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COMPARATIVE ADVERTISING AND DISPARAGEMENT INTRODUCTION “Sales may lead to advertising as much as advertising leads to sales” – Michael Schudson

April 20, 2019 0 Comment

COMPARATIVE ADVERTISING AND DISPARAGEMENT
INTRODUCTION
“Sales may lead to advertising as much as advertising leads to sales” – Michael Schudson.

These lines stated above do make sense in the rapidly changing business today. Advertisements are what they are- they define everything. It is like two sides of a coin. One where the powerful advertisements helps the companies only to gain more market share or you can say to get a better hold in the market to face its competitors. On the other side it is about the consumers who benefit out of it i.e more choices from a wide range of products to buy at cheaper prices. Since the beginning of 20th century we have seen a remarkable change and the types of aggressive marketing strategies being adopted by the companies. In the 1990’s it started with the big celebrities endorsing the products of the companies to attract the consumers. Even now it can be seen that celebrities endorse the products of the brands but there has been a paradigm shift in the marketing strategies. Earlier it was about attracting a greater number of customers but now it is about being superior and that too in the sense where one brand ‘claims’ that is it superior.

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Advertising is an important aspect of trade and business. It is the life blood of competition in the market. It is a powerful tool which is useful in influencing and moulding the behavioural changes of the consumer. It affects the mentality of the consumer in the sense that whatever looks good and has nice features then he/she will go for it. If the product turns out to be good then it creates a good image of the brand- that is how powerful it is. On a large scale and long run it builds up the goodwill of the company.

COMPARATIVE ADVERTISING- THE CONCEPT
For a layman to understand, comparative advertising can be defined as form of advertising in which the trader compares his products or services with that of another trader by using the trade mark or the trade name of such trader. This method is adopted in the maturity stage when similar products fast appear in the market causing stiff competition.

Article 2(c) of the Directive 2006/114/EC of the European Parliament and of the Council Concerning Misleading and Comparative Advertising defines “comparative advertising’ which explicitly or by implication identifies a competitor or goods or services offered by the competitor”. 3
Although it has not been expressly or impliedly stated anywhere or even defined in the Indian statute, the UK regulations define it as advertisements “explicitly or by implication, identifies a competitor or goods or services offered by a competitor”.

But it was the case of RECKITT AND COLEMAN OF INDIA LIMITED Vs. M.P RAMACHANDRAN AND OTHERS which actually determined the legality of comparative advertisements in India and has attained an authoritative status in India and is still being followed for reference in the present cases. It is the case which laid down the important principles and they are:
A tradesman/advertiser is entitled to declare his goods as the best one even if such a statement is not true in reality.

A tradesman/advertiser can say that his goods are better than all its competitors even though such a statement is not true.

While making the claim that his goods are better than its competitor, the tradesman/advertiser can compare the advantages of his goods against its competitor.

While making the comparison the tradesman/advertiser can mention about the advantages of the goods over the goods of the competitor but it cannot be said that the goods of the competitor are bad as it will amount to slander/defamation and that is not permissible.

No action lies if there is no element of defamation in goods or to the manufacturer of goods. Only if defamation exists then only an action lies for it, and if an action lies for recovery of damages for defamation, the court is also competent to grant an order of injunction restraining repetition of the same.
A survey of advertisements conducted in the United States reveals that there are three categories into which the advertisements falls-
Non-comparative advertisements: advertisements that do not refer to a competing product either directly or indirectly.

Indirectly comparative advertisements: advertisements that refer to a competing product in an indirect manner.

Directly comparative advertisements in which a competing product is specifically named or recognised.

Advertising falling within the last two categories could be referred to as comparative advertising. Different countries put in different views in this regard. In UK both the forms of comparative advertisements are allowed but there are countries where comparative advertising is banned. Then there are countries where this is all legal but there is a catch to it. A company can advertise his product by highlighting its features by comparing it but it cannot go and say that the rival’s product is not upto the mark or belittle his product as it will affect its reputation in the market. A company can do “puffery on its products. Puffery is basically exaggeration of the features on the products by the company itself and is used to get the attention of the people. It is not illegal and is a very common technique in use.

