Image source - https://bit.ly/3aGmsc7

This article has been written by Suvigya Buch, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. It has been edited by Prashant Baviskar (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).

Introduction

Advertisements are defined by The Advertising Standards Council of India (“ASCI”) as a form of communication that has to be paid for and is directed at the general public or a specific subset thereof, with the intent of influencing the views or behavior of those to whom it is directed under The Code for Self-Regulation of Advertising Content in India. Further, the ASCI also states that this description includes any message that the general public would consider as advertising under normal circumstances, even though it is distributed free of any cost for any purpose. Furthermore, they also define a product as anything that forms the subject of an advertisement and includes goods, services, and facilities.

If such puffery goes too far and depicts a recognizable rival product in a negative light, it leads to the denigration of the other product. Both active, as well as implied denigration, have been prohibited by the courts and therefore it is critical to develop a “broadly uniform standard to govern comparative advertising practices while keeping the interests of the parties involved in mind. 

Comparative Advertisement and Product Disparagement in India

Because of the growing importance of consumer protection jurisprudence in recent times, the customer is just as much a stakeholder in any regulatory scheme as the seller or competitor.” Advertising is guaranteed protection under the law as it is recognised as commercial speech. Resultantly, a manufacturer or seller has the right to declare his products to be the best on the planet, even though the declaration may be seen as false because everyone is well within their rights to believe that the product created by them is the best in the world. In trying to advertise their products there is often a temptation for the seller to compare the product with its competitors’ products to prove the advantages of using the seller’s product. One may be tempted to equate the advantages of his products to those of others to declare them to be the best in the world. 

Is it, however, permissible to argue that his products are superior to those of his rivals when claiming that the competitors’ goods are inferior? Is this considered slandering or disparaging his rivals’ products? What happens in cases where the seller’s products that are being advertised are better than that of the competitor? The aim of this paper, therefore, is to examine the legal complexities surrounding the principle of comparative advertising as it relates to product disparagement and trademark infringement.

Pushing The Boundaries Of Advertising In India

Provisions for comparative advertising have been included in Section 29(8) and Section 30(1) of the Trade Marks Act, 1999 where Section 29(8) defines cases wherein advertisements in which trademarks have been used may amount to trademark infringement. It states that an act of infringement takes place when the advertisements are not in compliance with the ethical standards or are harmful to another brand’s distinguishing characteristics and reputation. Additionally, under Section 30(1) of the Trade Marks Act, the practice of comparative advertising is exempted from the definition of infringement as under Section 29(8) of the Trade Marks Act as it states that if an advertisement follows honest practices and consequently does not damage or harm the unique character and its reputation, it is acceptable and therefore does not qualify as an infringement. As a result, the only grounds for infringement are deceiving practices or the use of a trademark in a way that harms the mark’s integrity or distinguishing property. However, the word “honest practice” has not been established anywhere.

Often, the interpretation of the phrases ‘is not such as to be harmful to the trademark’s repute’ and ‘in compliance with honest standards’ tend to be confused for each other due to their entwined nature. If an analogy harms the image of the trademark owner it is to be avoided at all costs. Moreover, determining a specific commercial’s honesty is a question with an extremely wide scope and must be answered from the viewpoint of a reasonable consumer. Hence, if a reasonable consumer is likely to have overlooked hyperbolic and exaggerated claims, the advertisement may be touted as honest.

Honesty in the conduct of trade is largely to be measured with what is fair for the target audience of the advertised products or services and therefore it is the owner of the trademark and not the user of the trademark upon whom lies the burden of proving that the use of his/her trademark was not only unauthorized but also dishonest. It is widely agreed upon that it is trademark infringement as per Section 29(8)(a) and (c) of the Trade Marks Act if anyone gains an undue benefit by using a registered trademark in their commercial, thereby harming the mark’s integrity.

In the case of Hamdard Dawakhana v. Union of India, the court held that even though commercials were viewed as a practice of free speech, they were not considered to qualify as free speech as their intention has always been that of commercial gain. The Supreme Court in Tata Press v. Mahanagar Telephone Nigam Ltd., reversed the above mentioned position and ruled that commercials benefit both manufacturers as well as the free flow of knowledge in a free market economy, which helps to achieve the larger objective of public awareness. As a result of this decision, commercials were deemed to be “commercial speech” under Article 19(1)(a) of the Constitution of India (“the Constitution”).

