Bundle offers in the healthcare sector – Legal pitfalls from a competition law perspective

Clinics are often confronted with so-called bundle offers from sellers or manufacturers of therapeutic products and medical devices. These bundle offers often provide for a (minimum) purchase of medical consumables at standard market prices and additionally particularly lucrative conditions for so-called "capital goods" for which the consumables are to be used. These "capital goods" are usually special technical equipment or large devices, often with purchase prices in the five-digit range or higher.

However, the respective decision-maker is rarely well advised to conclude a contract quickly in order to secure the supposedly favorable possibility of procuring the capital goods, as the constellation described contains a whole bundle of legal pitfalls from a wide variety of legal areas, especially if senior physicians also receive personal benefits from the contractual partner, such as invitations to further training events, consulting contracts or paid lecture series or work shadowing.

In such constellations, particular attention must be paid to risks under criminal law, compliance law, public procurement law, therapeutic products advertising law and unfair competition law. This article deals exclusively with the sometimes narrow legal boundaries arising from therapeutic products advertising law and unfair competition law:

I. The prohibition of promotional gifts in Section 7 HWG and the meaning of "gratuitousness"

Section 7 of the Therapeutic Products Advertising Act (HWG) provides for a fundamental ban on benefits and other advertising gifts in order to prevent improper influence. The focus of competition between providers should be directed towards the parameters of quality and price of the main service (in this case, the respective therapeutic products). In order to achieve this, advertising gifts may generally neither be offered nor accepted by a healthcare professional (healthcare professionals, clinics, etc.) unless one of the listed exceptions applies.

The prohibition in Section 7 HWG generally only covers product or service-related sales advertising; pure image or company advertising should not be covered. This distinction is regularly difficult to make in individual cases, but in the case of ongoing business relationships, for example between a hospital and a supplier, it is obvious that the supplier not only wants to maintain its image with an advertising gift, but also wants to secure its ongoing contract for the continued purchase of certain therapeutic products by the hospital. It is therefore advisable to initially assume a sales promotion within the meaning of the standard in relation to manufacturers or suppliers of therapeutic products.

"Promotional gifts" within the meaning of Section 7 HWG are all benefits of monetary value granted free of charge, in particular goods or services as well as all other benefits that are used accessorily or abstractly for the purpose of promoting the sale of medicinal products.

This rather unwieldy definition can be approached in practice via the relevant demarcation criterion of "gratuitousness". In this context, "gratuitousness" concerns the question of whether, from the recipient's perspective, the promotional gift is perceived as a gift, i. e. no consideration has to be provided in return

This requires a specific assessment of each individual case. However, guidelines can be taken from the (clear) case law of recent years as an initial guide:

In principle, gratuitousness is to be affirmed if an ancillary service is granted separately but not invoiced separately.

On the other hand, gratuitousness is generally to be denied if this takes place in the context of an exchange transaction, i. e. if a consideration must be provided. The granting of favorable conditions for the main service, some of which are significantly below the market average, is not per se impermissible as part of the desired main service competition. In this respect, the so-called "fair market value" does not play a decisive role in the context of Section 7 HWG. Therefore, if the service and consideration are in an exchange relationship, this initially speaks against "gratuitousness"

However, if there is a complete lack of suitability to improperly influence the recipient's decision, for example if the recipient is granted the ancillary service without first having to purchase a main service (e. g. a medical consumable) and there is no other ongoing business relationship, this may be permissible as an exception.

II. No circumvention of "gratuitousness" by agreeing a fictitious remuneration

However, the mere agreement of a symbolic consideration does not eliminate "gratuitousness" and therefore inadmissibility under Section 7 HWG. In order to counter attempts to circumvent this, case law considers the limit of "gratuitousness" to be reached where the promised consideration in the context of the exchange transaction is so disproportionate that it only has the character of a sham, i. e. the result is a so-called "sham consideration".

It is not possible to quantify in abstract terms the ratio (in terms of value) of performance and consideration from which it can be assumed that there is sham remuneration. This depends on the circumstances of the individual case. However, an initial rough guide can be provided on the basis of a few examples from case law in which a sham consideration has been affirmed:

According to the Higher Regional Court of Nuremberg, a sham fee exists, for example, if a dentist receives a technical device for one euro when purchasing a certain quantity of dental alloy, for which he would normally have had to pay EUR 420 (Higher Regional Court of Nuremberg, judgment of June 10, 2008 - 3 U 2224/07).

The Higher Regional Court of Cologne has also ruled that a gratuitous gift exists if the promotional gift is not given entirely free of charge, but only at 28 % of the otherwise set price and thus significantly below the cost price (Higher Regional Court of Cologne, judgment of 23.02.2011 - 6 W 2/11). In the case decided by the Higher Regional Court of Cologne, the prohibited offer consisted of a significantly reduced dental scanner at a discounted price of EUR 5,000 instead of the usual EUR 17,900, which could be taken up if the obligation to purchase a certain number of dental consumables every month for 3 years was also entered into.

Therefore, if a service component is offered significantly below its cost price, the assumption of "fictitious remuneration" is obvious.