In one of land mark judgements delivered in the English Courts in the case of DE BEERS ABRASIVE V. INTERNATIONAL GENERAL ELECTRIC CO. the Court held as follows, “The law is that any trader is entitled to puff his own goods even though such puff as a matter of pure logic involves the denigration of his rival’s goods…Notices…reading ‘the best tailor in the world’, ‘the best tailor in this town’ and ‘the best tailor in this street’ do not commit an actionable offence. Where however the situation is not that the trader is puffing his own goods but turns to denigrate the goods of his rival… then the situation is not so clear-cut. The statement ‘my goods are better than the goods of X is only a more dramatic presentation of what is implicit in the statement ‘my goods are the best in the world’ and would not be actionable. However, the statement ‘my goods are better than X’s because X’s are absolute rubbish would be actionable.”
In another case, ELLISON EDUCATIONAL EQUIP, INC v. TEKSERVICES, Inc it was held that, advertising claims that defendant’s letter-cutting machine was the “finest”, “most flexible” and “most versatile system available today” were not actionable qua Section 43(a) of the Lanham Act, because they constitute mere puffing.

The position regarding “puffery” is that it is allowed as long it is subjective. A company is allowed to puff its products even if such a statement issued by the advertiser is not true. But it cannot make an objective claim for its products as it is likely to be believed by the consumers an action can be brought against the same.

COMPARATIVE ADVERTISING AND LEGAL PROVISIONS
INDIAN CONSTITUTIONAL LAW
There is no provision in the Indian Constitution which expressly speaks about advertising but it is mentioned implicitly in article 19(1)(a) which talks about right of freedom of speech and expression.

Article 19(1)(a) is not merely a right of speech and expression but a right to freedom of speech and expression and includes right of an individual to express his/her views at any issue through a medium i.e words of mouth, writing, picture, film, movie etc. The reasonable restrictions for this right are contained in article 19(2) of the constitution.

In the case of HAMDARD DAWKHANA V. UNION OF INDIA the court stated that an advertisement is a form of speech but the true character is reflected by the objective it seeks to promote. As a general rule anything which speaks about expression of ideas and propagation of human thought would fall under article 19(1)(a). Commercial advertisements come up with an element of commerce and trade and if these two elements are present in an advertisement then it would never fall within the concept of freedom of speech as the objective changes and it not anymore to propagate any ideas- Social, political or economic or to further literature or human thought.

In short, an advertisement which speaks purely about business falls within the category of commerce and trade. It cannot be considered as a freedom of speech.

Advertisements were considered a part of form of speech but did not make up for ‘free speech’ as it contained the element of commercial gains. This position changed in the case of TATA PRESS Vs. Mahanagar Telephone Nigam Limited the court held that the main motto of advertisements is not merely making profits by the producers but also for disseminating the free flow of information in economy as the public has the right regarding the same. In this case, the Supreme Court accepted the printing of commercial advertisements as article 19(1)(a) guarantees the freedom to publish the same. It is this case only where the term “commercial Speech” was coined.

As it has been said earlier that advertising is the life blood of competition in the market and advertising plays a pivotal role in it. Advertising is important to an economic system of a country. Low pricing of the product is heavily reliant upon economies of scale or you can say mass production, and mass production and volume sales for a product are directly interconnected. Volume sales depend on good and out of the box advertising. According to the statistics, the newspaper industry to thrive and continue obtains most of the revenue from advertising. Advertising is what pays the costs for supplying the public at large with newspaper. For a democratic press the advertising “subsidy” is crucial. With restriction in the advertisements the price of the newspapers will eventually go up affecting the circulation and deteriorating the quality. The cost of new available to the public would increase thereby restricting its availability.

