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 help 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.
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 molding the behavioral 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 comprehend, comparative advertising can be outlined as a type of advertising in which the goods or services of one trader are compared with the goods or service of another trader.
Any advertisement which expressly or impliedly can identify a competitor or goods or services of a competitor can be taken under the purview of comparative advertising.
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”.
Be that as it may, it was the was the case of Reckitt and Coleman of India Limited v. M.P Ramachandran and others which actually determined the lawfulness of comparative advertisements in India and has achieved 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:
1. A tradesman/advertiser is entitled to declare his goods as the best one regardless of whether such a declaration isn’t valid truly.
2. A tradesman/advertiser can state that his goods are superior against all of its competitors even though such a statement is not true.
3. While making the claim that his goods are superior than its competitor, the tradesman/advertiser can compare the advantages of his goods against its competitor.
4. While making the comparison the tradesman/advertiser can say about the merits of the goods over the goods of the competitor however it cannot be said that the goods of the competitor are bad as it will amount to slander/defamation and that is not passable under the law.
5. No action lies if there is no component 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-
(a) Non-comparative advertisements: advertisements that do not refer to a competing product either directly or indirectly.
(b) Indirectly comparative advertisements: advertisements that refer to a competing product in an indirect manner.
(c) 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 to 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 an 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.
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.
When puffery is being discussed it is important to talk about denigration. There is a thin line between the two. In puffery, a producer may make superior claims to indicate that his product is the best. But when this same claim is being made by degrading the image of the rival’s product, then the scope of puffery is crossed leading to denigration. This would not only amount to defamation but it will mislead the consumers of buying the wrong products.
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 the 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 an 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 Dawakhana 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 the articulation of thoughts and proliferation of human idea and 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 a 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 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 the 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 the restriction in the advertisements the price of the newspapers will eventually go up affecting the circulation and deteriorating the quality and with it, the cost of the newspaper available to the public would increase thereby restricting its availability.
In case of newspapers the restriction on the number of pages is inversely proportional to the growth of the newspaper. In other words, any restriction upon the number of pages and advertisement would expose them to financial loses. When all this happens, it would affect the fundamental rights conferred under article 19(1)(a) to propagate, publish and circulate.
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 three 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 the 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 the main reasons why the MRTP Act failed is because it allowed excessive government 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 realize 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 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 arises 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. 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 have 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. It was enacted to ensure adequate protection to the domestic and international brand owners.
Trademark 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 colors.
The main objective of the 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. 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 trademark 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 trademark 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 the use of another’s trademark in advertising would constitute the infringement. According to section 29(8), a registered trademark is infringed when such advertisement-
(a) Takes advantage of and is contrary to honest practices in industrial or commercial matters; or
(b) Is detrimental to its distinctive character; or
(c) 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 a detriment to the distinctive character or repute of the trademark 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.
ADVERTISING 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 Consumer 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 manufacturers and sellers are permissible in the interests of vigorous competition and free dissemination of information subject to the following criterias being satisfied:
(a) It is clear what aspects of the advertiser’s products are being compared with what aspects of the competitor’s product.
(b) 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.
(c) The comparisons are factual, accurate and capable of substantiation.
(d) 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.
(e) 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.
Under the ASCI a complaint council has been constituted which is also known as the Consumers Complaints Council (CCC). Any person can approach the CCC in case of objectionable advertising. First, the CCC hears the facts of the case and looks if that particular advertisement has violated the ASCI code and if there is an objectionable element then it can suggest to either withdraw or modify the same.
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 a vital component to prove that product disparagement took place e.g. a newspaper article censuring 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
i) The statement made against the business house must be false and doesn’t reflect any reality.
ii) It is made with an intention to cause financial loss or damage.
iii) Actual loss happening due to issuance of such a statement.
iv) 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 Laboratories 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 the 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 Laboratories 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 v. 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 v. 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 Limited. v. 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 a 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 v. Amritanshu Khaitan , a new approach was taken to create the extent of comparisons in comparative advertising.
Facts of the case-
1. 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.
2. According to the plaintiff the commercial has caused disparagement and misrepresentation apart from misleading its consumers.
3. 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.
4. 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.
5. The plaintiff also contended that all the features of the bulb should be fairly disclosed to the consumers and not only those two attributes.
6. 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.
7. 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.
8. The defendant has relied upon the case of Dabur India v. 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:
1. Goods or services meeting the same needs or intended for the same purpose.
2. One or more material, verifiable, and representative features (which may include price)
3. 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.
CONCLUSION
No doubt that comparative advertising has become an important tool which has been adopted by the manufacturers and sellers to reach the top and have a hold in the market. It is fine to compare the features of the products with the competitor’s but should be noted that in the process of doing so the reputation of the rival is not affected. An action always lies in case of causing disparagement.
The provisions have been laid down regarding the permissible limits in comparative advertising in chapter four of the code for self-regulation of ASCI. The code should be given more importance and be treated as benchmark to determine the extent upto which comparative advertising should be allowed while deciding whether the advertising is just comparative or in fact it is misleading and denigrating from the customer’s point of view.
Lastly there is not one specific legislation that deals with the issue of comparative advertising. When it comes to the judicial approach, the courts have put forward different interpretations depending upon the facts and circumstances of the case. For now, the position in India regarding comparative advertising is that comparison with the products of the competitors can be done but not at the cost of lowering the reputation even if such a declaration is truthful in nature.
It is the need of the hour that the legislators look into this issue and work on the framework or for an authoritative disposition on the issue by the highest court of the land.