchies artificially.

In light of the principles of an overall assessment, the Supreme Court further more based its decision on a broad understanding of distant selling contracts (which is predetermined by EU law) and applied the FAGG to the statutory obligation relationship, namely the acquisition of a (digital) toll badge by consumers.

In line with this principle, the Supreme Court equally denied the differentiation between the rendering of a service and its intermediation as sought by many platform-operators including the Defendants (see the CJEU decision regarding UBER and newly also regarding Airbnb) and rightfully qualified the Defendants’ offer as a “total service”, which has only been completed once the digital toll badge’s validity period expired and which is crucial for the exemption from the withdrawal right under section 18 para 1 fig 1 FAGG.

With regard to the elements stipulated in the fig 18 of the annex to the Unfair Competition Act, the Supreme Court held that the term “product” does not only mean goods but also services and that the term “market conditions” means everything that is characteristic for the “product” or the relevant customer.

Unfair Competition by Breach of ASFINAG‘s ToU

Although this should have been clarified as well, the Supreme Court did not deal with the fact that the Defendants’ business model also breach the resale-prohibition laid down in ASFINAG’s Terms of Use, which are designed to prevent any abuse, and thus also the Unfair Competition Act.

Liability despite Intricate Corporate Structure

The Defendants obviously tried to avoid their personal liability through an intricate corporate structure. The Supreme Court also denied this attempt: The second Defendant (a company) as personally liable shareholder of the platform-operating First Defendant well as the Second Defendant’s two managing directors and inventors of the business model in question (third and fourth Defendant) were held liable for the breaches in question.

Regarding the Trademark Infringement – Distinctiveness of ASFINAG’s Word-Device Marks

When examining the inherent distinctiveness of trademarks, the Supreme Court again confirmed that generous standards are to be applied. Any distinctiveness, be it ever so small, is sufficient for having a trademark registered. In case the characteristic and solely distinctive element of a word-device mark is a peculiar graphic element that is “sufficiently imaginatively designed for enabling the relevant audience to understand the trademark as an indication of commercial origin”, the (non-)registrability of the verbal element is irrelevant.

The trademark-proprietor’s obligatory acquiescence laid down in section 10 para 3 of the Austrian Trademark Act (which implemented Article 6 of the EC Trademark Directive) particularly concerning a mere reference to the trademark proprietor’s goods or services complying with the usual trade practices and/or descriptive use does not apply if a trademark is used in the course of an unfair business model, which was given in the present case.