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Advertising and promotion of drugs is a delicate and difficult task, since in this sphere, intersect the art of attracting attention to the product, principles of ethics, and mandatory rules of advertising legislation as well as legislation on the protection of competition.

In this regard, in order to facilitate the work of advertising and creative departments of pharmaceutical companies, as well as to simplify the work of advertising agencies — the counterparties of such companies, we have prepared a summary matrix of the main risks, based on the analysis of law enforcement practice in the field of advertising of medicinal products.

To do this, we analysed the practical decisions of FAS Russia and the courts for the years 2013-2014 on typical revealed violations, which occur in the advertising of medicines, as well as some practical solutions for the given period, from related industries, confirming the consistency of regulatory approaches. On the basis of this analysis, in the risk matrix below, we provide the appropriate generalizations and describe specific illustrative examples.

However, we would like to turn your attention to the fact that advertising, like any creative process, is always individual, and therefore in the assessment of the possible risks (in particular in determining the content of promotional materials, the recipients of such materials and the order of placement), one must use an individual approach.

Attributes of advertising

In accordance with Article 3 of the Federal Law dated 13 March 2006 No. 38-FZ “On Advertising” (hereinafter referred to as the “Federal Law On Advertising”) advertising is information distributed by any means, in any form or by using any resources addressed to an unspecified group of people and aimed at drawing their attention to the object of advertising, the formation or maintenance of interest in it, and its advancement in the market. Thus, falling under the object of advertising are the goods, means of their individualization, the manufacturer or seller of the goods, and the results of intellectual activity or events, to draw attention to which the advertising is directed.

Thus, on the basis of this legal regulation, as well as interpretations, given in law enforcement practice[1], it can be concluded that the information, recognized as advertising, must satisfy the following fundamental conditions, namely:

(a) intended for an unspecified group of people[2] (which can – including the dissemination of information in periodic mass media, or the inclusion of relevant information in a booklet – be transmitted from one person to another, or by the holding of campaigns in pharmacies, aimed at an unspecified group of people — potential customers of pharmacies, etc.);

(b) to attract, develop and sustain an interest in the object of advertising[3]; and

(c) promote the object of advertising (goods) in the market.

Moreover, in practice, analytical and informational materials such as articles, brochures, flyers, etc., can be classified as materials that are of an advertising nature, and therefore the advertiser’s claim that such materials are for reference use only, is not taken into account by FAS Russia and the courts.

For example, information about a drug, which was placed in a separate unit next to an article in a magazine about beauty and health[4], FAS Russia, in its Decision on Case No. RTS.08.12.58 dated 22 November 2012, recognized as advertising, despite arguments that this information is analytical material in which the object of advertising is not visible, because there is no information about the manufacturer, and place of distribution of said preparation.

In addition, the courts can reject the argument that a leaflet of a pharmacy organization (including those containing information on prescription medicines) is aimed at promoting the trademarks of their respective network of pharmacies, not at advertising specified in the booklet medicines. For example, in the Decision on Case No. A56- 74059/2013 dated 29 July 2014, the Thirteenth Arbitration Court of Appeals found that a booklet of a pharmacy organization lacked any significant information about the

trademark (service mark or other means of individualization of a legal entity — the pharmacy organization), but listed were addresses of pharmacies, provided was information on applicable discount system in pharmacies, and the remaining pages contained information about medicines and services of partners of the corresponding pharmacy organization. In this regard, the court found no basis for concluding that the contained on these pages information about medicines was aimed at drawing attention to any other object of advertising, except for the actual drugs.

The Decision of OFAS Moscow Region on Case No. 08-21/1-14 dated 10 July 2014, also shows that as advertising can be considered the publication of information in print mass media about a particular pharmacy, indicating the names of medicines and their prices, despite the arguments of the pharmacy that such information belonged to reference and informational materials.

As another example, we can mention the Decision of the Novgorod OFAS on Case No. 13, dated 22 October 2014, imposing a fine for an administrative offense. In it, the antitrust authority rejected the arguments that the broadcasting of the TV show “Beauty and Health” was not advertising, but rather informational in character. During examination, the antitrust body established that: (i) these broadcasts contained detailed information about certain products — progressive optical lenses and eyeglass lenses of a particular brand; and (ii) before the end of the TV show, broadcast was information in text form, which in the context of the preceding program content, obviously pointed to a specific entity to which one could turn to obtain the relevant goods.

In this regard, the antitrust body concluded that these broadcasted TV programs “Health and Beauty” were aimed at attracting attention, the formation of consumers’ interest in particular products (medical products — optical glass lenses) and the entity selling them (network of salons selling lenses and glasses). In such circumstances, the antitrust body could not conclude that the TV shows served only informational purposes, and the object of advertising was absent, since the purpose of dissemination of this information on television was to promote the products of a particular seller on the market, by specifying the benefits and features of using these products, and messages showing contact data for a particular distribution network.

When is it advertising, and when is it unfair competition?

