Comparative Advertising: Comparative Study on U.S and India

INTRODUCTION

A trademark is an emblem or motto that conveys limited property rights in a certain word, phrase, or symbol. Traditionally, trademarks have had an important, but limited purpose in society; to permit consumers to identify the manufacturer of a product or the provider of a service.[1] The essence of comparative advertising is expressed by the old slogan "anything his can do mine can do better."[2] In other words 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 products or by denigrating the quality of the compared product. By recognizing the right of an advertiser to truthfully compare its products to those of a competitor, comparative advertising can be viewed as a vehicle of expression that assists consumers in making informed.[3] Trade rivalries and comparative advertising have been an old phenomenon in the advertising world and the customers have witnessed innumerable product wars on their television sets. The concept of comparative advertising emerged in the nineties. The nineties era witnessed the Pepsi-Coke war which was followed by Complan-Horlicks tug of war and the latest in the basket is the Rin-Tide war. All these advertisements disparaged the competitor’s product to showcase the superiority of their product in the market.[4] The key to comparative advertising lies in the depiction of the rival goods in a discreet yet assertive fashion. India does not have in place dedicated statue governing the area of Comparative Advertising.[5] Comparative advertising compares alternative brands on price or other measurable attributes, and identifies the alternative brand by name, illustration or other distinctive information.[6] Fair use doctrine is applicable in cases of comparative advertising as it is used in copyright law, but fair use in comparative commercial advertising is a new notion which cannot be explained by applying either the fair use doctrine under the confusion test of trademark law or the fair use defense of copyright law.[7] In recent years, comparative advertising has become a multibillion dollar business and has challenged courts with new, complex legal issues related to the rights of consumers, advertisers and their competitors.[8] In comparative advertising, the doctrine of fair use is invoked in cases where the use of a competitor's trademark is necessary to truthfully describe the characteristics of the alleged infringer's goods.[9] However, the evolution of the fair use defense in comparative advertising has been relatively slow because the Lanham Act was not primarily concerned with advertising and because competitors were generally afraid to engage in possibly unlawful comparative advertising.[10] Unauthorized uses that cause consumers to associate a mark with an unsavory image or a running joke, while potentially damaging to the mark's owner, cannot cause dilution if consumers do not believe the mark is being used to designate an additional source. Non-trademark uses of marks such as parody, comparative advertising, satire, or creative expression do not forge the kind of additional mark-source links necessary to effect dilution.[11]

COMPARATIVE ADVERTISING AND FAIR USE

Whether “fair use” can also be brought in trademark related matters is a big debated question. As in copyright doctrine of fair use is involved which protects the authors right over the copyrighted material, whereas in the trademark if we bring it will protect the interest of the owner of trademark to the goodwill attached to the mark.[12]  In India fair use doctrine is well established in the cases relating to copyright but is little bit blurred in cases related to trademarks.[13] The fair use exception in copyright law is justified by public interest, but the same is not true for fair use in the dilution context. The application of the fair use doctrine from copyright law to trademark dilution would subject the latter to constraints completely extraneous to the goals of the trademark dilution doctrine.[14] The doctrine of fair use has been dealt by the U.S courts seriously and in the landmark case of Triangle Publications[15] the District Court and the Court of Appeals have discussed the fait use doctrine and the conditions for its validity. In this case the publisher of a television program magazine wanted to enjoin a newspaper publisher from using the plaintiff's magazine to promote a competing publication through comparative advertising. The defendant argued that its comparative advertising was a form of commercial criticism and, therefore, it was exempted from the application of the plaintiff's monopoly right. The district court observed that the exception for criticism was developed by courts to include uses of copyrighted material for literary or cinematic purposes and did not include commercial critiques. Because the defendant's comparative advertisement was carried out for commercial purposes, it did not fall within the statutory exception. However, although it refused to consider the defendant's advertisement a fair use, the district court went on to deny the grant of an injunction on the ground that such an order would violate the right of free speech under the First Amendment. The court specifically, the court observed that the extension of free speech protection to commercial speech gave rise to a conflict between the Copyright Act and the First Amendment; because comparative advertising was a form of protected speech, the court had to construe the Copyright Act in a narrow way, so as to exclude its applicability in the case at bar. This case went to appeal and the Court of Appeals affirmed the decision of the District Court but disagreed with the reasoning laid down by the District Court. The Court of Appeal held that the fair use is like a “rule of reason” which is for the judges to maintain it and balance the author’s right to compensation and against the public's interest in the widest possible dissemination of ideas and information.[16] The Court of Appeals also held that the function of fair use doctrine is a means "to eliminate potential conflicts between copyright and free speech."[17] The court also held that contrary to the reasoning of the district court, the alleged tension between the Copyright Act and the First Amendment simply did not exist in this case since "the Copyright Act itself provides a safety valve - fair use - to minimize this potential tension."[18] The Court of Appeals further held that the District court has made an error in giving too much weight to the commercial motive behind the defendant's comparative advertisement, ignoring other important factors, such as the lack of any attempt by the defendant "to palm off Triangle's product as that of the Herald's." Therefore, the court of appeals held that the defendant's use of the plaintiff's magazine cover for comparative advertising purposes was a fair use. One of the important guideline laid down by the Court of Appeals in this case[19] was that the truthfulness of defendant's comparative advertisement and the growing public interest in allowing comparative advertising favors the applicability of fair use.

