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Introduction

Advertising exists today in a business environment made increasingly competitive by factors such as global presence and media-clutter . According to market experts advertisements have become one of the most important tool for companies of all lengths and breadths across the globe to grow their businesses. The impact that a brand makes from its catchy advertisement in a customer’s mind is simply unmatched when compared to other brand endorsement practices. A few seconds video, establishing effective emotional bonding with the customer can do wonders for the product and for the brand-image of the company. The depiction of the telecom giant Airtel in its series of indigenous advertisements connecting directly with the common man’s heart has helped it to evolve as a brand bigger than just another telecommunication company.

But while looking at not so healthy practice of “comparative advertising”, comparing one’s own products or services with those of a competitor in the market place can indeed be an effective tool in persuading the public of the associated advantages. Because comparison plays very important role when customer is choosing from a bunch of similar goods, which are alike in almost everything, in that case the image created by the advertisement is judgmental. “Comparison lies at the root of modern advertising” . In a Competitive environment, every representation of a product or service is about what ‘others are not’ . The two main purposes fulfilled by comparative advertising is firstly, of highlighting of special features of a product or service, aiming at increasing the enticement for the product or service in the minds of potential consumers, and secondly, the comparative statement directly position the product or service as not just potential but as the only best substitute to an already established product or service.

Any marketing measure that- implicitly or explicitly-identifies a competitor or goods and services offered by a competitor falls into the category of comparative advertising.

Commercial advertising needs the power of seduction but should be within the boundaries of fair competition .

 

 

The laws/ Regulation of Comparative Advertising in India:

 

With the liberalization and globalization of the Indian economy, firms have been aggressively and vigorously promoting their product and services. Not just the consumers but even such multinationals need adequate law against unfair trade practices to have some ‘rules of the game’ for competing among themselves . In the changing context of proliferation of advertisements, the law needed to be further strengthened in its application. The present protection is available under the Consumer Protection Act , but within the structure of the Consumer Protection Act, competing firms cannot be ‘consumers’ to approach a consumer forum. This act protects two key rights, namely:

• the right of the consumer to be informed about the quantity, potency, purity, standards and price of goods to guard against unfair trade practices; and

• the right to consumer education.

 

The Monopolies and Restrictive Trade Practices Act (MRTP Act-1969) has metamorphosed into the new law, Competition Act, 2002. Until it was repealed by the new Act of 2002, Section 36A(x) of the MRTP Act 1984 provided a basis upon which a claim could be made against disparagement of goods. Section 36A(x) limited comparative advertising by recognizing that the publishing of any misleading or disparaging facts about a competitor’s goods or services amounted to ‘unfair trade practice’. The new law is designed to repeal the extant MRTP Act. As of now, only a few provisions of the new law have been brought into force and the process of constituting the regulatory authority, namely, the Competition Commission of India under the new Act, is on. The remaining provisions of the new law will be brought into force in a phased manner. For the present, the outgoing law, MRTP Act, 1969 and the new law, Competition Act, 2002 are concurrently in force .

An Overview of Competition Act, 2002.

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India. These Articles are a part of the Directive Principles of State Policy. Pegging on the Directive Principles, the first Indian competition law was enacted in 1969 and was christened the Monopolies And Restrictive Trade Practices, 1969 (MRTP Act). Articles 38 and 39 of the Constitution of India mandate, inter alia, that the State shall strive to promote the welfare of the people by securing and protecting as effectively, as it may, a social order in which justice social, economic and political shall inform all the institutions of the national life, and the State shall, in particular, direct its policy towards securing.

1. That the ownership and control of material resources of the community are so distributed as best to sub serve the common good; and

2. That the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

It is suggested that, the pending UTP cases in the MRTP Commission may be transferred to the concerned consumer Courts under the Consumer Protection Act, 1986. The pending MTP and RTP Cases in MRTP Commission may be taken up for adjudication by the CCI from the stages they are in.

The Competition Commission was of the view that the Competition Act should not be burdened with unfair trade practices . This was instead, to be given effect under the Consumer Protection Act, 1986.

Section 4 enjoins that no enterprise shall abuse its dominant position. The philosophy of the Competition Act is reflected in this provision, where it has been made clear that a situation of monopoly per se is not against public policy but, rather, the use of the monopoly status such that it operates to the detriment of potential and actual competitors.