Despite having been given protection under the free speech clause of the Constitution, commercials cannot be granted blanket protection solely based on their ability to generate public awareness. It is extremely important to double-check that the commercials do not mislead the viewers or vilify a competitor’s product. Originally, Section 36A of The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP) regulated false or deceptive advertisements as it dealt with “unfair trade practices”. Section 66 of the Competition Act 2002, however, revoked the MRTP Act. However, since the concept of “unfair trading practices” was adopted pari materia under Section 2(1)(r) of the Consumer Protection Act of 1986, traders were not left without recourse. The Consumer Protection Act of 1986’s scope was confined to offering redress only to the consumers and not the service providers, distributors, and retailers.

Due to the lack of a proper legislative instrument for advertisers to redress their grievances, the ASCI was created. The ASCI principles guaranteed that comparative advertising is handled fairly, taking into account the needs of all parties concerned. Furthermore, these principles guaranteed the disparity was not set up in such a way that gave the producers an unfair advantage over the competition’s product. Additionally, it guaranteed that the comparisons are correct and based on evidence so that future customers are not misled. 

Despite the fact that ASCI established appropriate and equitable rules, it lacked successful enforcement and ran into issues when non-members’ acts resulted in the violation. Sections 29(8) and 30(1) of the Trade Marks Act further address the issues surrounding such infringements. Although Section 29(8) of the Trade Marks Act deals with trademark infringement by commercials, Section 30(1) makes an exception for the use of marks in industrial and commercial matters where they are done per “honest practices”. The Trade Marks Act protects the rights of other producers whose brands are at risk of being tarnished as a result of unfair competition in cases where a producer uses comparative advertising to promote his or her products or services.

While the Trade Marks Act does not explicitly define disparagement, dilutions, and honest practices, all of which are essentials, they can be traced back through various court decisions over time. For the very first time, the court addressed puffery as an element of comparative advertising in Reckitt & Colman India Ltd. v. M.P. Ramchandram & Anr. In this case, the plaintiff was ‘Robin Blue’ and the defendant was ‘Ujala’, both of them being detergent brands. The plaintiff claimed that the defendant had purposefully used a bottle that looked similar to the plaintiff’s product in his commercial. Furthermore, in the commercial, the defendant also claimed that the plaintiff’s product was inefficient and uneconomical. In this case, the court cited the De Beers case to hold that a producer can declare his products to be the best, or even better than those of his rivals, even if the claim is false. And yet, even though this is valid, he cannot say that his competitor’s products are poor when making such a distinction. He/She is not allowed to make any statements that could be construed as demeaning his competitor’s products.

In the case of Pepsico. v. Hindustan Coca Cola Ltd. the definition and meaning of the word disparagement were dealt with. Patent infringement was claimed by Pepsico. because, in its commercial, Coca-Cola had demeaned Pepsi’s products by naming Pepsi “Bachon Wala Drink.” Coca-Cola also used a bottle with the same color scheme as Pepsi and the word “Pappi” written on it. When considering the definition of disparagement, the court determined that advertising is defamatory if it dishonours, undervalues, or discredits a competitor’s product. The court held that “In the electronic media the disparaging message is conveyed to the viewer by repeatedly, showing the commercial every day thereby ensuring that the viewers get clear message as the said commercial leaves an indelible impression in their mind and so to decide the question of disparagement, the following factors have to be kept in mind: 

(i) intent of the commercial; 

(ii) manner of the commercial; 

(iii) storyline of the commercial and the message sought to be conveyed by the commercial. 

Out of the above, ‘manner of the commercial’, is very important. If the manner is ridiculing or condemning the product of the competitor then it amounts to disparaging but if the manner is only to show one’s product better or best without derogating other’s product then that is not actionable.”

In Havells vs. Amritanshu Khaitan the disputed commercial concerned Havells and Eveready LED bulbs. The problem was whether, for an advertisement, to be honest, the contrast between the producer’s and competitor’s products had to include all of the features. It was held by the Delhi High Court that an advertiser may highlight only a distinctive property of their product that distinguishes it from that of a competitor as long as the distinction is accurate. Disparagement would not occur if all characteristics of a product are not compared at the same time.

Additionally, Advertisements are a form of commercial speech protected by Article 19(1)(a) of the Constitution of India, according to Indian courts. Moreover, they can only be limited to by-laws passed under Article 19(2) of the Indian Constitution. In the landmark case of Horlicks Ltd. v. Heinz India Private Limited it was held that “In a democratic country, free flow of commercial knowledge is indispensable, and the public has a right to receive commercial expression.”