COMPARATIVE ADVERTISING IN U.S

In U.S comparative advertising is regulated through combination of federal, state and local laws as well as self regulatory codes of conduct, these are:  The Federal Trade Commission Act (FTC Act), Federal Dilution Act 1995, Section 43(a)[20] of the Lanham Act.[21] The Federal Trade Commission is the primary federal agency responsible for regulating public advertisements. It regulates advertising by prescribing rules under FTC Act, investigating suspected violations of the FTC Act, bringing lawsuits against companies which are conducts illegal activities. In addition other industries like Food and Drug Administration (FDA) have the authority to regulate certain types of advertising claims made to industry specific products.

The FTC Act

The FTC does not require a higher standard of proof for substantiating comparative claims because it evaluates comparative advertising in the same way as it evaluates all other advertising and therefore. As a result, advertisements that attack, discredit or otherwise criticize another product are permissible if they are truthful and not expressly or impliedly deceptive. The FTC considers an advertisement to be deceptive if:

1. It includes a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances.

2. The representation, omission or practice is likely to affect the consumer’s conduct or decision regarding a product or service.

3. The advertiser does not possess a reasonable basis, or substantiation, for believing any representations it makes are true when the representations are made.[22]

The Lanham Act

At the federal level, this purpose is furthered by the Lanham Act which seeks to protect trademark owners from unauthorized uses of their trademarks that are likely to cause consumer confusion or deception.[23] The Lanham Act,[24] passed by Congress in 1946, primarily sought to protect consumers from confusion as to the source or sponsorship of goods and services available in the market place.[25] It took several decades after the enactment of the Lanham Act for courts to begin "to fashion a comprehensive set of remedies" for comparative advertising claims.[26] In the case of Smith v. Chanel[27] the Ninth Circuit court laid down the standard of comparative advertising under the Lanham Act. In Smith v. Chanel, the defendant advertised a low priced imitation of the plaintiff's perfume "Chanel No. 5" with the slogan "We dare you to detect any difference between Chanel No. 5 and Ta'Ron's 2nd Chance." The district court entered a preliminary injunction prohibiting the defendant from making any reference to Chanel No. 5 in the advertising of "2nd Chance." The court noted that comparative advertising prevents consumers from making purchasing decisions based on irrational elements,[28] and that this public benefit would be lost if a defendant could not advertise its products by comparing them to those of its competitors. Thus, the Court of Appeals for the Ninth Circuit concluded that comparative advertising may not be prohibited under the Lanham Act as long as it is not misleading and does not create a reasonable likelihood of confusion among consumers.[29]