The apex court has said that the restriction upon the number of pages would hamper upon the growth of the newspapers. The restraint on the advertisement would expose them to financial losses. When all this happens, it would affect the fundamental rights conferred under article 19(1)(a) to propagate, publish and circulate. (BENNET COLEMAN AND COMPANY AND OTHERS ETC V. UNION OF INDIA AND OTHERS ETC 1972 2 SCC 788)
From the analysis of the case laws discussed above it can be said that the constitution of India, being the law of the land has provisions for advertising under article 19(1)(a) but if the commercial speech is used is used in a misleading or deceptive manner or is Untruthful is then regulated by the state under article 19(2).

MONOPOLIES RESTRICTIVE TRADE PRACTICES ACT, 1969 (‘MRTP ACT’)
Before the framework of the trademarks act, 1999 was not even drawn it was the Monopolies and Restrictive Trade Practices Act,1969 (‘MRTP Act’) which kept a check on the untrue or misleading advertisements. Some major amendments were made to this in 1984 and it focused mainly on four things- Curbing monopolistic, restrictive and unfair trade practices to ensure healthy competition in the economy and safeguarding the interests of the customers by providing them protection against false or misleading advertisements and/or deceptive trade practices. Another highlight was the addition of section 36A.

Section 36A of the Act speaks on unfair trade practices- Unfair trade practices in comparative advertisement include any endorsement of goods or services that deceives or gives false information concerning the goods or services of another individual. Secondly, the acceptance of any unfair or misleading methods or practices on representation of goods and services.

Under the MRTP a judicial body was created which came to be known as the Monopolies Restrictive Trade Practices Commission (MRTPC). Before the repeal of the act it was the only authority which provided relief for unfair trade practices indulged in advertising by the competitor and trademark disparagement
One of main reasons why the MRTP Act failed is because it allowed excessive governmental control over the small, medium and large enterprises. Secondly it had vague and ambiguous provisions in it.

The MRTP act was dissolved by section 66 of the Competition Act, 2002 but it did not leave the trader with any remedy because the definition of ‘unfair trade practices’ was incorporated parimateria under section 2(1)(r) of the consumer protection Act,1986 and thus the repeal of the MRTP did not carry any importance. Even though some of the provisions of the old act have been incorporated under the new one but here the “competing firms” cannot be the consumers and approach the redressal forum for their grievances. The Consumer protection act, 1986 laid down an effective mechanism to address the grievances of the consumer but on the other side it failed to realise the needs of the competitor under the act as it excluded the manufacturers, sellers and service providers under its ambit. Consumer protection act is about promoting the interests of the consumers and for this purpose a three-tier system has been created at the national level, state level and the district level. The consumers can without hesitating can approach the consumer forum in the case where they think that they are being duped by the misleading advertisements but the main issue that arise is what will be the standing now of the tradesmen/advertisers who are already indulged in the act of denigrating the products of the rivals.

After the MRTPC was dissolved by section 66 of the competition act of 2002, all the cases which were related to unfair trade practices referred in section 36A(1)(x) and which were pending before the MRTPC itself were transferred to Competition Commission of India. MRTP only dealt with the pending cases and ceased to exist after two years.

Section 66 of the competition act made it very much evident that the MRTPC had no more power and the authority to listen and adjudicate the matters related to unfair trade practices even before or after the commencement of the new act. Secondly the Competition Commission is devoid of the authority to deal with the new cases that could come up under 36(i)(x) of the repealed MRTP act. Now the consumer forum has the power and jurisdiction to look into the matters related to unfair trade practices which has incorporated under the consumer protection act,1986 by the amendment in 1993. Lastly the manufacturers/ tradesmen have the common law remedy to approach the civil court and pray for relief.

