Both the ECJ and the English courts have credited comparative advertising with promoting healthy competition, but advertisers need to ensure they comply with the rules
The European Union first dealt with advertising issues in 1984 with the EU Misleading Advertising Directive (84/450/EEC). The directive was superseded on December 12 2006 by the EU Misleading and Comparative Advertising Directive (2006/114/EC), requiring EU member states to harmonise their laws on comparative advertising. Today’s EU comparative advertising regime remains more onerous for advertisers than the US regime. Although the Comparative Advertising Directive is now 15 years old, advertisers continue to explore the boundaries of what is permitted.
Before the 2006 directive, a UK brand owner that objected to its products being described as inferior in a competitor’s advertising would generally rely on the Trademarks Act 1994 in seeking to prevent its competitors from using its brand in the offending advertisement. The act generally prohibits a third party from using an identical trademark for identical goods. However, Section 10(6) of the act permits the honest use of a registered trademark to identify the goods and services of the mark owner, provided that the use is not without due cause and does not take unfair advantage of, or cause detriment to, the mark’s distinctive character. A business that uses a competitor’s trademark within its advertising would generally argue that the mark is used only to identify the competitor’s goods, whereas the competitor would argue that its mark is used in a manner that takes unfair advantage of, or is detrimental to, its mark. Initially, the 1984 directive protected consumers, competitors and the public from misleading and unlawful comparative advertising. The Unfair Commercial Practices Directive (2005/29/EC) introduced the concept of misleading adverts, including misleading omissions within comparative adverts.
The law on comparative and misleading advertising has been harmonised throughout the European Union by the 2006 directive, which requires EU member states to legislate to enforce compliance with the provisions. The responsible body in the United Kingdom is the Advertising Standards Authority (ASA). The 2006 directive was implemented in the United Kingdom by the Business Protection from Misleading Marketing Regulations 2008. The Consumer Protection from Unfair Trading Regulations 2008 implemented the Unfair Commercial Practices Directive. The latter regulations prohibit unfair businessto- consumer practices and cite as a criminal offence any comparative advertisement that is viewed as misleading. They also provide for the authority to bring injunction proceedings.
The practice of comparative advertising is widespread and is particularly popular among highly competitive consumerorientated businesses, such as supermarkets, which regularly compare the price of a basket of goods. Article 2(a) of the directive defines ‘advertising’ as all forms of representation made to promote the supply or transfer of the products of a trade, business, profession or craft. Under Article 2(c), in order to be comparative, an advert must identify a competitor or the products offered by a competitor, either explicitly or by implication.
There is a robust legislative framework which governs this controversial form of marketing and a wealth of case law that is used to determine whether a comparative advertisement is lawful. An advertiser whose comparative advertisement is not within the rules can be liable for trademark infringement and may face an injunction.
The directive sets out the following requirements for a lawful comparative advertisement:
- The advertisement must not deceive, or be likely to deceive, its audience and consequently affect their economic behaviour, or harm, or be likely to harm, a competitor (Article 2(b)).
- The advertisement must not constitute a misleading action or omission (Article 4(a)).
- The products compared must meet the same consumer needs or be intended for the same purpose (Article 4(b)).
- The factors compared must be material, relevant, verifiable and representative features of the products compared, and the comparison must be objective (Article 4(c)).
- The advert must not discredit or denigrate the competitor’s trademarks, trade names or other distinguishing marks, products or activities (Article 4(d)).
- Products that designate origin may be compared only to products designating the same origin (Article 4(e)).
- The advertisement must not take unfair advantage of the reputation of a trademark, trade name or other distinguishing mark of the competitor, or the designation of origin of competing products (Article 4(f)).
- The advertisement must not portray products as imitations or replicas of products bearing a trademark or trade name (Article 4(g)).
- The advertisement must not cause confusion between the advertiser and the competitor, including confusion of trademarks, trade names or other distinguishing marks or products (Article 4(h)).
In Lidl Belgium GmbH & Co KG v Etablissementen Franz Colruyt NV (C-356/04, September 19 2006) the ECJ considered transparency in the comparison of a basket of goods and held that the comparative advertising rules should be interpreted in the manner most favourable to the advertisers. Crucially, the ECJ held that an advertiser cannot rely on a comparison of a selection of products to claim that all of its products are cheaper than a competitor’s. Furthermore, although the advertiser is not required to list all products which could be compared, the advertisements must enable consumers to verify the products that were compared.
Reference was made to the ECJ in Lidl SNC v Vierzon Distribution SA (159/09, November 18 2010) regarding an advertisement comparing 34 products from Lidl and Vierzon. Lidl claimed that the advertisement failed to demonstrate that the price differences were due to qualitative and quantitative differences between the products. The ECJ held that an advertisement is misleading if it incorrectly suggests that all of the advertiser’s good are cheaper than the competitor’s, or fails to make clear that the price comparison involves goods with differing features that affect consumer choice.
In O2 Holdings Ltd v Hutchison 3G Ltd ( EWHC 2571) the ECJ confirmed that the use of a third party’s trademark in comparative advertising was not an infringement under Article 5(1) of the Trademarks Directive, as the trademark could still denote origin and there was no possibility of confusion.
In L’Oréal SA v Bellure NV (C-487/07, June 18 2009), comparison lists were provided to distributors which likened L’Oréal products to cheaper imitation, ‘smell-alike’ products. The ECJ held that unfair advantage could be taken of the reputation of a trademark, even where the mark’s ability to denote origin is not affected. Furthermore, an infringement also occurs if the use affects the function of a trademark – for example, its function in guaranteeing quality or in communication, investment or advertising. The ECJ also held that a comparative advertisement may not state that a product is an imitation or replica of a product bearing a well-known mark because this would provide an unfair advantage.
In Specsavers International Healthcare Ltd v Asda Stores Ltd ([ 2010] EWHC 2035 (Ch)) the High Court held that the strapline “be a real spec saver at Asda” amounted to an infringement and took unfair advantage of Specsavers’ marks, but did not object to the overlapping logo used by Asda or the strapline “spec savings at Asda”. The court also held that there was no misrepresentation giving rise to passing off because the advert featured a significant amount of Asda’s own branding.
Companies in the United Kingdom can either bring trademark infringement proceedings against comparative advertisements or make a complaint to the ASA. Proceedings on behalf of consumers are predominantly initiated by the Office of Fair Trading (OFT).
Both the ECJ and the English courts have credited comparative advertising with promoting healthy competition in the marketplace. The British Code of Advertising, Sales Promotion and Direct Marketing, known as the CAP Code, is enforced by the ASA and largely replicates the provisions of the Comparative Advertising Directive. A new version of the code was introduced in September 2010 and the ASA began regulating online advertisements from March 1 2011. Rule 7.1 prohibits misleading advertisements and Clause 20 prohibits advertisements that discredit and denigrate competitors’ products or take unfair advantage of the reputation of their trademarks.
The ASA raised a number of criticisms of misleading price comparisons following a complaint by Safeway regarding a price comparison leaflet published by Tesco which stated that “1000s of products were cheaper than Safeway”. In particular, the price information and small print were unclear and not linked to qualifying information. Moreover, the price checks were carried out in only five Safeway stores, with some prices being two to five weeks old and also incorrect.
Although complaints to the ASA are relatively inexpensive, they are often viewed as lacking real authority, since the ASA cannot grant injunctions, levy fines or award compensation. