Regulation of comparative advertising [compatibility mode]


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Regulation of comparative advertising [compatibility mode]

  1. 1. REGULATION OF COPARATIVE ADVERTISING Sanjeev Kumar Chaswal Advocate and IPR Attorney LL.M ( IPR,ARB & ADR) M.S (Cyber Law and Cyber Security)
  2. 2. Over view - Comparative Advertising• Most comparative advertisements refer to rival products as ‘ordinary,’ instead of specifically mentioning names of products. Aggrieved firms have claimed that ‘ordinary’ refers to all products other than the advertised one.• Comparative advertising is advertising where one party advertises his goods or services by comparing them with the goods or services of another party.• This raises several concerns - on the one hand, the concern of brand owners for their goodwill being harmed and, on the other, the benefits for consumers that may result from the reduction in information asymmetry and the stimulation of competition.• If the disparagement is based on ‘false and misleading facts’ that the advertisement becomes an unfair trade practice. 1/29/2013
  3. 3. Concept and Definition• Comparative advertising is an advertisement in which a particular product, or service, specifically mentions a competitor by name for the express purpose of showing why the competitor is inferior to the product naming it.• Comparative advertising, also referred to as ‘knocking copy’, is loosely defined as advertising where “the advertised brand is explicitly compared with one or more competing brands and the comparison is oblivious to the audience.• They may explicitly name a competitor or implicitly refer to him it may emphasize the similarities (positive comparisons) or the differences (negative comparisons) between the two products. 1/29/2013
  4. 4. • The advertised product is “better than” (superiority claims) or “as good as” the competitor’s (equivalence or parity claims).• No Indian statute defines the term, but the UK Regulation defines comparative advertising as meaning any advertisement which “explicitly or by implication, identifies a competitor or goods or services offered by a competitor”.• In this backdrop, the Delhi High Court summarized the law on the subject in the case of Reckitt & Colman v. Kiwi TTK , as follows:• 1. A tradesman is entitled to declare his goods to be the best in the world, even though the declaration is untrue.• 2. He can also say that his goods are better than his competitor’s, even though such statement is untrue. 1/29/2013
  5. 5. • 3. For the purpose of saying that his goods are the best in the world or his goods are better than his competitor’s he can even compare the advantages of his goods over the goods of others.• 4 One, cannot say his goods are better than his competitors, or say that his competitors goods are bad. If one says so, then in other words he defames his competitors and their goods, which is not permissible.• 5. If there is no defamation to the goods or to the manufacturer of such goods no action lies, but if there is such defamation an action lies for recovery of damages for defamation, then the Court is competent to grant an order of injunction restraining such defamation.1/29/2013
  6. 6. Statutory Provisions In India: India:• The Supreme Court was significantly led by the Judgment of the American courts. The Indian Supreme Court’s had also reflected its doubt in their decision on the Hamdard Case in 1960 as per American courts judgments of 1940.• In the backdrop of revisions change in the position of the American courts, the Supreme Court, gave its view in the Tata Yellow Pages case in 1985, was categorical: We, therefore, hold that ‘commercial speech’ is a part of freedom of speech and expression guaranteed under Article 19(1)(a) of the Constitution.• The MRTP Commission has followed the constitutional freedom under “MRTP Act”. A party has a right to advertise its product making commendation about its quality. Advertisement being a commercial speech, which is a part of the freedom of speech is guaranteed under article 19(1)(a) of the Constitution. The MRTP Act and the Trade 1/29/2013 Marks Act, 1999 work in tandem
  7. 7. • to provide the basic structure that govern Comparative Advertising. :• The Trade Marks Act is a balance to the conflicting interests of the rights of registered trade mark owners and a keeps a consumer interest in informative advertising.• The Trademarks Act, 1999 has provisions related to this concept in Ss. 29(8) and 30(1). According TM Act Comparative Advertising is permissible, with certain limitations as to unfair trade practices.• Section 29(8) of the Trade Marks Act provides that a registered trademark is infringed by any advertising, if such advertising takes unfair advantage and is contrary to honest practices in industrial or commercial matters, is detrimental to its distinctive character, or is against the reputation of the trade mark. The Section 30(1) however, provideds an escape route for what would otherwise have been an infringing act under Section 29, if the impugned use of the mark is in accordance with “honest practices” in industrial or 1/29/2013 commercial matters.