The Federal Dilution Act

The famous dilution theory came in to existence in January 1996 with the passage of the Federal Trademark Dilution Act into law.[30] A federal cause of action under this Act is provided  to the owners of famous trademarks against subsequent unauthorized uses that may blur their distinctiveness or injure their reputation. The first attempt to introduce a federal trademark dilution cause of action in the United States was made in 1988 as part of the Trademark Revision Act.[31]The 1988 federal dilution statute introduced a limited dilution provision which sought to modify the Lanham Act. This endeavor caused a disturbance among exponents of the media and broadcasting industry who saw it as a threat to their First Amendment right of free speech.[32] There was an amendment made to the Federal Dilution Act and which excluded from the Act the non commercial use of a mark, and its fair use in comparative commercial advertising. Traditionally, trademark dilution occurs either by blurring or tarnishment. Dilution by blurring is characterized by a diminution of the trademark's ability to bring to a consumer's mind the products with which the trademark is associated, thereby compromising its distinctiveness and selling power. Dilution by tarnishment arises when a famous trademark is associated with goods or images that injure its reputation, such as illegal drugs, pornography, or other illicit activities.[33] Another method of dilution by tarnishment is associating an owner's trademark with goods that are likely to produce negative responses in the minds of consumers, such as the use of a famous beer trademark to advertise an insecticide.[34]

In the case of Prestonettes Inc. v. Cody,[35] a French manufacturer of toilet powders and perfumes sought to enjoin the defendant from repackaging its products in a way that allegedly deceived the public as to the origin of the products. The trial court issued a decree allowing the sale of the plaintiff's repackaged products so long as the defendant put a conspicuous disclaimer on them stating that the plaintiff's products had been independently repackaged by the defendant and that there was no connection between the plaintiff's trademark and the defendant's. On appeal, the court found that, given the volatile nature of the plaintiff's products, there was a high risk of adulteration and public deception. Accordingly, it issued a preliminary injunction enjoining the defendant's use of the plaintiff's mark except for the sale of products in their original package as marketed by the plaintiff. However, the Supreme Court reversed the circuit court's decision and affirmed the trial court's holding. The Court focused on the prevention of public confusion and found that "when the mark is used in a way that does not deceive the public we see no such sanctity in the word as to prevent its being used to tell the truth." Thus, because the plaintiff could not prevent non-trademark descriptive uses of its trademark,[36] the Supreme Court upheld the trial court's decision to allow the non-confusing use of the plaintiff's trademark on the repackaged products.

In New Kids on The Block v. News America Publishing, Inc.,[37] a musical group brought suit for trademark infringement against two newspapers for publishing pictures of the group's trademark in connection with some telephone polls. Although it defined a trademark as a limited property right in a word, the court noted that an absolute restriction on the use of trademarks would deplete our language. Because it was impossible for the defendants to refer to the plaintiff's group without using their trademark, the defendants were entitled to a "nominative fair use defense."[38]

COMPARATIVE ADVERTISING IN INDIA

As discussed in the introduction part of this article that in India are regulated by the Advertising Standards Council of India which is a self regulatory body and lays down a code to be followed by the advertising industry which is not in competition with the law.[39] With respect to comparative advertising, the code lays down as follows:

1. Advertisements containing comparisons with other manufacturers or suppliers or with other products including those where a competitor is named is permissible in the interests of vigorous competition and public enlightenment, provided:

(a) It is clear what aspects of the advertiser’s product are being compared with what aspects of the competitor’s product.

(b) The subject matter of comparison is not chosen in such a way 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.

2. Advertisements shall not make unjustifiable use of the name or initials of any other firm, company or institution, nor take unfair advantage of the goodwill attached to the trade mark or symbol of another firm or its product or the goodwill acquired by its advertising campaign.

3. Advertisements shall not be similar to any other advertiser’s earlier run advertisements in general layout, copy, slogans, visual presentations, music or sound effects, so as to suggest plagiarism.[40]

