The Court of Justice of the European Union (CJEU) in its recent decision in the Ford Italia SpA v ZP and Stracciari SpA case, further clarified the scope of ‘producer’ liability under the Product Liability Directive. The question was whether a distributor can be considered a „producer” if their name or a distinctive element of it matches that of the manufacturer, even if they did not physically label the product. In our article we summarise the decision and its possible consequences for branches of foreign manufacturers.
Smartlegal Schmidt&Partners reports from Hungary:
Background
The case arose from a 2001 road accident involving a Ford vehicle whose airbag failed to deploy. The car was manufactured in Germany by Ford WAG, supplied by Ford Italia SpA, and sold by a local retailer Stracciari SpA in Bologna to ZP.
The injured party, ZP, sued both the retailer and the Italian distributor for damages. The distributor, Ford Italia argued that it should not be liable as it did not manufacture the vehicle.
The Italian Supreme Court of Cassation referred the case to the CJEU to determine whether a distributor with a name similar to the manufacturer’s could be considered a „producer” under the Product Liability Directive, i.e. whether it shall assume product liability.
Decision
The court recalled that under the Product Liability Directive, “Producer” means the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting his [or her] name, trade mark or other distinguishing feature on the product presents him[- or her]self as its producer.
The question referred to the CJEU therefore was whether the distributor of a defective product shall be considered to be a ‘person who … presents him[- or her]self as … [a] producer’ of that product, where that distributor has not physically put his or her name, trade mark or other distinguishing feature on the product, but the trade mark which the producer has put on that product is the same, on the one hand, as the name of the distributor or a distinctive element thereof, and, on the other hand, as the name of the producer.
The court, by referring to the Fennia v. Koninklijke Philips case, noted that by putting his or her name, trade mark or other distinguishing feature on the product at issue, the person who presents him- or herself as a producer gives the impression that he or she is involved in the production process or assumes responsibility for it. Accordingly, by using such particulars, that person is effectively using his or her reputation in order to make that product more attractive in the eyes of consumers which, in return, justifies his or her liability being incurred in respect of that use.
The court considered the above logic applicable in case the distributor uses similar name as the manufacturer, as it emphasised that the similarity between the distributor’s name and the manufacturer’s name can create an impression of responsibility for the product’s quality, thereby giving consumers confidence comparable to that which they would have if the product had been sold directly by the manufacturer. The decisive factor is the impression created among consumers that the distributor is involved in the production process or assumes responsibility for the product’s quality.
Therefore, the CJEU ruled that the concept of a „person who presents themselves as its producer” is not limited to those who physically place their name, trademark, or distinguishing feature on the product; indeed, it can also include distributors whose names or trademarks are similar to those of the actual producers.
Comment
In the decision, the CJEU used teleological (purposive) interpretation and, by deviation from the text of the Directive, found that product liability can be expanded to distributors if they appear in business with a name similar to the manufacturer’s.
While the CJEU’s approach makes sense if the brand representation is in direct contact with consumers, it is questionable if the distributor is a wholesaler, since it is unlikely that the consumer, who is typically in contact with the retailer, would know the identity of the distributor or would attach any particular importance to it.
Although the decision strengthens consumers’ rights to enforce product liability claims, it has to be seen that it creates significant liability for branches of foreign brands in connection with the goods supplied by them, as they must prepare for a type of claims that they have not encountered before.
In the article, we analysed the judgment of the CJEU in case C‑157/23
The article was written by dr. Gritta Péter
SMARTLEGAL is a team of agile business & litigation lawyers in Budapest, Hungary, helping international corporate clients and individual entrepreneurs doing business in Hungary. For more information please visit our website at smartlegal.hu