Deepti Verma & Harsha | Dr. Ram ManoharLohiya National Law University, Lucknow | 9th November 2019
INTRODUCTION
Advertisement plays a pivotal role in influencing consumers and stimulating the sale of the product. Globalization and Liberalization have increased the competition so much that every company wants to advertise its product to survive and remain in the race of competition. Everyday multiple players in the market come up with innovative tactics to show their product as superior to others and make every possible effort to come up with one of the best ways to disseminate information to its consumers. It is human psychology that consumers are attracted towards the more advertised product so each company advertises its product in the best possible way to boost the sale of its product in the market.
Advertising where products of one trader is compared with products of other trader is called comparative advertising. The crux of comparative advertising is well defined in the old slogan “Anything his can do, mine can do better”. According to Jack Bowen, President of Benton & Bowels, “comparative advertising positions a product within a specific category, so that consumers can relate to that product or category”[1]. It increases consumer’s knowledge and awareness about the nature and quality of the whole range of products that are compared promotes competition[2] and helps consumers in making an informed decision. Comparative advertising generally consists of two components, Puffery and Denigration. Puffing is exaggerated advertising, blustering and boasting, on which no reasonable buyer would rely and is not actionable. It may also consist of a general claim of superiority over comparable goods that is so vague that it will be understood as merely the seller’s expression of opinion. Even if the advertisement is puffed up with malice against the competitor, it doesn’t give rise to any actionable claim. On the other hand, if a tradesman says his competitor’s product is inferior to his product, it amounts to denigration. He lends himself in trouble as defaming competitor’s goods is not permissible under law.
Part II of the paper highlights the existing statutory and non-statutory provisions dealing with comparative advertising. Part III examines the constitutional perspective towards the same. Part IV and V deal with the judicial aspect i.e. the stand taken by the judiciary during the initial phase of liberalization and shift in its perspective with the passage of time. Part VI concludes the paper emphasizing the lacunae in the existing legal framework and suggests remedial measures that are needed to be implemented.
LEGAL FRAMEWORK OF COMPARATIVE ADVERTISING:
Post liberalization the Indian economy underwent a significant change since it stepped up towards opening up of markets from a state-controlled economy which resulted in the advent of a wider range of products coming in the market that led to cut-throat competition among companies. With the increasing competition, the companies started to show their products best in the eyes of consumers in comparison with others. Such behavior led to the dissemination of untruthful information to the consumers. To regulate such comparative advertising, a chapter on ‘Unfair Trade Practices’ was introduced in the MRTP Act in 1984, just a few years before liberalization.
Monopolies and Restrictive Trade Practices (MRTP) Act was enacted in 1969 to “ensure that the operation of the economic system does not result in the concentration of economic power to the common detriment and to prohibit such monopolistic and restrictive trade practices as are prejudicial to the public interest.”[3] As the country stepped up towards liberalization, the government made some significant changes in the act to make it conducive to the changing state of affairs. One of such amendment was the addition of Sec 36 A defining unfair trade practices in the comparative advertisement to protect consumers from untruthful and misleading claims.[4] Unfair trade practice means trade practice of making any statement which falsely represents that goods and services are of particular standard and gives public assurance of efficacy and usefulness of the product that is not based on the adequate test. But it couldn’t survive for long and was repealed due to its inefficiency to deal with upcoming cases and to meet the need for modern competition problems.