The Act therefore targets the abuse of dominance and not dominance per se. This is indeed a welcome step, a step towards a truly global and liberal economy.

The Advertising Standards Council of India

 

Advertising Standards Council of India is a self regulatory voluntary organization of the advertising industry registered under section 25 of the Indian Companies Act.. It is a commitment to honest advertising and to fair competition in the market-place. The Role and Functioning of the ASCI & its CCC (Consumer Complaints Council) in dealing with Complaints received from Consumers and Industry, against Advertisements which are considered as False, Misleading, Indecent, Illegal, leading to Unsafe practices, or Unfair to competition, and consequently in contravention of the ASCI Code for Self-Regulation in Advertising .

Eighty percent of the complaints Upheld by the CCC resulted in advertisements being either withdrawn or modified appropriately by the Advertisers/Agencies involved . Implementation of CCC decisions – as a result of prompt and effective follow ups, there have been positive responses received from advertisers and agencies, in respect of CCC recommendations on complaints which were upheld.

Also, the Trademarks Act, 1999 (Section 28(9)-notified with effect from September 15, 2003) mandates that the use of a registered trademark by an advertiser results in infringement if it:

• takes unfair advantage of the mark’s reputation;

• in contrary to honest practice in industrial or commercial matters;

• is detrimental to the mark’s distinctive character; or

• damages the reputation of the trade mark.

In addition to these,

Article 19 (1) (a) of the Constitution of India, explicitly protects freedom of speech and expression. However, the freedom of speech and expression has limitations. Article 19(2) permits the state to limit the freedom:

… in so far as such law imposes reasonable restrictions … in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence.

The question had arisen before the Supreme Court whether advertisement was ‘commercial speech’ and, thus, had the protection of Fundamental Right under Article 19(1) (a). The Supreme Court had maintained in its judgment:

… “Commercial speech” cannot be denied the protection of Article 19(1)(a) of the Constitution merely because the same are issued by businessman.

The Supreme Court was categorical in its position in the Tata Yellow Pages Case:

Advertising as a “commercial speech” has two facets. Advertising which is no more than a commercial transaction is nonetheless dissemination of information regarding the product advertised. Public at large is benefited by the information made available through the advertisement. In a democratic economy free flow of commercial information is indispensable. There cannot be honest and economical marketing by the public at large without being educated by the information disseminated through the advertisements.

The economic system in a democracy would be handicapped without there being freedom of “commercial speech” .

The Supreme Court had further continued:

Examined from another angle, the public at large has a right to receive the “commercial speech”. Article 19(1) (a) not only guarantees freedom of speech and expression, it also protects the rights of an individual to listen, read and receive the said speech. So far as the economic needs of a citizen are concerned, their fulfillment has to be guided by the information disseminated through the advertisements. The protection of Article 19(1) (a) is available to the speaker as well as to the recipient of the speech. The recipient of “commercial speech” may be having much deeper in the advertisement than the businessman who is behind the publication.

Law Relating to Disparaging Advertisements in India

Turning to the development of law on the issue in India, it appears that the earliest decision was that of the Calcutta High Court in Chloride Industries Ltd vs. The Standard Batteries Ltd , It was an action brought forth by the manufacturers of Exide Battery against their competitor on the ground that the competitor indulged in disparagement. A single Judge of the Calcutta High Court held therein 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.

Following the position of American Courts, the MRTP Commission has recognized even ‘a certain degree of puffing up of one’s product’ and generic ‘puffery’ is not actionable .

The principles, as stated in the case of Reckitt & Coleman of India Ltd v Kiwi TTK Ltd. , are as follows:

• An advertisement can declare that the advertised goods are the best in the world, even though this declaration is untrue;

• An advertisement can state that the advertised goods are better than those of competitors, even if this statement is untrue;

• An advertisement can compare the advertised goods with those of competitors;

• An advertisement cannot, while stating that the advertised goods are better than those of a competitor, state that the competitor’s products are bad, as this would be defamation; and in a case of defamation, damages can be claimed. The court can also grant an injunction against repetition of the defamatory action.

