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Comparative Advertising laws

Written by: Rashi Saraf and Yamini Das - Both studying in Indian Law Society, Law College, Pune in the fourth year of the five year course
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Comparative advertising is advertising where one party advertises his goods or services by comparing them with the goods or services of another party. Such other party is usually his competitor or the market leader of that good or service . The comparison is made with a view towards increasing the sales of the advertiser, either by suggesting that the advertiser's product is of the same or a better quality to that of the compared product or by denigrating the quality of the compared product.

The holder of a trademark has the exclusive right to use his trademark to identify the products or services , which is used by advertiser in comparative advertising , in order to identify the goods or services of a competitor by making reference to a trade mark of the proprietor. 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. As a result, it becomes incumbent to understand the law relating to comparative advertising to better understand how it affects the various parties - consumers, competitors, proprietary right holders and, ultimately the general public.

This article attempts to address the concept of comparative advertising, within the domain of intellectual property law, studying the various components involved, statutory enactments and stands taken by the courts of law in India and abroad, honest and unfair practices involved in CA, and finally, a comparative analysis of laws of other countries, thereby bringing to light the ambiguity and lack of comprehensive laws in India.

• Concept And Definition
Comparative advertising is a widely used form of commercial advertising in many countries. This type of advertising intends to influence consumer behavior by comparing the features of the advertiser's product with that of the competitor's product.

Comparative claims are variable in nature. They may explicitly name a competitor or implicitly refer to him. They may emphasize the similarities (positive comparisons) or the differences (negative comparisons) between the products. They may state that the advertised product is “better than” (superiority claims) or “as good as” the competitor’s (equivalence or parity claims). The aim behind this concept is to allow honest (i.e. not misleading ) comparison of the factors of one trader’s products with those of another; such a comparison will inevitably involve the use of the trade marks associated with the products in question. In the absence of provisions controlling this, such use could constitute trade mark infringement.

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.
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. He, however, cannot while saying his goods are better than his competitors', say that his competitors' goods are bad. If he says so, he really slanders the goods of his competitors. 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 and if an action lies for recovery of damages for defamation, then the Court is also competent to grant an order of injunction restraining repetition of such defamation.

• Statutory Provisions In India:

The Monopolies and Restrictive Trade Practices, 1984 (herein after “MRTP Act”) and the Trade Marks Act, 1999 work in tandem to provide the basic structure that govern Comparative Advertising. The Trademarks Act, 1999 has incorporated the provisions related to this concept in Ss. 29(8) and 30(1). According to the statute Comparative Advertising is permissible, with certain limitations as to unfair trade practices.

The Trade Marks Act is an attempt to balance the conflicting interests of the rights of registered trade mark owners and a compelling consumer interest in informative advertising. Section 29(8) of the Trade Marks Act provides that a registered trademark is infringed by any advertising of that trade mark 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.

Section 30(1) has, however, provided 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 commercial matters.

• “Honest practices”- mandatory for CA:

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.

In 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.

• Comparative Advertising is limited by 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, 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.

• 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. As per 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, a condition of low estimation 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.

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”. 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.

• Case Study:
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. 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.

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 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, the manner of commercial is important. 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 legitimate market strategy.”

• 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.

• 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.”

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 claimant's products in any means. Therefore, the court dismissed all of the plaintiff's claims.

• 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.

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). These 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.

• 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 advertiser's products are better than its competitor's, such comparison, has the actual effect of disparaging other commodities or services. 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.

• Conclusion:
• From the above research, it can be concluded that the Indian law, although interpreted to allow comparative advertisement, does not address the issue in a direct or comprehensive manner in any legislation.

• TM Act and MRTP Act have to be read together to understand the concept of CA. In view of the policy shift from curbing monopolies to promoting competition, the Union Cabinet on June 26, 2001 approved the repeal of the Monopolies and Restrictive Trade Practices Act. Hence, the Competition Law which aims at doing away with the rigidly structured MRTP Act is tipped to come into force by mid-2008, and all cases pertaining to unfair trade practices referred to in clause (x) of sub-section (1) of section 36A of the MRTP Act, and pending before the Monopolies and Restrictive Trade Practices Commission on or before the commencement of this Act shall, on such commencement, stand transferred to the Competition Commission of India, and the Competition Commission of India shall dispose of such cases as if they were cases filed under that Act.

• It must also be noted that several important terms related to the concept of comparative advertising such as “disparagement” and “honest practices” are not defined in any legislation, and the dictionary meaning or judicial interpretations have to be used in ascertaining the meaning of these terms. ‘Unfair trade practice’ has been defined u/s 36A of Monopolies and Restrictive Trade Practices, 1969 that stands repealed now. Another statute, Consumer Protection Act, 1986 provides protection against unfair trade practice but in the cases of ‘comparative advertising’ the parties are firms (whose products are endorsed by the advertisements), which would not come in the ambit of ‘consumers’ to approach the consumer forum.

The author can be reached at: rashisaraf@legalserviceindia.com / Print This Article

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