MRTP Act was replaced with the Competition Act, 2002 with the intent to ensure efficient allocation of economic resources in the free competitive market. Later provisions of unfair trade practices were imported in the Consumer Protection Act, 1986 from MRTP Act. Though it took into consideration the interest of consumers but couldn’t provide much relief to sellers, manufacturers and service providers.[5]
When India became a member state to the TRIPS agreement, the need for an appropriate law was felt that could give protection to one’s trademark at the national and international levels. So the Trademark Act was passed in 2000 to increase the globalization of trade, promote investment, provide better protection to trademarks and to prevent fraudulent use of the mark.[6] Though TM Act doesn’t use the word ‘comparative advertising’ specifically, it has a provision dealing with it under Sec 30(1). Comparative advertising is permissible under the act until it is in accordance with ‘Honest Practices’ and is not detrimental to the repute of other’s trademark. The word ‘Honest Practices’ has not been defined by the act but the judiciary has interpreted the term in several cases.[7]
The European court of justice also interpreted the term ‘Honest Practice’ as “expressing a duty to act fairly in relation to the legitimate interests of the trademark owner, and the aim as seeking to reconcile the fundamental interests of a trademark protection with those of free movement of goods and freedom to provide service in the common market.”[8] To prove an advertisement as dishonest, one needs to establish that advertisement is untruthful and misleading to consumers. Despite the Trademark Act, the need for a uniform integrated legislation was felt in the market industry to enhance public confidence in advertisement and to ensure honesty and truthfulness in representations. Thus, a non-statutory body, Advertising Standard Council of India (ASCI), was adopted in 1986. ASCI is a self-imposed regulation in the advertising industry consisting of the Board of governors and Consumer Complaints Council. Chapter IV of ASCI deals with comparative advertising and states that a manufacturer can compare his product with others even by stating the name of his competitor’s product provided:[9]
A. It is clear what aspects of the advertiser’s product are being compared with what aspect 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 that 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. “Honest practice is satisfied when one cannot decipher a commercial relation between the registered proprietor of trademark and other person business.” The advertisement doesn’t unfairly denigrate, attack or discredit other products, advertisers or advertisements directly or by implication.
These principles were designed to protect consumers from being misled or deceived by the advertising tactics of manufacturers. They also prescribe limit for puffery as to what extent a product can be puffed up and fall in the category of denigration. But due to a lack of enforcement mechanism to implement the above principles, its rules remain only recommendatory in nature.
CONSTITUTION OF INDIA AND COMPARATIVE ADVERTISEMENT
Article 19(1)(a) of the constitution of India explicitly protects freedom of speech and expression. Advertising is also a form of speech that is used to disseminate information to persuade the consumer to buy a particular product. Initially, advertising was not included within the purview of Article 19(1)(a) of the Indian constitution. Hamdard Dawakhana v. Union of India[10] court stated that although advertisements constituted a form of speech, they were not constitutive of the concept of “free speech” as they were guided by the object of commercial gain in order to promote trade and commerce. “The advertisements in the instant case related to commerce or trade and not to propagating of ideas; and advertising of prohibited drugs or commodities of which the sale is not in the interest of the general public cannot be spoken within the meaning of freedom of speech and would not fall within Art. 19(1)(a).”
Subsequently in the case of Tata Press Ltd. vs. Mahanagar Telephone Nigam Ltd[11] the Hon’ble 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”. It further observed that advertisement is a mode of disseminating information to consumers and gives substantial contribution to print and electronic media organization.
Hence, we can infer that commercial speech comes under the purview of Article 19(1)(a) of the Indian Constitution and advertisement being a Commercial speech is protected under the same and certain restrictions has also been imposed by Article 19(2) of the Indian Constitution. Commercial Speech which is untruthful, unfair, misleading, deceptive can be regulated or prohibited by the State under Article 19(2).
JUDICIAL PERSPECTIVE
With the liberalization of the economy numerous cases were filed in the court regarding disparagement by competitors. Initially courts adopted very limited approach showing indifferent attitude towards consumers. It inclined to enhance the competition in the market by allowing companies to puff up their claims without any substantial proof to support the same. The first issue regarding comparative advertising came before the court in 1996 in Reckitt & Colman of India Ltd. v. M.P. Ramchandran & Anr.[12] In this case plaintiff and defendant were engaged in the same business of manufacturing clothing detergent brand. An advertisement was aired on TV in which defendant compared ‘Ujala’ with a product similar to ‘Robin Blue’ with similar shape and size. Advertisement stated ‘Ujala’ as cheaper and effective as compared to ‘Robin Blue’. Court held the advertisement as disparagement of plaintiff’s product and laid down five principles to state the law on the subject:
1. A manufacturer can claim his goods to be best in the world, even though such claim is false.
2. He can assert that his goods are better than his competitor’s despite such statement being untrue.
3. To show his goods better he can even compare his goods with his competitors.
4. While making comparison, he cannot criticize the goods of his competitor. To say otherwise defaming competitor’s goods are not permissible.
