In this article, Tanya Nayak of Kiit School of Law discusses Commercial Disparagement Laws in India.

Introduction

Commercial disparagement and comparative advertisement are an important subject matter for manufacturers of goods. The main reason arises from the fact that a consumer’s choice is flexible to be influenced by comparative advertisements towards a brand’s goodwill. It is noted that such comparative advertisements leave a negative impression over the market which results in monetary damage to the manufacturers. In India, there is no specific legislation covering the subject matter of commercial disparagement.

Meaning of commercial disparagement

1. Commercial disparagement is a civil wrong, it carries tortious liability. The tort of commercial disparagement is also known as business disparagement, it takes place when a negative statement is made against an individual’s title to his property for business or his property with the intention to discourage others from dealing with the person or his business house.
2. Statements made on the subject matter of dishonesty, unethical practices, and incompetency are capable of commercial disparagement. Mainly the objective of business disparagement is unfair competition between businesses, but it can be brought against a customer.
3. There is a thin line of difference between commercial disparagement and defamation, though they appear to be very similar. Firstly, defamation is a tort wherein an untrue statement is made against anyone which is published and causes injury to the name and reputation of the person against whom such statement is made. Whereas, commercial disparagement is exclusive for business houses, unlike defamation only business house can file a claim for commercial disparagement. Secondly, the claim for commercial disparagement is to protect the financial interest of a business house and the claim for defamation is to protect reputation in general sense.

INGREDIENTS FOR COMMERCIAL DISPARAGEMENT

For a successful claim regarding business disparagement, one must stand firm with respect to the following ingredients:

1. The statement so made against a business house is false and does not reflect any reality.
2. The statement is made with an intention to cause financial loss or damage.
3. There is an actual loss taking place due to the statement made.
4. The competitor has made the statement with the knowledge that it will cause damage to the business house or has made the statement negligently.

Case study: P&G v. Hindustan Unilever

• Parties to the case were FMCG majors Procter and Gamble (P&G) and Hindustan Unilever Limited(HUL), the product of P&G is Head and shoulder which was sold in sachets and product of HUL is clinic plus shampoo which was sold in bottles.
• The conflict arose because of their respective TV commercials with respect their products. Both the brands compared their products to one another in their TV commercials.
• In HUL’s TV commercial it compared clinic plus shampoo with head and shoulders shampoo, saying-’’ mazbooti de leading anti-dandruff shampoo se behtar’’ and teen rupaye wale anti-dandruff shampoo se baal jyada tootte hain’’.
• Upon this statement, P&G instituted a suit claiming injunction against HUL’s TV commercial.
• The Court directed HUL to suspend airing of its alleged TV commercial an ad interim order. Disappointed by court’s direction, HUL approached the advertisement standard council of India for relief, which rejected its complaint. Subsequently, two cross suits were instituted, one by HUL and other by P&G. The court directed all three suits to be decided together.
• The suits alleged five TV commercials publishing controversial statements like “ek rupaye wala shampoo dandruff nahi nikalta, ek, do, teen washes mein bhi“, “zyada dandruff hataye” or “anti-dandruff shampoo can damage your hair“, claiming to be disparaging in nature by respective plaintiffs.
• P&G contended that the presented by HUL was not maintainable as ASCI had rejected HUL’s complaint after it was directed to suspend its impugned TVC.
• The aspect of maintainability of the suit was looked into by a single judge bench at length. It was held that the power to decide whether an advertisement is of disparaging nature or not is vested with the civil courts and not ASCI, as it was not a dispute resolution body to compel removal of advertisements, grant interim relief or award damages like civil courts.
• ASCI powers are only restricted to formulating certain rules for governing comparative advertisements, such as the Code of Self-Regulation in Advertising. At best it could recommend removal of any advertisement in adverse cases or forward the matter to an authorized officer under the Cable Television Network Act who can prohibit the advertisement from being broadcasted.
• Thus, the court rejected P&G’s contention on maintainability due to the difference in reliefs granted by ASCI and civil courts, and the common law recourse to be taken under Section 9 of Civil Procedure Code in absence of a codified law on disparagement.
• Then the court dealt with the main issue in the matter, i.e., disparagement of goods of the plaintiffs in each suit. Both parties had contended disparagement against each other, whereas in defense, stated that their commercials were informative in nature, to educate the public.
• HUL relied on the argument that its TVCs were truthful based on laboratory test results displayed in its TVCs. P&G alleged that the said test results are false in nature. It was further contended by HUL that comparison of head and shoulder to clinic plus is similar to comparing apples to mangoes.
• The court after listening to both the parties, based its decision on Marico Ltd. v. Adani Wilmar Ltd.[1] case, which was headed by the same Bench as in this case.
• The court concluded that disparagement is a similar face of defamation law. It also held that puffing in the comparative advertisement is permitted subject to certain conditions as held in cases that were referred in the Marico’s case.
• The case of De Beers Abrasive v. International General Electric Co.[2], was referred and the judgment emphasized on false advertising causing injury to a rival’s trade, to uphold that a trader can puff up or declare his own goods to be the best; he can also puff up to claim that his goods are better than his rival’s, but such puffing should not denigrate, discredit or disgrace the products of his rival[3].
• The court looked into the following factors as laid down in Pepsico. for determining disparagement:

1. The intention and message should be conveyed through the storyline.
2. The effect of the advertisement should be either promote the trader’s product or it has to disparage other competitor’s product.
3. The manner of advertising that whether the comparison made is truthful or falsely disparaging rival’s product. Truthful disparagement is permitted whereas, untruthful disparagement is not.