III. No fictitious remuneration in the case of an overall offer

In individual cases, however, a fictitious remuneration may be excluded despite a critical value ratio of the services if the exchange transaction contains several service components in the form of an overall offer that cannot be divided into a main and ancillary service and is submitted at an overall price.

In its Kleidersack decision (judgment of 30.01.2023 - I ZR 142/00), the German Federal Court of Justice (BGH) upheld the assessment of the appellate court that the offer of a "promotional package" to dental practices, which included medicines and a garment bag at a total price, whereby the garment bag was mathematically provided for DM 44 instead of DM 119, was a total offer at a total price for which no sham remuneration could be assumed due to the lack of divisibility of the services and consideration. Consequently, the overall offer did not violate Section 7 HWG due to the lack of gratuitousness.

But watch out: The offer of the "action package" was nevertheless prohibited, as it was classified as inadmissible in terms of unfair competition law due to the fact that it did not influence dentists objectively.

IV. Narrowly defined exceptions for cash and in-kind rebates

If an offer is to be classified as a free promotional gift within the meaning of Section 7 HWG, it is generally inadmissible.

However, the provision contains a number of exceptions, of which the exception in Section 7 (1) sentence 1 no. 2 UWG, which covers so-called cash and non-cash discounts in the context of a purchase transaction, is regularly of interest for the bundle offers relevant here:

• Cash discounts are permissible if the amount of money is (numerically) determined or calculated in a certain way. However, the decisive factor is that the discount is granted directly on the price charged for the medical consumables. In the above-mentioned case of the Higher Regional Court of Cologne, the price reduction granted on the dental laboratory scanner was therefore not classified as an exceptionally permissible cash discount, as the discount was not granted on the dental consumables to be purchased, but only on the scanner provided as a capital good. In the opinion of the Higher Regional Court of Cologne, this entailed the risk that it was no longer the value for money of the advertised dental consumables that was decisive, but rather the possibility of purchasing the scanner at a discount, i.e. that extraneous considerations determined the purchase decision.
• Rebates in kind are permitted if they are granted in a specific quantity or in a quantity to be calculated in a specific way for the same goods or services. The decisive criterion in this respect is that there must be a generic and quality identity between the additionally granted goods or services and the purchased goods or services. It is therefore necessary that there is complete identity between the purchased goods or services and the goods or services granted as a discount in all essential characteristics that determine the nature of the goods or services. Merely an identical nature, similarity or proximity of use is not sufficient (BGH, judgment of 6.11.2014 - I ZR 26/13).

Furthermore, promotional gifts for healthcare professionals are only ever permitted if they are intended for use in medical or pharmaceutical practice.

V. Perspective under German Act against Unfair Competition (UWG)

In addition to the perspective of the law on therapeutic products, bundle offers should also be viewed critically from the perspective of the German Act against Unfair Competition (UWG).

It is true that advertising through free or discounted bonuses is not per se unfair within the meaning of the UWG.

However, unfairness may be considered if, in a specific individual case, an unlawful influence on the freedom of choice pursuant to Section 4a (1) No. 3 UWG or a targeted obstruction of competitors pursuant to Section 4 No. 4 UWG can be assumed. According to case law, the former should be considered if the benefit completely eclipses the rationality of the average addressee's decision, e. g. if the benefit has such an enticing effect that the addressee is deterred from taking a closer look at other offers. However, this constellation is less likely to apply to B2B situations.

Unfairness may also be considered on the basis of the general clause of unfair competition law due to the specific risk of improperly influencing the respective addressee. With this justification, corresponding promotional gifts have been classified as unlawful under unfair competition law in case law in the past, for example by the BGH in its above-mentioned garment bag decision. In this decision, the BGH ruled that the addition of a heavily discounted garment bag as part of an overall offer combined with the purchase of therapeutic products was likely to improperly influence the dentists addressed to the effect that the advertised therapeutic products would only be purchased because of the associated opportunity to purchase the garment bag at a favorable price and that the offer was therefore unfair.

The BGH took exception to the fact that the offer created the risk that the doctors addressed would no longer be guided in their decisions by the medical and objective interests of the patient's well-being, but by irrelevant considerations such as the favorable acquisition of the garment bag.

VI. Legal consequences of violations

Violations of Section 7 HWG can be punished as an administrative offense with a fine of up to EUR 50,000.

In addition, Section 7 HWG also constitutes a market conduct rule within the meaning of Section 3a UWG and infringements can be pursued accordingly by the group of persons entitled to claim under fair trading law, in particular by competitors, and in particular warnings can be issued for a fee. In each case, claims for injunctive relief and, if applicable, ancillary claims for information, damages and reimbursement of warning costs are at issue.

Violations of UWG regulations can also be prosecuted in this way.

VII. Conclusion and outlook

Section 7 HWG is generally not regarded as a legislative masterpiece, but rather as being in clear need of reform. The assessment of whether an impermissible advertising gift exists in the respective individual case, whether an exception applies or whether the promised benefit is legally unobjectionable can be correspondingly complex.

This assessment will often not be possible without consulting legal expertise.

Here too, however, it is important first and foremost to be sufficiently aware of the problem. In this respect, a rough guideline for bundle offers is that a more detailed examination is always advisable as soon as the promised investment good is offered below the cost price.