TRADEMARKS ACT,1999
India enacted the trademarks act, 1999 and repealed the trademarks and merchandise act,1958 which has been in force w.e.f from September 15th, 2003 with conformity with the TRIPS agreement. Secondly it was enacted to ensure adequate protection to the domestic and international brand owners
Trade mark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include the shapes of goods, their packaging and combination of colours. (Section 2(1) (zb) of the Trade Marks Act 1999)
The main objective of trademark is to exclusively distinguish the goods or services of one person from those of others. One of the main functions they serve is that they give an indication beforehand to the buyer/ buyer about the make or quality of goods. Secondly it lets them know about the source from the goods come, or the trade hands through which they pave their way into the into the market (Ch 17 page 146). In the rat race in today’s market the competitors are fighting for a good standing to sell their products but if in that process if one advertises their product in such a way that it tarnishes the trade mark of its competitor by indirectly comparing the goods i.e comparative advertising and product disparagement, then it might cause problems for the one who is involved in such an act and may give rise to issues which are related to the trademark infringement.

Trademark Infringement
Infringement takes place when a registered trade mark is infringed by a person in the course of trade, in relation to the same goods for which the mark is registered and uses without authority the same mark or a deceptively similar mark.

One of the essentials for an infringement to be caused is that should be used in the course of trade and its use must be in a printed form or it bears visual representation. Use on advertisements, invoices or bills would constitute infringement.

When we talk about the trademark act, it has definitely opened up the doors to deal with and regulate the unfair trade practices in comparative advertising and preventing infringement of trademark.

In this regard section 29(8) enunciates all those situations where use of another’s trademark in advertising would constitute the infringement. According to section 29(8) a registered trademark is infringed when such advertisement-
Takes advantage of and is contrary to honest practices in industrial or commercial matters; or
Is detrimental to its distinctive character; or
Is against the reputation of the trademark.

At the same times section 30(1) impliedly makes an exception for comparative advertising, to acts constituting infringement under section 29. It provides that any act which is in conformity with the honest practices in industrial and commercial matters and does not take unfair advantage or is detriment to the distinctive character or repute of the trade mark will be permissible and will not constitute infringement.

From the above two sections of the trademark act which section 29(8) and 30(1) it can be said that the primary objective is not to stop comparative advertising but to permit provided that use of competitor’s mark is honest.

ADVERTISNG STANDARDS CODE OF INDIA (ASCI)
The advertising standards council of India (ASCI) was set up as a non- statutory tribunal in 1985, incorporated under section 25 of the Indian companies act,1956. It is a non-governmental body which works for the self- regulation in advertising to promote and protect the interests of the consumers and maintain and enhance the public confidence in advertising.

For promoting the fair practices in the field of advertising and protecting the interests of the consumers guaranteed in the consumers protection act of 1986, the ASCI had come up with its own code which is called “code for self- regulation in advertising”. The code has been framed with an objective of identifying and controlling the content of the advertisements so that they are not offensive and don’t mislead the customers to buy the wrong product.
ASCI has divided the code into four chapters and the fourth chapter is about the form and manner of comparative advertising. It talks about how the advertisements containing comparisons with competing manufactures and sellers are permissible in the interests of vigorous competition and free dissemination of information subject to the following criterias being satisfied:
It is clear what aspects of the advertiser’s products are being compared with what aspects of the competitor’s product.

The subject matter of comparison is not chosen in such a way so as to confer an artificial advantage upon the advertiser or so as to suggest that a better bargain is offered than is truly the case.

The comparisons are factual, accurate and capable of substantiation.

There is no likelihood of the consumer being misled as a result of the comparison, whether about the product advertised or that with which it is compared.

The advertisement does not unfairly denigrate attack or discredit other products, advertisers or advertisements directly or by implication.

This code brings into its ambit all those advertisers, advertising agencies, media or such other individuals who are involved in the process of commission, creation, placing and publication of the advertisements. Even if an advertisement has originated outside the country but aims at the Indian consumers in that case the code is applicable to them.

Product disparagement and comparative advertising – The interface
According to Black’s law dictionary the word ‘disparage’ means to connect unequally; or to dishonour (something or someone) by comparison; or to unjustly discredit or detract from the reputation of (another’s property, product or business); or false or injurious statement that discredits or detracts from reputation of another property, product or business. As per the Merriam Webster Dictionary “disparage” means to describe (someone or something) as unimportant, weak, bad etc.