The Indian Constitution

As we know that under Article 19 (1) (a)[41] of the Constitution of India right to freedom of speech and expression is protected, and many advertisement can argue the same. It is very important for us to analyze article 19 (1) (a) of the Constitution in relation to comparative advertising. As we know that freedom under this article is available for public speaking, radio, television, and press. However, the freedom of speech and expression has limitations but the same is restricted by imposing reasonable restrictions by the state under article 19 (2)[42] of the Constitution. Now the moot question is that whether the commercial speech can be protected under article 19 (1) (a) of the Constitution in the case of Tata Press Ltd. vs Mahanagar Telephone Nigam Ltd.,[43] and the Supreme Court held that “commercial speech cannot be denied the protection of Article 19(1) (a) of the Constitution merely because the same is issued by businessmen”. Court took a very wide interpretation of the Article 19(1) (a) of the Constitution Supreme Court held that 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 advertisements. The economic system in a democracy would be handicapped without there being freedom of ‘commercial speech.’ Supreme Court also stated that 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 the Supreme Court held that a party has a right to advertise its product making commendation about its quality. Advertisement being a commercial speech which is a part of the freedom of speech is guaranteed under article 19(1) (a) of the Constitution and it can also be restricted under Article 19 (2) if it fulfills its elements.

MRTP ACT 1969

The MRTP Act, 1969 was enacted to prevent monopolies and restrictive trade practices in the economy. In 1984, it was amended to add a chapter on unfair trade practices. A body was created under this act named Director General of Investigation and Registration (DGIR). The power and function of DGIR was that it will on a complaint or on its own can investigate matters related to a restrictive or unfair trade practices in India. A judicial body was also created under it named MRTPC.[44] The commission’s work is to deal with the cases which are brought by the DGIR. The Commission, on judging a practice to be an unfair trade practice, could order the offending party to cease and desist the practice. Actions which constitutes unfair trade practice is laid down in section 36 A of the Act.[45]

Trade Marks Act, 1999

Section 29 (8) of the Trade Marks Act, 1999 provides certain limitations to comparative advertising, according to which advertising infringes on a trade mark when it:

1. takes unfair advantage and is contrary to honest practices in industrial or commercial matters; or

2. is detrimental to its distinctive character; or

3. is against the reputation of the trade mark.

Section 30 (1) of the Act read as: ''Nothing in Section 29 shall be preventing the use of registered trademarks by any person with the  purposes of identifying goods or services as those of the proprietor, provided the use:

1. is in accordance with the honest practices in industrial or commercial matters, and

2. is not such as to take unfair advantage of or to be detrimental to the distinctive character or repute of the trade mark.'

In the case of Reckitt & Colman of India Ltd. v. Kiwi T.T.K. Ltd[46], Court held that a manufacturer is entitled to make a statement that his goods are the best and also make some statements for puffing his goods and the same does not give rise to a cause of action to other traders or manufacturers of similar goods as there is no disparagement or defamation to the goods of the manufacturer so doing. However, as manufacturer is not entitled to say that his competitor's goods are bad so as to puff and promote his goods and defame the goods of another. Court laid down guidelines for comparative advertising, they are:

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 my goods are better than his competitors', 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 competitors' 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.[47]

In the case of Dabur India Limited v. Emami Limited,[48] it was held that even if there be no direct reference to the product of the Plaintiff and only a reference is made to the entire class of Chayawanprash in its generic sense, even in those circumstances disparagement is possible. There is insinuation against user of chayawanprash during the summer months, in the advertisement in question, for Dabur Chayawanprash is also a Chayawanprash as against which disparagement is made. The same line of reasoning was followed in the case of Dabur India Limited Vs. Colgate Palmolive India Ltd[49], Court held that “in a suit of this nature one has to look at whether the advertisement merely puffed the product of the advertisement or the advertiser in the garb of doing the same directly or indirectly contended that the product of the other trader is inferior. It was sought to be contended that insinuations against all are permissible though the same may not be permissible against one particular individual. I do not accept the same for the simple reason that while saying all are bad it was being said all and everyone is bad and anyone belittling the description of everyone is affected thereby. Generic disparagement of a rival product without specifically identifying or pin pointing the rival product is equally objectionable. Clever advertising can indeed hit a rival product without specifically referring to it. No one can disparage a class or genre of a product within which a complaining plaintiff falls and raise a defence that the plaintiff has not been specifically identified."[50]

There was a interesting case of Reckit Benckiser (India) Limited Vs. Naga Limited and Ors.,[51] the Plaintiff had filed a Suit for permanent and mandatory injunction, being aggrieved by the Defendant's television commercial. The issue was whether the Defendant could be held to have disparaged the Plaintiff's product even though no false statements have been made by the Defendant? And it was held that if a competitor makes the consumer aware of his mistaken impression, the Plaintiff cannot be heard to complain of such action. The Learned Judge in the judgment commented,” I find it difficult, nay impossible, to hold a party liable for libel when all that has been stated by the competitor is the truth. Truth is always a complete defence against any assault or challenge regardless of whether any damage is sustained as a result of it.” This case brought a principle that if the statement used by the defendant is true in comparative advertising then the plaintiff cannot claim relief under comparative advertising.