5. In case of defamation if an action for recovery of damages lies, then the court is also competent to grant an order of injunction to restraint repetition of such defamation.
Here the court drew borderline as to what extent advertiser can boast his product and if he goes beyond that it comes in the domain of denigration which amounts to disparagement of competitor’s product. The remarkable part of the holding was liberal attitude of the court to enhance the competition among traders. It gave very wide interpretation of puffery without taking into consideration the interest of consumers.
The position on Puffery was reconsidered in the case of Glaxo Smith Klien Consumer Health Care Limited v. Heinz India Private Limited and Ors[13]. Herein, plaintiff and defendant were manufacturers of nutritional drink ‘Horlicks’ and ‘Complan’ respectively. An advertisement was broadcasted in which defendant claimed his product has ‘extra growing power’ which enables kids to grow faster as compared to other drinks. Plaintiff argued that defendant was misleading consumers as the claim was made in untruthful manner without any proof to support the same as result of which plaintiff is facing a huge economic loss. Here also court didn’t adopt any different approach than the previous case. Adhering to the Ramchandran case[14], court held that advertiser can puff his claims in any manner he wants until it slanders his competitor’s product. Again, in Godrej Sara Lee case[15] court observed that defendant can highlight positive features of his product irrespective of the veracity of such claims. As long as he is not making any negative claims against the product of his competitor, no possible objections can be raised.
From M.P. Ramchandran[16] to Godrej Sara Lee case [17] the position remained the same as court continued to make wide interpretation of term Puffery and failed to take into consideration the interest of consumers. A significant departure was made in 2008 by Madras High Court in the case of Colgate Palmolive (India) Limited v Anchor Health and Beauty Care Private Limited[18] because first time court took into consideration the interest of consumers. Herein, plaintiff and defendant were dealing in the same line of business and were manufacturers of toothpaste under trademark ‘colgate’ and ‘Anchor’ respectively. An advertisement was aired in which defendant claimed his product ‘Anchor’ is the ‘only’ one to contain all three ingredient i.e. Calcium, Fluoride and Triclosan. Moreover he also stated that his toothpaste is ‘first’ to provide all round protection. Plaintiff objected to the assertion of the defendant as he made false statements because plaintiff’s product also contains all these ingredients and gives overall protection. He argued that use of the words “ONLY” and “FIRST” goes beyond the tolerable limits of puffery resulting into disparagement of his product.
Court held that use of the words ‘first’ and ‘only’ are enough to mislead a prudent consumer to think that Anchor is the only product containing all these qualities. Along with this it observed that defendant misrepresented the consumers because he didn’t come up with any scientific basis to prove his claim. Though court didn’t call it a case of disparagement because defendant didn’t slander his competitor’s product actively but it surely made it a case falling under unfair trade practices.
The case marks an important shift in the reasoning of the court because it had never taken into account the consumer’s interest previously rather focused on the protection of competitor’s interest. By this judgment court not only recognized consumer a significant stakeholder in the market but also protected him from getting misled by advertising companies.
SHIFT IN PARADIGM: SUSTANTIAL PROOF REQUIRED FOR PUFFERY
“A manufacturer can claim his goods to be best in the world, even though such claim is false”- it was one of the principles laid down by the court in Ramchandran case[19]. A series of cases adhered to this principle interpreting term puffery in a wider sense. However with the passage of time judicial perspective began to change and consumer was recognized as a significant stakeholder in the market. Later courts began to ensure that consumer didn’t get flustered by misleading claims but still position remained same regarding wider interpretation of puffery. The consistent view was taken by the courts till 2010, except Colgate Case[20], was that advertiser while comparing his product with his competitor, can state that his product is better than his competitor even when such claim is false provided it doesn’t disparage the competitor’s product.