Product disparagement has no boundaries in comparative marketing. Even an act on the part of the third party is an essential element to prove that product disparagement took place e.g. a newspaper article criticizing a particular good and in the process of doing so causes disparagement.

In simple words, trademark disparagement means defamation: trade libel or slander of goods. In common business language it is known as product disparagement. For an advertisement to be defamatory in nature, it should not only use strong offensive words for e.g. tagline to degrade the rival’s product but should be able to put a dent on the reputation also.

For constituting product disparagement, the following essentials are necessary
The statement made against the business house must be false and doesn’t reflect any reality.

It is made with an intention to cause financial loss or damage.

Actual loss happening due to issuance of such a statement.

It is made with the knowledge that it will cause damage to the competitor or the statement has been made negligently.

In India, the concept of disparagement in advertising was first taken up in the now repealed MRTP act of 1969.

In one of the first cases brought before the MRTP Commission for disparagement in advertising is the case of M. BALASUNDARAM V. JYOTHI LABORATRIES a television commercial showed that 2-3 drops of Ujala were adequate to achieve the striking whiteness of the clothes. In the same advertisement it was also shown in stark contrast that more spoons of other competing brands were required to achieve the same performance but no particular brand was targeted in the commercial. A lady was shown holding a bottle of Ujala and looking down on another bottle with disgust and exclaiming chhii chhii! in disgust. The manufacturers of Regaul, a competing brand from South India approached the MRTP Commission saying that advertisement was disparaging their goods. The commission was of the view that mere claim to superiority in the quality of one’s product by itself is not sufficient to attract section 36(1)(x) of the MRTP Act. The commission elaborated the meaning of provision:
In order to bring home a charge under clause (x) of section 36A (1) it must be established that the disparagement is of the goods, services or trade of another. … the words “goods of another person” have a definite connotation. It implies disparagement of the product of an identifiable manufacturer. Further, the bottle did not have similarity with bottle of any brand. The Commission, thus, was of the opinion that it could not be a case of disparagement of goods.

In the case of PALMOLIVE (INDIA) LIMITED V. VICCO LABORATRIES Hindustan Lever Limited advertised its toothpaste, ‘New Pepsodent’ in print, visual and hoarding media, claiming that its toothpaste ‘New Pepsodent’ was ‘102% better than the leading toothpaste’. Here, Commission was of the view that the word toothpaste has become synonymous with Colgate over the years. The Commission in addition noted that the jingle in the background was a familiar one. The comparative manufactured goods in the television commercials could, therefore, be identified as Colgate dental cream. Thus, it became a case of comparative advertisement and a claim could be made of disparagement of Colgate’s products.

It was this case only where the principle was evolved that disparagement arises only when the product in question is identifiable. Identification could be explicit or can be determined from the facts and circumstances of the case.

In the case of CHLORIDE INDUSTRIES LIMITED Vs. THE STANDARD BATTERIES LIMITED a single judge of the Calcutta High Court held that if the goods are disparaged maliciously or with some other such intent to injure and not by way of fair-trade rivalry, the same would be actionable.

From the above case law, it can be said that mala fide intention has no place in the field of comparative advertising. The products can be compared with the competitor within the permissible limits only.

In another landmark judgement delivered in the case of PEPSICO Vs. HINDUSTAN COCA COLA, the division bench of the Delhi High Court has stated that advertisements leave an indelible impression in the minds of the viewers and to decide the question of disparagement the following questions need to be taken into consideration:
What is the intention of the commercial?
How is the commercial depicted?
What is the story line of the commercial and what message does it intend to send out through that particular commercial?
Further, the division bench in this case observed that only if the ‘manner of commercial’ is ridiculing or condemning the product of the competitor, it amounts to disparagement and is actionable but if the manner is only to show one’s product better or best with denigrating other’s product then that is not actionable.

In the present day, even though the judiciary has been making several efforts to deal with the cases relating to the product disparagement vis-à-vis the trademark law, it is the competitors who have been finding new ways to deal with comparative advertising. Now they have started condemning a whole class of products of a specific competing product. This has led to the birth of another species you can say that is “generic disparagement”. In this form of advertising the competitor doesn’t only target a specific product but instead goes for disparagement of the whole class of products.