The offenses referred to in Article 5 of the Federal Law On Advertising and Article 14 of the Federal Law dated 26 July 2006 No. 135-FZ “On Protection of Competition” (hereinafter referred to as the “Federal Law On Protection of Competition”) contain a number of similar provisions in respect of dissemination of untrue information, misleading of consumers, incorrect comparison of goods among themselves. Moreover, in law enforcement practice of the courts and by FAS Russia, given were explanations as to what rules should be applied when considering a specific situation.

According to the legal position set out in Paragraph 7 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 08 October 2012 No. 58 “On some issues in the practice of arbitration courts applying the Federal Law On Advertising”, in the delimitation of the scope of these articles, it is necessary to proceed from the fact that if they contain false, inaccurate or distorted information, which can cause damage to an economic entity or damage its business reputation, or incorrect comparison between an economic entity producing or selling its goods, with the goods produced or sold by other economic entities, which are in a position to compete with the said entity, as well as other dissemination of other information, which meets unfair competition attributes, contained in the advertisement, then the administrative liability is established by Article 14.3 of the RF Administrative Code (establishes liability for violation of legislation on advertising) rather than Article 14.33 of the RF Administrative Code (establishes liability for unfair competition).

In the Information Letter No. AK/25319/14 dated 25 June 2014 on the relationship between regulations of the Federal Law On Advertising and Article 14 of the Federal

Law On Protection of Competition, FAS Russia pointed out that, if the information that contains untrue information, thus misleading of consumers, incorrect comparison of the goods among themselves, distributed exclusively in advertising, such information shall be assessed for compliance with the legislation on advertising. If such information is disseminated not only through advertising, but also in other ways (e.g., on labels of goods, in correspondence with contractors under agreements, etc.), it will be evaluated for compliance with the antimonopoly legislation (regarding unfair competition).

Thus, during the determination of strategy to promote products (including drugs) or a specific brand in the market, one must always take into account the risks associated with the application of both the advertising legislation and legislation on the protection of competition.

Risk Matrix[5] 

Ensuring “compliance” with antitrust legislation, part of which is compliance with the legislation on advertising and fair competition, is a complex multi-step process.

Tools for building such a system could be internal company policies and procedures describing the main risks arising from the promotion of drugs, as well as the procedure for interaction between the different divisions of the company, when negotiating the content and placement of advertising materials.

In addition, market participants may adopt and effectively use internal training and education programs for their staff, based on constant analysis of enforcement practices and updating the corresponding risks “compliance” matrix, which will on a regular basis show the main indicators of risk zones to internal creative departments and marketing departments.

Such a system can be constructed by analogy with the construction of a “compliance” system, which is needed to comply with FCPA[27], and which is used by large international pharmaceutical companies. This solution will enable companies that are manufacturers of medical products to minimize the risks of violating advertising legislation and legislation on protection of competition, as well as to build up relationships with contractors — advertising agencies.

[1] See for example, Tatarstan OFAS Russia Decision on Case No. 08-335/2014 dated 18 December 2014, decision of the Tatarstan OFAS Russia on Case No. 08-356/2014 dated 16 September 2014, decision of the Arbitration Court of St. Petersburg and the Leningrad Region on Case No. A 56-74059/2013 dated 3 April 2014, etc.

[2] Under the unspecified number of persons are those persons who cannot be defined in advance as the recipient of the advertising information and particular parties of violation detection, arising out of the sales of the object of advertising. (See for example, decision of Tatarstan OFAS Russia on Case No. 08-356/2014 dated 16 September 2014).

[3] For example, in one case, the antitrust body said that the placement of certain non-prescription medicines at the pharmacy on a separate stand together with the gifts that are given to the buyer when purchasing these drugs, sets them apart from any other variety of pharmaceutical institutions, and is aimed at drawing attention to them, their progress, and, accordingly, has the purpose of advertising (Udmurt OFAS Russia Decision on Case No. SYU04-03/2014-107R dated 2 June 2014).

[4] This information is also accompanied by warning of side effects and the need to read the instructions or obtain professional advice.

[5] The risk matrix is made based on an analysis of key decisions, which were issued during law enforcement practice by FAS Russia and the courts in 2013-2014 (as well as a preliminary analysis of some of the proceedings initiated in 2015) for assessing the legality of the various ways to promote medicines and health care products. In addition, this matrix of risks refers to the practice of related industries, which indicate the uniformity of regulatory approaches to the assessment of certain circumstances.

[6] See FAS Russia’s Decision on Case No. 3-24-29/00-08-14 dated 11 July 2014. Determination of FAS Russia to initiate Case No. 3-24-47/00-08-14 dated 20 August 2014 also points out that the inclusion in an advertising article of information on the cosmetic properties of the preparation for hormonal contraception is not specified in the instructions, may present evidence of violation of the provisions of paragraph 6 of Article 24 of the Federal Law On Advertising, according to which the message in the advertising on the properties and characteristics, including the methods of application and use of drugs, is only permitted within the indications contained in the duly approved instructions for taking and use of such objects of advertising.