The next decision is also that of the Delhi High Court in Pepsi Co., Inc. And Ors. vs. Hindustan Coca Cola Ltd . In that case, an advertisement in which a boy was shown preferring THUMS UP to PEPSI on the ground that the former was a stronger drink while the latter was meant for children, was in issue. The Division Bench of the Delhi High Court held it to be disparagement.

In Reckit Benckiser (India) Limited vs. Naga Limited and Others , the Delhi High Court was concerned with an advertisement in which Dettol soap was allegedly shown in poor light by the manufacturer of an Ayurvedic soap. But the plaintiff sued only for injunction and did not claim damages. Therefore, the learned Judge of the Delhi High Court refused to grant an injunction on the ground that in the absence of a primary and substantive claim (for damages) the relief of injunction would ordinarily be barred.

The advertisement asking the viewers to forget CHYAWANPRASH in summer season and to take to AMRITPRASH, was the subject matter of dispute in Dabur India Ltd vs. Emami Ltd. A learned Judge of the Delhi High Court quoted with approval all the above decisions.

Also, in Karamchand Appliances Pvt. Ltd vs. Sh. Adhikari Brothers and Ors. , the Delhi High Court was concerned with mosquito repellents ALL OUT and GOOD NIGHT. The offending advertisement showed a lady removing the ALL OUT pluggy and replacing it with GOOD NIGHT with a background voice claiming that the latter’s turbo vapour chases the mosquitoes at double the speed. The court granted injunction.

A new approach

One case, however, has marked a significant departure from the settled traditional approach. In the case of Colgate Palmolive (India) Limited v Anchor Health & Beauty Care Private Limited , Madras High Court held that false claims by traders about the superiority of their products, either directly or by comparing them against the products of their rivals, were not permissible.

In this case, an advertisement was telecast by the defendant, Anchor, claiming that:

• Its product was the only toothpaste containing the ingredients calcium, fluoride and triclosan;

• It was the first all-round protection toothpaste;

• The fluoride in Anchor toothpaste gave 30% more cavity protection;

• And the triclosan was ten times more effective in reducing bacteria.

The plaintiff, Colgate, objected to these claims, stating that it was the pioneer in the field and that its own toothpaste contained all these ingredients prior to Anchor. Colgate further said that the Anchor’s statement with regard to fluoride protection, and efficiency of triclosan was false and misleading as the amount of fluoride in toothpaste is mandated by Rule-149-A of the Drugs and Cosmetic Rules. Although, a mere puff within the tolerance limits is permitted by law. But, a claim which exceeds the said limit would amount to disparagement of the other people’s product and therefore, should not be allowed to continue.

In its interim order, the court restrained Anchor “from using the words ‘only’ and ‘first’ in the offending advertisement, in such a manner that it does not send a message to the consumer that it is the only product with these characteristics. This seems to be the first time a court has included consumer interest in its analysis of such advertising unlike before. Court further said that in a Country with limited resources and a low literacy level, is possible only by allowing a free play for the trade rivals in the advertising arena, so that each exposes the other and the consumer thereby derives a fringe benefit.

“Therefore, it is only on the touchstone of public interest that such advertisements are to be tested.”

Further, the Court said that restrictions contained in statutes such as the MRTP Act and the Consumer Protection Act (Section 2(1) (r)) satisfies the test of reasonable restrictions allowed by Article 19(2) of the Constitution.

To sum up, the law as it stands today, does not appear to tolerate puffery anymore. In the light of ‘public good’ advertisements, the court cited two instances as an exception to this- namely, if an advertisement is motivated by malice, and if it is false.

Hindustan Unilever Limited vs. Procter & Gamble

In the recent case of HUL vs. P & G , the Petitioner claimed that a television commercial of respondent in respect of “Fairness Cream” has disparaged its product. Such disparagement is not by name, but is so subtle that it communicates to the viewer that like products of others are lacking in something. This representation is false as Niacinamide is the only component which has a lightening effect and the products both of the petitioner and the respondent contain this only. The “innuendo” that the fairness cream of others works on the surface (jaise ye kaam kare sirf upar se) shows the petitioner’s product in bad light. The court said that such comparison is permitted as there is no direct attempt made by the respondent to defame HUL’s Product and there is no economic loss been established. Similar, was the dispute between the products RIN and TIDE respectively, of the same companies.