In DABUR INDIA LIMITED Vs. EMAMI LIMITED the defendant had come up with a commercial and it disseminated the message saying that chayawanprash was not good in summers. Even though the commercial did not speak specifically about the brand of the plaintiff and the issue in disparagement was ‘generic’ yet the commercial was upheld to be insinuating.

In the case of UNIBIC BISCUITS INDIA PRIVATE LTD. Vs. BRITANIA INDUSTRIES the appellant in its advertisement used the tagline “why to have a good day when you can have a great day”. The respondent in this case alleged that through the tagline the product of the respondent through that advertisement has been disparaged. The contention of the appellant was that the words ‘good and ‘great are generic and no disparagement has been caused. The Karnataka High Court delivered the judgement in favour of the defendant saying that disparagement has been caused.

From the above case law, it is clear that usage of word in a generic to describe the product of the competitor will not amount to disparagement. The product that is insinuated should have a strong resemblance with the product of the insinuator to claim action for damages.

Generic disparagement of the rival product can be caused without even specifically mentioning or pointing out the rival product is objectionable and no one has the right to disparage the class of goods within which the complaining plaintiff falls and raises defence that plaintiff has been not specifically identified.

HOW FAR CAN ONE GO IN COMPARATIVE ADVERTSING?
It is rightly said that comparison lies at the root of advertising. The main question concerned is that how far can a tradesman/advertiser can go or to what extent he can go to sell his product in the market. The relationship between comparative advertising and product disparagement is one of a kind. In other words, both are interconnected. In this regard, the Indian courts have held that a tradesman/advertiser may compare its products and say that its products are of superior quality but in doing that it cannot lower the value of the rival’s product or reputation
In the recent case of HAVELL’S INDIA LIMITED Vs. AMRITANSHU KHAITAN, a new approach was taken to create the extent of comparisons in comparative advertising.
Facts of the case-
The plaintiff has challenged the defendant regarding the misleading and disparaging advertisement/ promotional activity saying that the defendant has compared its product i.e ‘Eveready LED bulb with plaintiff’s ‘Havells’s LED bulb.

According to the plaintiff the commercial has caused disparagement and misrepresentation apart from misleading its consumers.

According to the plaintiff, the defendant in the commercial “check lumens and price before you buy” used selective and mischievous means to attract consumers and compare only two things i.e lumens (brightness) and price.

The plaintiff contended that when the defendant compares two features that is the lumens and price then it creates an impression in the mind of the buyer that it is a better product.

The plaintiff also contended that all the features of the bulb should be fairly disclosed to the consumers and not only those two attributes.

The defendant in this case contended that the representations made in the advertisement were true and solely based on the information derived from the product packaging of the plaintiff.

The defendant even contended that that is no need to specify all the features of the product and in this case all the major features have been disclosed and compared. Therefore, no action lies as there is no disparagement.

The defendant has relied upon the case of DABUR INDIA Vs. COLORTEK MEGHALAYA which held that comparison is allowed within permissible limits but denigrating the rival’s product is not.

Findings
It was found that comparative advertising can be used in relation to like products. The court in this case had observed that comparative advertising is permitted provided that the following criterias should be fulfilled:
Goods or services meeting the same needs or intended for the same purpose.

One or more material, verifiable, and representative features (which may include price)
Products with the same designation of origin (where applicable)
The court observed that while making out the comparisons care must be taken to ensure that no statement should be issued which may lower the reputation of the competitor’s product in the market. The statement should not be defamatory or libelous or misleading. It also observed that certain amount od disparagement always exists in comparative advertising.

The court held that it is the discretion of the advertiser to highlight the special features of its product which sets it apart from its competitors. Full disclosure is not mandatory but whatever features are being highlighted must be true only. It was also held that if there is mere trade puffery and the registered proprietor is not comfortable with it then it won’t bring the advertisement within the scope of trademark infringement.

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