  8. 8. Honest practices - mandatory for Comparative Advertising• Comparative advertising aims to objectively and truthfully inform the consumer, and promotes market transparency, keeping down prices and improving products by stimulating competition. Therefore, it is important to protect the interests of such competitors by not allowing comparative advertising to cause confusion, mislead, or discredit a competitor.• There is no definition or explanation as to what constitutes “honest practices”. There is a large and clear shared core concept of what constitutes honest conduct in trade, which may be applied by the courts without great difficulty and without any excessive danger of greatly diverging interpretations. 1/29/2013
  9. 9. • In BMW v. Deenik , European Court of Justice, 3 December 1998, BMW v Deenik The question was whether a trader, not being an authorized dealer of BMW motor cars, was entitled to use the name BMW being a registered trademark of the BMW manufacturing company, in the context of holding itself out as having specialized expertise in servicing BMW cars. The Court held that the proprietor of the trademark is not entitled to prohibit a third party from using the mark for the purpose of informing the public that he carries out the maintenance and repair of the goods covered by that trademark, unless the mark is used in a way that may create the impression that there is a commercial connection between the other undertaking and the trademark proprietor, and in particular that the reseller’s business is affiliated to the trademark proprietor’s distribution network or that there is a special relationship between the two undertakings. 1/29/2013
  10. 10. Comparative Advertising - Unfair Trade practices:• Comparative advertising is also subject to certain other limitations contained in the definition of ‘unfair trade practices’. In 1984 the MRTP Act was amended to add a chapter on unfair trade practices.• Section 36A of the MRTP Act lists several actions to be an ‘unfair trade practice’ as any unfair method or unfair or deceptive practice which gives false or misleading facts disparaging the goods, services or trade of another person.• The object of this section is to bring honesty and truth in the relationship between the provider of the services and the consumer, and when a problem, arises as to whether a particular act can be condemned as an unfair trade practice or not, 1/29/2013
  11. 11. • the key to solution would be to examine whether it contains a false statement and is misleading and further what is the effect of such representation on the common man.• From the above context it may be gathered that false representation would mean an incorrect or untrue statement or expression which is designed to influence and induce a consumer to buy or engage, or use such goods or services and make such advertisements available to the members of the public.1/29/2013
  12. 12. Concept of Disparagement:• Section 36 A of the MRTP Act purports that unfair trade practices are those which lead to disparagement of the goods, services or trade of another person. The term “disparagement” has not been defined in any statute, but judicial pronouncements have adopted its dictionary meaning.• The New International Webster’s Comprehensive Dictionary, disparagement means, to speak of slightingly, undervalue, to bring discredit or dishonor upon, the act of depreciating, derogation or valuation, a reproach, disgrace, an unjust classing or comparison with that which is of less worth, and degradation.• The Concise Oxford Dictionary defines disparage as under, to bring dis-crediting or reproach upon; dishonour; lower in esteem; speak on or treat slightingly or vilify; undervalue, and deprecate. 1/29/2013
  13. 13. • In the electronic media the disparaging message is conveyed to the viewer by repeatedly showing the commercial everyday thereby ensuring that the viewers get clear message as the said commercial leaves an indelible impression in their mind. But, it must be noted that a mere opinion, which is not a statement of fact, would not attract Clause (x) of Section 36A (1).• In the New Pepsodent v Colgate case , HLL advertised its toothpaste ‘New Pepsodent’ as “102% better than the leading toothpaste”. In the television advertisement, samples of saliva are taken from two boys, one who has brushed with the new Pepsodent while another has brushed with “a leading toothpaste”. 1/29/2013