[7] See decision OFAS Nizhny Novgorod Region on Case No. 803-FAS52-07/14 dated 22 August 2014.

[8] Similar logic can be seen in the Definition of the FAS Russia to initiate Case No. 3-5-1/00-08-15 on the grounds of violation of the legislation on advertising dated 22 January 2015 (discussed in more detail below).

[9] See decision of the Tatarstan OFAS Russia on Case No. 08-356/2014 dated 16 September 2014.

[10] 1See decision of FAS Russia on Case No. 3-5-82/00-08-13 dated 31 January 2014.

[11] See definition of FAS Russia to initiate a case No. 3-5-1/00-08-15 for violating the law on advertising dated 22 January 2015. Please note that this definition refers to the very existence of the risk, but this risk can be objectively assessed only after the final decision on the case.

[12] See definition of Tatarstan FAS Russia to initiate Case No. 08-442/2014 dated 19 August 2014. Please note that this definition refers to the very existence of the risk, but this risk can be objectively assessed only after a final decision on the case. At the same time, similar logic in relation to similar infringements can be seen in the decision of OFAS of the Republic of Tatarstan on Case No. 08-298/2013 on the grounds of violation of the legislation of the Russian Federation on advertising dated 18 June 2014.

[13] See decision of the Voronezh OFAS Russia on Case No. 454-269r on violations of advertising legislation dated 30 October 2014.

[14] See decision of the Ninth Arbitration Court of Appeal dated 25 June 2014 on Case No. A40-38162/2014.

[15] Similar logic is applicable for use in promoting a product using the word “best”, as evidenced by the practice of related industries. Thus, in particular, the decision of OFAS in the Stavropol Region on Case No. 5 on violations of Russian legislation on advertising dated 3 June 2014 indicates about the following. In the advertising article, it was stated that the regional catering business [...] was the best in the nomination “The best enterprise in the consumer catering market of Stavropol Territory”, during their respective regional competition. However, in the investigation of the case, the antitrust body established that during the contest, there were two first-place winners in the catering nomination in Stavropol Territory, (one organization based in the city, and one located in a municipal district). In this regard, the corresponding advertising was recognized as misleading.

[16] See decision of FAS Russia on Case No. 4-14.33-505/00-08-14 on an administrative offense dated 16 October 2014.

[17] In the period under review, the associated risks are confirmed also in the practice of allied industries. See decision of the FAS of Moscow District dated 20 February 2014 on Case No. A40-72706/2013 regarding advertising of fixing products, containing, among other things, the statement “Building hardware number 1”. Assessing the nature of the statement “Building hardware number 1”, the courts stated that this judgment clearly indicates the superiority of the advertised product in comparison with other commodities, as “number 1” means that the advertised product is the first among a number of other similar goods, having a higher value and advantage over them. Moreover, no comparative criteria justifying such an indication was given in the disputed advertisement. The courts did not recognize as supporting the controversial statement found in the footnote about winning an award as “Brand No. 1”, because this prize was awarded in the field of brand development, and could not be regarded as a positive recognition of consumer qualities produced under a specific brand name of products.

[18] See decision of FAS Russia on Case No. 4-14.33-505/00-08-14 on an administrative offense dated 16 October 2014.

[19] See decision of FAS Russia on Case No. 4-14.33-505/00-08-14 on an administrative offense dated 16 October 2014.

[20] This is due to the fact that baseless allegations about the superiority of one agent over another allows the obtaining of unwarranted advantage in entrepreneurial activity, and can cause damage to an economic entity — a competitor, due to redistribution of the demand of consumers, being misled about consumer properties and quality of offered products.

[21] See decision of FAS Russia on a case involving the grounds for violations of the law when advertising medical products No. 3-5-91/00-08-13 dated 03 December 2013.

[22] See definition of FAS Russia on the termination of proceedings on Case No. 3-24-47/00-08-13 on the grounds of violation of the legislation of the Russian Federation on advertising dated 12 November 2013. Although the case was dismissed on formal grounds (placing video on the air at a specified time, in the complaint was not supported by evidence), the risks of corresponding qualifications remain high.

[23] See decision of OFAS Russia Udmurt on Case No. SYU04-03/2014-107R dated 02 June 2014.

[24] See decision of OFAS Russia Udmurt on Case No. SYU04-03/2014-107R dated 02 June 2014.

[25] See decision of FAS Russia on Case No. 3-24-60/00-08-13 dated 24 January 2014.

[26] See definition of FAS Russia to initiate a case No. 3-24-47/00-08-14 on the grounds of violation of legislation on advertising of the Russian Federation dated 20 August 2014. Please note that this definition refers to the very existence of the risk, but this risk can be objectively assessed only after the final decision on the case.

[27] The Foreign Corrupt Practices Act of 1977 (Law on the Foreign C 27 orrupt Practices).