There are several other cases which are delivered by the MRTP Commission which will make us understand the concept of comparative advertising more clearly. The MRTPC plays a major role in development of the rules against comparative advertising.

In the case of M Balasundaram vs Jyothi Laboratories Ltd.,[52] (Regaul v. Ujala), the commission explained the meaning of section 36 A of the MRTP Act. In this the facts were that  advertisement promoting Ujala liquid blue showed that two-three drops of this brand were adequate to bring striking whiteness of clothes while several spoons of other brands were required for the same effect. A lady holding a bottle of Ujala was looking down on another bottle without any label, exclaiming ‘chhi, chhi, chhi!’ in disgust. The manufacturers of Regaul, a competing brand, complained to the Commission that the advertisement was disparaging its goods. The commission held that in order to bring home a charge under clause (x) of Section 36A (1)[53] 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.  The Commission was of the view that ‘a mere claim to superiority in the quality of one’s product’ by itself is not sufficient to attract clause (x). In the advertisement, neither did the bottle carry any label nor did it have any similarity with the bottle of any other brand. The Commission, thus, was of the opinion that it could not be classified as a case of disparagement of goods.

New pepsodent v. Colgate case, In this case, Hindustan Liver 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.

Reckitt and Coleman India Ltd. vs Jyothi Laboratories Ltd.[54] (Cherry Blossom Case), In this case the principle laid down was that a case of disparagement arises only if the product in question is identifiable. Identification could be explicit or drawn from the facts and circumstances. Thus, in the advertisement of ‘Kiwi Liquid Wax Polish,’ a bottle is described as X from which liquid is shown dripping while from a bottle marked Kiwi, liquid does not drip. From the shape of the bottle marked X and from the fact that Cherry Blossom had a design registration for this shape, the bottle could be identified with Cherry Blossom and the advertisement became a case of disparagement.

Ujala vs Robin Blue Case[55] in this case Ujala whitener was advertised as insta violet concentrate, a post-wash whitener for white clothes. The advertisement disparaged ‘Neel.’ The makers of Robin Blue contended that this was a case of disparagement under Section 36 A (1)(x),[56] as their product was also ‘Neel.’ The makers of Robin Blue claimed that they were the market leaders in India with a market share of 56.4 per cent in the blue powder category. Thus, disparagement of ‘Neel’ would definitely mean disparagement of their product. However the commission differed with this view, the commission stated that simply because Robin Blue is stated to be commanding the market share to the tune of 56.4 per cent is no ground prima facie to come to the conclusion that in common parlance it is known as ‘neel.’

CONCLUSION

After going through the cases of both U.S and India we can come to a conclusion that the comparative advertising is an unethical way of promoting a products or services in business and also we have seen that there are specific provisions to regulate the comparative advertising in order to protect the right of the other. Comparative advertisement will be banned if the advertisement is not telling the truth of the other. The electronic media can play a role of major platform for many more comparative advertisements which will pave way for the growth of stronger advertisement laws because the changing globalization and commercialization needs a strong regulations and institutions to regulate comparative advertising. From time to time the rules and regulations must be amended as the Indian government did after the recommendations of the Commission set by it to know the latest changes in unfair trade practices. The existing laws in India are strong and the only need is that the balance should be maintained to protect the economy, if a investor has invested a huge amount of money in a business and advertises his product revealing the truth of the other competitor then he should be allowed to proceed which his advertisement. Only opening ways for strong economy will not fulfill the need there needs to be an appropriate law, adequate enforcement, strong infrastructure, and a quick dispute settlement mechanism would be needed to sustain competition. Fair use doctrine as applied in US should also be applied in India in order to allow persons to use the advertisement without any intention to harm the original and not to mislead the consumers.

Ankur Mishra, B.Sc LL.B (Hons.), KIIT Law School