• The Court observed that commercial disparagement comes under the purview of defamation law, therefore reputation is not only restricted to human beings but also to products. It becomes a matter of right to protection of reputation.
• It reasoned that only when the words or statements are authoritative and reliable in nature or published by a non-trade rival, other than as mere puffing or sales talk, then the opinion of an ordinary man/consumer can be altered.
• The court also to stated that ordinary public does not go for the word by word articulation of the advertisement whereas, the public expects some degree of exaggeration in advertisements and it has to be tested whether a reasonable man is taking such words of the advertisement seriously, or not. Only then could a statement be called authoritative or reliable.
• The court further observed that claims made in the comparative advertisements are considered to be less effective on the ordinary consumer than in a situation where the same information was offered in the news. So, HUL’s reliance on its laboratory test results was held to be not authoritative or reliable in nature and couldn’t potentially alter an ordinary consumers opinion.
• The court held that the impugned statements made in the alleged TV commercials were not disparaging in nature as they fell within the permissible boundaries of puffing up in the comparative advertisement. Such advertisements, in the opinion of the court, should be encouraged “in the interest of vigorous competition and public enlightenment”. Thus, the court rejected the contentions of the plaintiffs in each suit.
• The ad interim injunction order against HUL was vacated. The court disposed of the matter before trial stage basing the judgment upon its own experience and understanding of human nature towards advertisements.
• At present, the matter is lying on appeal before the Division Bench of the High Court filed by P&G as well as HUL.

Reckitt & Colman of India Pvt V. Ramachandran and Anr[5]

This case presented 5 guidelines which are considered to be the law regarding disparagement in India. The fundamental objective behind comparative advertisement is that a commercial or advertisement of one business house can praise its own product and even compare its qualities to other products but it cannot demean the reputation of another product.

Summary of those principles are

1. A business house can praise its own product by using various fancy statements, even if they are untrue.
2. He can also say that his goods are better than his competitors’, even though such statement is untrue.
3. With an intention to show that one’s product is the best in the world and even better than other products in the market, he can even compare its product with that of products of other business houses.
4. He , however, cannot, while saying that his goods are better than his competitors’ say that his competitors’ goods are bad. If he says so, he defames his competitors and their goods, which is not permissible.

Commercial disparagement and puffing

• Commercial disparagement is a wider concept, to which puffing a new approach. Puffing is an exaggeration of something generally, the word ‘’puffing’’ is attached to products and business houses.
• When a salesperson exaggerates about its product or when an advertisement highlights too much about its product regarding the quality, discount or sale those actions amount to puffing.
• In puffing, there are mostly the opinions presented and not promises which are legally binding. The impact of puffing is such that a normal consumer will not believe it. Puffing is superlative claims with regards to their products and goods.
• The Madras high court, in the case of Colgate Palmolive v. Anchor, has distinguished between subjective and objective claim and said that all puffing is an actionable wrong.
• Now the question before the court was that whether the statement used by Anchor i.e (the anchor is the ‘’only and ‘’first’’ toothpaste to offer all round dental protection) is amounting to puffing or disparagement to Colgate? The Court said that this statement was not a puff, in fact, it was a misleading objective claim.
• Further, the court stated that any puff will amount to unfair trade practices under the consumer protection Act and be allowing business houses to puff about their respective products is not in accordance with public interest.
• Hence, it was observed by the court that all puffing was illegal.
• There is a conflict between the decisions delivered by Delhi high court and Madras high court with regards to puffery of products.

Legal consequences of disparagement and exceptions to it

Legal consequences of disparagement is a civil suit. Person suffering from disparagement can claim for injunction or damages.

Exception

1. Truth becomes an absolute defence for commercial disparagement.
2. The statement so made was an opinion and therefore will not amount to any action.
3. The defendant has a conditional or absolute privilege.

Conclusion

The position of law with regards to commercial disparagement in India is absolutely in a very underdeveloped state. As the business world is in a great progress, in accordance to that we are in a greater need for specific laws and legislation.

References

[1] 2013 (199) DLT 663

[2] (1975) FSR 323

[3] Pepsi Co., Inc. v. Hindustan Coca-Cola Ltd.

[4] (2009) 156 DLT 330

[5] 1999 PTC (19) 741.