  14. 14. • The saliva of “the leading toothpaste” shows larger number of germs. While the sample was being taken from the boys, they were asked the name of the toothpaste with which they had brushed in the morning.• One boy said Pepsodent, the response of the second boy was muted, however, lip movement of the boy would indicate that he was saying “Colgate”.• Also, when the muting was done, there was a sound of the jingle used in the Colgate advertisement. According to the Commission, the word toothpaste had become synonymous with Colgate over the years and a reference to “leading brand” was to Colgate. Thus it became a case of Comparative Advertisement which led to the disparagement of Colgate’s products. 1/29/2013
  15. 15. • Use of the trademark to disparage the goods of another, and the aforementioned concepts of comparative advertising have been dealt with in Pepsi Co. Inc. and Ors. v. Hindustan Coca Cola Ltd. and Anr .• Pepsi, the appellants filed suit against Hindustan Coca Cola and others, who were endorsing their product with the help of a commercial which shows that the lead actor asks a kid which is his favorite drink. He mutters the word "Pepsi", which can be seen from his lip movement though the same is muted.• The lead actor thereafter asks the boy to taste two drinks in two different bottles covered with lid and the question asked by the lead actor is that "Bacchon Ko Konsi pasand aayegi"? After tasting, the boy points out to one drink and say that that drink would be liked by the children because it is sweet. 1/29/2013
  16. 16. • In his words he says. "Who meethi hain, Bacchon ko meethi cheese pasand hai". He discredited the drink which according to him has a sweet taste. He preferred the other drink which according to him tastes strong and that grown up people would prefer the same.• At that point, the lead actor lifts the lid from both the bottles and the one which is said to be strong taste reveals to be "Thums Up", and one which is sweet, word "PAPPI" is written on the bottle with a globe device and the colour that of the "PEPSI". Realising that he had at the initial stage given his preference for "PEPSI" and subsequently finding it to be a drink for kids, the boy felt embarrassed. He depicts this embarrassment gesture by putting his hands on his head. There are other commercials by the respondents where the lead actor said "Wrong choice baby", and that the "Thums Up" is a right choice, and "Kyo Dil Maange No More" for the appellant’s products. 1/29/2013
  17. 17. • Here the issue was whether the commercial by depicting that the boy preferred Thums Up as against "Pepsi" because Thums Up is strong drink while "Pepsi" is for children as children like sweet, amounts to disparagement or it is only a healthy competition and puffing the product of the respondents?The Delhi HC explained the concept of disparagement stating that “a manufacturer is entitled to make a statement that his goods are the best and also make some statements for puffing of his goods and the same will not give a cause of action to the other traders or manufacturers of similar goods to institute proceedings as there is no disparagement or defamation or disparagement of the goods of the manufacturer in so doing. However, a manufacturer is not entitled to say that his competitor’s goods are bad as to puff and promote his goods, and concluded that comparative advertising cannot be permitted which discredits or 1/29/2013
  18. 18. ” denigrates the trade mark or trade name of the competitor.In another case, the Supreme Court was of the view, that in a democratic economy, free flow of commercial information is indispensable and advertisement is a facet of “commercial speech” as public at large is benefited by the information made available through the advertisement. Thus, “commercial speech” is a part of Freedom of Speech and Expression guaranteed under Article 19 (1) (a) of the Indian Constitution.• To decide the question of disparagement of another’s goods. Unfair trade practice can be ascertained only in the presence of false or misleading facts through scientific or technical assessment of the claims. It is not actionable if the manner is only to show one’s product better or best without derogating the competitor’s product. Thus, Courts have taken the position that “publicity and advertisement of one’s product with a view to boosting sales is a 1/29/2013 legitimate market strategy.”