A significant departure from this pattern was made by Delhi High Court in the case of Dabur India Limited v M/S Colortek Megalaya Private Limited[21]. Here plaintiff and defendant were manufacturers of mosquito repellant cream, Odomos naturals and Good Knight naturals respectively. Defendant claimed in an advertisement that his mosquito repellant cream consists of Tulsi, Lavender and Milk Protein that protect skin from rashes, allergy and stickiness unlike other creams. Plaintiff argued that the advertisement disparages his product as the claim seems to convey the message that his cream causes allergies and rashes. However court held that the advertiser didn’t cause any disparagement to plaintiff’s product. It merely highlighted its positive aspect without suggesting anything negative to his rival product. It further observed that puffed up claims are allowed considering the fact that they don’t go beyond the permissible assertion having reasonable factual basis. No one can say that his goods are best in the world without any substantial proof to support the same. The case marks an important shift in the reasoning of the court because merely claiming a product better than others is not enough, the assertion so made should be backed by substantial proof. Now Consumer’s interest was playing a dominant role in influencing the court’s decision.
Here court also referred to the case of Dabur India Ltd. v Wipro Limited, Banglore[22] where in High Court observed that “it is one thing to say that the defendant’s product is better than that of the plaintiff and it is another thing to say that the plaintiff’s product is inferior to that of the defendant.” Therefore advertiser should be careful enough not to denigrate its competitor’s product.
This case was recently followed in Hindustan Unilever Limited, Mumbai v Gujarat Co-operative Milk Marketing Federation Limited, Mumbai and others.[23] Here plaintiff was the manufacturer of frozen desserts and ice creams under the mark “KWALITY WALL’S” on the other hand defendant was a co-operative society of milk producers in Gujarat and was also engaged in production of ice cream under mark “AMUL”. Two advertisements were broadcasted where defendant claimed “use real milk Amul ice cream and not frozen desserts which has vanaspati oil”. It also used the tag line “Amul is real milk, Real ice cream”. Plaintiff contended that defendant had made a false claim as all frozen desserts don’t contain vanaspati oil and due to such claims plaintiff is facing a huge economic loss.
Court held that defendant has abused the rights guaranteed under Art 19(1)(a) by maligning, belittling and denigrating the product of its competitor. This is not even the case of comparative advertising because defendant has compared two entirely different features i.e. milk is compared with vanaspati oil and it shows the intention of defendant to denigrate the product of plaintiff who is market leader of that product. Here court also referred the M/S Colortek Megalaya[24] case holding defendant guilty of disparaging its competitor’s product by making untrue statements as all frozen desserts are not necessarily consist of vanaspati oil.
If we analyze the precedents set by judiciary, the legal position regarding comparative advertising seems to be well settled. Now courts have limited the ambit of puffery, a clear demarcation has been made between puffery and denigration and consumers have also been recognized as significant stakeholders in the market. From Ramchandran[25] to Hindustan Unilever Limited case[26], judiciary has played imperative role in molding legal framework of comparative advertising in a positive manner.
CONCLUSION
In this growing age of globalization and liberalization where there are plethora of products to choose from, advertising if done effectively can be the most effective way to help consumers to decide which product or service is best suited for them. Comparative advertising is not only beneficial to the manufacturers of the product but also beneficial for the consumers as in this process it educates the consumers and helps them in taking an informed decision as to which product is better amongst all the products in the market. The relevant question arises here is whether the so called “informed” decision of the consumer can be considered informed when traders are allowed to puffup their claims without exposing the demerits of other products? If yes, then it wouldn’t be wrong to say that consumers are misled by market players by making superlative claims. If not, then the purpose of comparative advertising to educate consumers gets defeated.