 

Advantages and Disadvantages of Comparative Advertising:

Advantages

• Direct comparisons provide for more meaningful data about the product or service, thus enabling potential purchasers to make more intelligent and sound purchasing decisions .

• By emphasizing the features of a distinct product they are informative.

• Advertisers use the claim of one product’s superiority over the competitor’s product mostly in the attempt to increase market share in an already somewhat established market of brand leaders .

Disadvantages

• Deceptive and uninformative claims may contribute to the confusion of consumers and disparage targeted competitors.

• It’s looked upon as “pulling oneself up on someone else’s bootstraps and thus offensive” .

Conclusion:

Comparative Advertising, when truthful and non-deceptive, is a source of important information to consumers and may assist them in making rational purchase decisions .

The ideal legal framework for comparative advertising puts consumers in the position to be the judges of the comparison, if the falsity of the claim is exposed by the rival, the consumer stands to benefit by the knowledge derived out of such exposure. Because, in a free market economy, the products will find their place, as water would find its level, provided the consumers are well informed . With the comparison providing truthful facts about the competing products or services; such an approach will falsify all those pre-conceived notions which place the advertiser in the role of judge for the same activity in which it is participating. Where such a scenario can be achieved, fears that comparisons reduce the credibility and effectiveness of an advertisement are unwarranted. Appropriate law, adequate enforcement, infrastructure and quick dispute settlement mechanism would be needed to sustain competition.

Endnotes:

1. “Advertising Matters”, The Globe and Mail- Report on Business, February 2004, at 61.

2. Cornish, W., “Intellectual Property”(4th Edn., Page 656).

3. Comparative Advertising in India: need to strengthen regulations, The Financial Express: Posted on June 25, 2005.

4. Ricardo Richelet, Argentina- Comparative Advertising, Building and enforcing intellectual property value 2005.

5. Akhil Pathak, Liberalisation and Law on Comparative Advertising in India, Available at < http://www.iimahd.ernet.in/publications/data/2004-01-02akhilpathak.pdf>

6. Consumer Protection Act, 1986.

7. The MRTP Act-1969.

8. Report of the High Level Committee on Competition Policy and Law, May 2000.

9. Available at < http://www.ascionline.org/> accessed 3rd July ’10.

10. Available at < http://www.ascionline.org/goals/roleasci.htm> accessed 3rd July’10.

11. Article 19, Constitution of India.

12. Tata Press Limited v Mahanagar Telephone Nigam Limited and Others, 1995, AIR (SC) 2438.

13. Hindustan Lever Limited v Mudra Communications Limited and Another (Decision of MRTP Commission), 2002 (50) CLA 1.

14. Decided on 30.9.1994.

15. M Balasundram v Jyothi Laboratories and Another (Judgment of the MRTP Commission); 1995(82) CC 830.

16. Reckitt Benckiser v Hindustan Lever, 2008(38) PTC 139(Del).

17. 63(1996) DLT 29.

18. (2003 (27) PTC 305 (Del)).

19. {2003 (26) PTC 535}.

20. {2004 (29) PTC1}.

21. {2005 (31) PTC 1 (Del)}.

22. (2008) 7 MLJ 119.

23. Ameet Datta, Comparative Advertising in India- puff under scrutiny: Published in World Trademark Review- December/January 2010.

24. Judgment by Calcutta High Court-Dated 15.2.2010.

25. Manuel Morasch, Comparative Advertising: A comparative study of trade-mark laws and competition laws in Canada and the European Union, 2004.

26. Ng, Catherine, “The limits of Comparative Advertising in Civil Actions: Just when you dare to compare” (1998) 15 C.I.P.R., at 143.

27. So Gross, Eric W. and Mulholland, Sylvia, “Comparative Advertising: Trial by Injunction and the Death of Brand X”, 12 C.I.P.R 1995, at 30.

28. Dominguez Perez, Eva M.”Review of Comparative Advertising-German Case Law in light of EC Directive,” IIC Volume 32, 1/2001, 20, at 25.

29. Colgate-Palmolive (India) Limited v Anchor Health & Beauty Care Private Limited, (2008) 7 MLJ 1119.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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