  19. 19. Comparison Between Comparative Advertising Laws Of Different Countries:• Like the Indian law, jurisdictions in UK and U.S.A. allow comparative advertising, since comparative advertising provides consumers with information about both parties products through a quick comparison, effectively results in lower prices, encourages competition, and helps prevent monopolies.• Comparative advertisements could be either indirectly or directly comparative, positive or negative, and seeks “to associate or differentiate the two competing brands”. Different countries apply differing views regarding the laws on comparative advertising.1/29/2013
  20. 20. United Kingdom• The UK has a relatively liberal regime permitting comparative advertising. The European Standing Committee of the UK Parliament debated the issue of comparative advertising in November 1995 and stated that the government viewed this type of advertising as ‘a legitimate, useful and effective marketing tool’ which ‘we believe stimulates competition and informs the consumers. Section 4(1) (b) of the 1938 Act was replaced in the new Act by Section 10(6). Also relevant is Section 11(2), which has been held to permit fair comparisons of goods, for example, indications of quality or price.• In the UK, most of the use of competitor’s registered trademark in a comparative advertisement was an infringement of the registration up till the end of 1994.1/29/2013
  21. 21. • However, the laws on comparative advertising were harmonized in 2000. The current rules on comparative advertising are regulated by a series of EU Directives. The Business Protection from Misleading Marketing Regulations 2008 implements provisions of Directive (EC) 2006/114 in the UK.• The primary objective of section 10(6) is to permit comparative advertising, as stated clearly by Laddie J in Barclays Bank v. RBS Advanta. Since the TMA 1994 came into force, there have been a number of decisions under section 10(6). It include Barclays v. RBS Advanta, Vodafone v. Orange, British Telecommunications v. AT&T . Barclays, BT, Macmillan Magazines was an application for interlocutory injunction and Vodafone was a trial. It is interesting to note that in all of these cases the plaintiff was unsuccessful, with judgments being firmly in favour of comparative advertising in general. 1/29/2013
  22. 22. USA History• The earliest case concerning comparative advertising dates back to 1910 in United States – Saxlehner v Wagner. Prior to the 1970s, comparative advertising was deemed unfeasible due to related risks. For instance, comparative advertising could invite misidentification of products, potential legal issues, and may even win public sympathy for their competitors as victims.• In 1972, the FTC began to encourage advertisers to make comparison with named competitors, with the broad, public welfare objective of creating more informative advertising. The FTC argued that this form of advertising could also stimulate comparison shopping, encourage product improvement and innovation, and foster a positive competitive environment. However, studies have shown that while comparative advertisements had increased since 1960, the relative amount of comparative advertising is still small.
  23. 23. USA In the United States, maximizing consumer welfare and promoting a free and competitive economy has been the guiding objective and “the keystone of governmental attitude towards the business scene” for more than 100 years. Thus, in US comparative advertising has been a well- recognised and acceptable form of advertising , and enjoys the additional protection of freedom of speech laws. The 1969 Federal Trade Commission (FTC) Policy Statement on Comparative Advertising encouraged the use of comparisons that name the competitor or the competitive product. However, the negative consequences of false and confusing comparative claims led the FTC to require “clarity, and, if necessary, disclosure to avoid deception of the consumer.”1/29/2013
  24. 24. • Another major law is the Trademark Lanham Act, which states that one could incur liability when the message of the comparative advertisement is untrue or uncertain, but has the intention to deceived consumers through the implied message conveyed.• The FTC and the National Advertising Division of the Council of Better Business Bureaus, Inc. (NAD), govern the laws of comparative advertising in the United States including the treatment of comparative advertising claims. FTC stated that comparative advertising could benefit consumers and encourages comparative advertising, provided that the comparisons are “clearly identified, truthful, and non-deceptive”.[15] Although comparative advertising is encouraged, NAD has stated “claims that expressly or implicitly disparage a competing product should be held to the highest level of scrutiny in order to ensure that they are truthful, 1/29/2013 accurate, and narrowly drawn