Infringement can occur when a trademark is used in advertising, according to Section 29(8) of the Trade Marks Act. Any advertisement that is not in line with honest practices; or is harmful to the unique identity; or the integrity of the mark is an act constituting infringement, according to Section 29(8) of the Trade Marks Act. Any commercial that follows honest practices and is not harmful to the unique identity or notoriety of the mark is considered good in law and does not constitute infringement under Section 30(1) of the Trade Marks Act. As a result, Section 30(1) of the Trade Marks Act exempts comparative advertisements from the definition of infringement under Section 29 of the Trade Marks Act.

Conclusion

When advertising is done right, it has the power to shift people’s perceptions of a product or service. Even so, given the fierce competition in the industry, having an advantage over the competition becomes critical. As a result of globalization, businesses today have a presence in many jurisdictions. Hence, “If done honestly and objectively, there is no better way to achieve this than comparative advertising.” It is therefore all the more important to use a competitor’s trademark in compliance with industry standards and honestly. Advertisers must be careful not to exaggerate the value of their products or services without providing facts to back up their arguments.

On analysing the legal framework, the judicial journey of several important cases, and legislations regulating comparative advertising in India, it is evident that as a result of the lack of a dedicated legislative framework to regulate the practice, a largely haphazard framework has been adopted, with various facets of the practice based on contradictory standards. The twin components of simplistic puffery and denigration must be discussed when bearing in mind the essence of such portrayals to arrive at a uniform norm or degree of acceptance. It’s worth noting that, while the degree of permissibility for puffery has varied, the stance on denigration has remained fairly constant. Additionally, considering the needs of all interested parties, including suppliers, advertisers, competitors, and customers is also important. The prevailing view, which had been followed by our judiciary for nearly ten years, failed to satisfy the expectations of consumer justice.  “The self-regulatory process as has been established by the advertising industry has been relegated to a purely recommendatory function, with it having no enforcement mechanism to ensure compliance with its directives.”

Recommendations 

Enabling the advertising industry to propose a broad framework for regulation, while guaranteeing that the interests of both competitors and consumers are protected, may be one way to develop a more robust system of regulatory oversight. This can be accomplished by following the model that has arisen in the UK, with the advertising body’s standards being legally enforceable. Universal standards for both simplistic puffery and denigration, while keeping consumer justice and fair competition in mind can be established through the enforcement of such norms. 

Competitive advertising not only increases awareness about products by increasing interest but also ensures high productivity levels in the industry. It also aids customers in making well-informed decisions. However, it is not always the case that what customers are told is accurate. It can be inaccurate, dishonest, and fraudulent. Advertising is, without a doubt, commercial speech covered by 19(1)(a) of the Constitution of India, however, it cannot be left unregulated.

A legislative advertisement regime that is backed by the government would prove to be highly beneficial in the interest of the customers. For a long time, ASCI has served as a self-regulatory body, but it has yet to establish a compliance mechanism with the requisite teeth for practical repercussions. A producer who has had their product disparaged has no legal standing to seek redress under the current law. Hence, notifying a consumer organization or representing the case before the state or the central government is the only recourse. 

Comparative advertising is advantageous in the interest of consumerism, but it must be objective and avoid disparaging competitors’ products. The competition that is reasonable and healthy is a sign of a thriving economy, and practices that foster competition should be encouraged. Establishing and enforcing specific and strict guidelines by a central authority with a strong compliance mechanism is essential as it is only after doing so that a balance between consumer interests and trademark owners’ interests is preserved.

Therefore, it can be established that even though comparative advertising is protected under Article 19(1)(a) of the Constitution as an expression of free speech, it should not be left unregulated to prevent misuse and disparage trademarks and products of competitors.

References

  • The Code for Self-Regulation of Advertising Content in India, ascionline, (2018) https://www.ascionline.org/images/pdf/code_book.pdf 
  • The Trade Marks Act, 1999, No. 47, Acts of Parliament, 1999 (India).
  • Uphar Shukla, Comparative Advertising and Product Disparagement vis-à-vis Trademark Law, 11 JIPR 409 (2006).
  • The Constitution of India.
  • Akhileshwar Pathak, Liberalisation and Law on Comparative Advertising in India, IIM AHMEDABAD (2004), https://ideas.repec.org/p/iim/iimawp/wp01792.html
  • Péter Iskolczi-Bodnár, Definition of Comparative Advertising, European Integration Studies, 25, Miskolc Vol. 3 (2004).
  • Jeerome G. Lee, Comparative Advertising, Commercial Disparagement and False Advertising, 71 Trademark Rep. 620 (1981).
  • Merriam-Webster‘s Collegiate Dictionary 542 (Merriam Webster, 11th ed. 2009).

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

LEAVE A REPLY

Please enter your comment!
Please enter your name here