If we analyze the legal position of comparative advertising in U.K., it seems very much similar to India but there is a crucial difference between the protectionist measures of the two countries. U.K. allows its advertisers to show their competitor’s product as inferior provided such assertion is backed by reasonable and valid claims. It helps consumers to make an objective comparison between the products and take an informed decision. However, in India manufacturers are allowed to merely puff up their claims rather than showing negative aspects of other products. Let’s say if two companies are claiming their products best in the world and only positive aspects of the products are shown in the advertisement. Now it’s beyond ones understanding how it is going to help consumers to take an informed decision. Though such provision is favorable to the manufacturer but is equally detrimental to consumer’s interest.
Thus,
it becomes imperative to find a balance between interest of manufacturers and consumers
so that latter doesn’t become prey to their “ill-informed” advertising. It is
recommended that ambit of comparative advertising should be extended a bit
further and manufacturers should be allowed to highlight negative aspect of
their competitor’s products.
[1] Tom Bradshaw, Comparative ads: what’s their status now ?, 74 TELEVISION/RADIO AGE (1974).
[2] WR Cornish & D Llewelyn, INTELLECTUAL PROPERTY: PATENTS, COPYRIGHT, TRADE MARKS AND ALLIED RIGHTS 741 (6 ed. Sweet & Maxwell Limitation 2007).
[3] K. Srinivasan, competition for the MRTP act, THE HINDU (Nov. 30, 2018, 02:30 PM), https://www.thehindubusinessline.com/2000/07/20/stories/122001mr.htm.
[4] The Monopolies and Restrictive Trade Practices Act 1969 Sec 36 A (vi).
[5] As seen in Colgate Palmolive (Indian) Ltd. v. Anchor Health and Beauty Care Private Ltd., 2009 (40) PTC 653.
[6] Trademark, OFFICE OF THE REGISTRAR OF TRADE MARKS (Nov. 30, 2018, 04:00 PM), http://www.ipindia.nic.in/about-us-tm.htm.
[7] See Hawkins Cooker Ltd v Murgan Enterprises, 2012 Indlaw DEL 4344. “Honest practice is satisfied when one cannot decipher a commercial relation between registered proprietor of trademark and other person business.”
[8] See C-2/00 Michel Holterhoff v Ulrich Freieslelen, September 20, 2001.
[9] The Code for Self-Regulation of Advertising content in India (Dec. 2, 2018, 08:00 PM), https://www.ascionline.org/images/pdf/code_book.pdf.
[10] Hamdard Dawakhana v. Union of India, AIR1965 SC 1167.
[11] Tata Press Ltd. v. Mahanagar Telephone Nigam Ltd, AIR(199 5) 5 SCC 139.
[12] Reckitt & Colman of India Ltd. v. M.P. Ramchandran&Anr, 1999 PTC (19) 741.
[13] Glaxon Smith Klien Consumer Health Care Limited v. Heinz India Private Limited and Ors., 2007 (2) CHN 44.
[14] Supra note 12.
[15] Godrej Sara Lee Ltd. v. Reckitt Benckiser (I) Ltd, 2006 (32) PTC 307.
[16] Reckitt &Colman of India Ltd. v. M.P. Ramchandran&Anr, 1999 PTC (19) 741.
[17] Supra note 15.
[18] Colgate Palmolive (India) Limited v. Anchor Health and Beauty Care Private Ltd., 2009 (40) PTC 653.
[19] Supra note 16.
[20] Supra note 18.
[21] Dabur India Ltd. v. M/S Colortek Meghalaya Pvt. Ltd, 2010 (42) PTC 88.
[22] Dabur India Ltd. v. Wipro Limited, Banglore,2006 Indlaw DEL 373.
[23] Hindustan Unilever Limited, Mumbai v. Gujarat Co-operative Milk Marketing Federation Limited, Mumbai and others, 2017 Indlaw MUM 842.
[24] Supra note 21.
[25] Reckitt &Colman of India Ltd. v. M.P. Ramchandran&Anr, 1999 PTC (19) 741.
[26] Supra note 23.
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