  25. 25. • For example, in Tommy Hilfiger Licensing Inc. vs. Nature Labs LLC [2002] , Nature Labs, a shop selling pet perfumery, used "Timmy Holedigger" as its trademark as well as the slogan "If you like Tommy Hilfiger, your pet will love Timmy Holedigger". Tommy Hilfiger, one of the best recognized U.S. fashion labels, brought a lawsuit against Natural Labs for, among other things, trademark infringement, unfair competition, trademark dilution and commercial fraud.• The court held that the use of a trademark similar to Tommy Hilfiger by the defendant is a fair parody, a type of "freedom of speech" protected under the First Amendment of the United States Constitution. Consumers were more likely to laugh at the humor in the parody than be confused about the origin of the products. Moreover, the comparison used by the respondent did not depreciate the claimants products in any means. Therefore, the court dismissed all of the plaintiffs claims. 1/29/2013
  26. 26. Australia• In Australia, no specific law governs comparative advertising although certain cases regarding this matter have occurred.• Comparative advertising that is truthful, and does not lead to confusion is permitted.• Generally, Australian advertisers should make sure that the following are complied when exercising comparative advertising to avoid breaches regarding misleading advertising under Australia Consumer Law1. Product compared should be like products as per HCF Australia Ltd v Switzerland Australia Health Fund Pty Ltd, or else comparison must be made clearly to consumers as per Gillette Australia Pty Ltd v Energizer Australia Pty Ltd; 1/29/2013
  27. 27. 2. Test results are presented as it is as per Makita v Black & Decker;3. Test used are appropriate and conducted according to industry guidelines as per Duracell Australia Pty Ltd v Union Carbide Australia Ltd; and4. Mock up test results truly reflects how is product functioning in real life as per Hoover (Australia) Pty Ltd v Email Ltd1/29/2013
  28. 28. China:• It is interesting to note that the laws relating to comparative advertising in China are a total contrast to those of the US, UK and India. “Trade mark owners need to be careful with advertising in China … aggressive campaigns which might work in other countries can be punished" .• The Advertising Law is primarily directed towards the protection of consumers’, as distinct from competitors’, interests.• In fact, Articles 7 and 12 of the Advertising Law effectively disallow comparative advertising , since the ultimate purpose of comparative advertising is to prove that the advertisers products are better than its competitors, such comparison, has the actual effect of disparaging other commodities or services. 1/29/2013
  29. 29. China Contd…. Contd….• Moreover, according to The Criteria for Advertising Examination issued by the State Administration for Industry and Commerce ("SAIC") in 1994, comparative advertising should not involve any direct comparison of specific products or services. Since these provisions tend to be either too vague or too strict, Chinese enterprises hesitate to engage in comparative advertising.1/29/2013
  30. 30. CASES {Regaul vs Ujala }A television advertisement promoting Ujala liquid blue showed that two-three drops of this brand were adequate to bring striking whiteness of clothes while several spoons of other brands were required for the same effect. A lady holding a bottle of Ujala was looking down on another bottle without any label, exclaiming ‘chhi, chhi, chhi!’ in disgust. The manufacturers of Regaul, a competing brand, complained to the Commission that the advertisement was disparaging its goods. The Commission was of the view that ‘a mere claim to superiority in the quality of one’s product’4 by itself is not sufficient to attract clause (x). In the advertisement, neither did the bottle carry any label nor did it have any similarity with the bottle of any other brand. The Commission, thus, was of the opinion that it could not be classified as a case of disparagement of goods. 1/29/2013
  31. 31. Novino Batteries’ Case• The judgement of the Supreme Court in the Novino Batteries’ case has had an important influence on all the cases raising questions about advertisements. Lakhanpal Industries Ltd. had a collaboration with Mitsubishi Corporation of Japan for manufacturing Novino batteries.• Mitsubishi Corporation was the owner of the well-known trade name, National Panasonic. Lakhanpal Industries, in its advertisements, claimed that Novino batteries were made in collaboration with National Panasonic.• This was technically incorrect as National Panasonic was only a trade name and Lakhanpal Industries could not have collaborated with a trade name. The Supreme Court ruled Following this, the court held that, even though, literally, the representation made by Lakhanpal Industries was inaccurate, it could not be held to be an unfair trade practice. In the next case, we would see how the judgement in the Novino Batteries’ case found an application 1/29/2013
  32. 32. Colgate vs Vicco Case• A television advertisement promoting Vicco toothpowder showed another oval-shaped tin without any label. The white powder coming out from the can was described as useless. Colgate claimed before the Commission that this was disparaging its product, Colgate toothpowder.• The Commission found that the shape and colour combination of the can shown in the television commercial resembled Colgate’s toothpowder can. Following the Novino Batteries’ case, the MRTPC noted that the advertisement did not explicitly mention Colgate. In fact, there may not have been any intention of depicting the can to be that of Colgate. But, since the advertisement created an impression among the viewers that the can was of Colgate, it would be a case of disparagement.• The Commission took into account the nature of the Indian audience: ... disparaging remarks about the uselessness of such toothpowder come through a mysterious invisible voice.1/29/2013
  33. 33. Cherry Blossom Case• The principle, thus, emerged that a case of disparagement arises only if the product in question is identifiable.• Identification could be explicit or drawn from the facts and circumstances. Thus, in the advertisement of ‘Kiwi Liquid Wax Polish,’ a bottle is described as X from which liquid is shown dripping while from a bottle marked Kiwi, liquid does not drip.• From the shape of the bottle marked X and from the fact that Cherry Blossom had a design registration for this shape, the bottle could be identified with Cherry Blossom and the advertisement became a case of disparagement. 1/29/2013
  34. 34. Colgate Dental Cream-Double Cream- Protection Case• In June 1998, Colgate introduced its new brand of toothpaste as Colgate Dental Cream-Double Protection (CDC-DP). It gave wide publicity through print and television that the toothpaste was 2.5 times superior to any ordinary toothpaste in fighting germs. Hindustan Lever Ltd. moved the Commission alleging that the advertisements disparaged toothpastes manufactured by it under various brand names. It contended that a reference to ‘ordinary’ toothpaste was to all brands other than Colgate. The Commission was of the view that a reference to ‘ordinary’ toothpaste does not identify any specific product.• Thus, the Commission took the position that the claim of 2.5 times superiority of CDC-DP over any ordinary toothpaste did not refer to any identifiable product or manufacturer. As a result, it could not be a case of disparagement of goods. 1/29/2013
  35. 35. Godrej vs Vasmol Case• The television commercial of Vasmol Hair dye opened with a lady dyeing her hair with instant hair dye made by mixing hair dye and developer contained in two cylindrical bottles. The bottles were labelled as ‘Sadharan’ (ordinary). The picture then widened to show the anguish of the lady with falling hair. The commentary attributed this to the use of inferior dye containing harmful chemicals. The advertisement ended with the picture of ‘Vasmol 33 Hair Dye’ which is stated to contain Ayurprash, a natural way of blackening the hair and strengthening the roots of the hair. Godrej Ltd. was aggrieved with the advertisement. It had products like ‘Godrej Hair Dye’ and ‘Godrej Kesh Kala’ for dyeing hair. Godrej’s contention was that the pictorial depiction of two cylindrical bottles would identify it as its product. Godrej claimed that its products were disparaged not only by insinuating that these contained harmful chemicals but also by calling these as ‘Sadharan’ (ordinary). The Commission stated the principles as follows: 1/29/2013
  36. 36. • To summarize the interpretation of the Commission, an advertisement could disparage other products and yet, it would not be a case of ‘disparagement’ so long as the disparaged product is not identifiable.• Is the law adequate to prevent unfair trade practices?• In the Indian context, should the balance in interpreting the law not be tilted against such an advertisement?• The conflicting claims would need to be assessed in the context of the constitutional provisions on the Fundamental Rights, privileging the freedom to speak 1/29/2013
  37. 37. • In the 1980s, during what has been referred to as the cola Wars soft drink manufacturer Pepsi ran a series of advertisements where people, caught on hidden camera, in a blind taste test, chose Pepsi over rival Coca-Cola.• The use of comparative advertising has been well established in political campaigns, where typically one candidate will run ads where the record of the other candidate is displayed, for the purpose of disparaging the other candidate. The most famous of these type ads, which only ran once on TV, consisted of a child picking daisies in a field, while a voice which sounded like Barry Goldwater performed a countdown to zero before the launch of a nuclear weapon which explodes in a mushroom cloud. The ad, “Daisy", was produced by Lydon B. Johnsons campaign in an attempt to prevent Goldwater from either winning the nomination of his party or being selected. Another example took place throughout starting in circa 1986, between the bitter rivalry between Nintendo and Sega. “Genesis does what Nitendon’t" immediately became a catch phrase following the release of the Sega Genesis (known 1/29/2013 as Mega Drive in PAL countries).
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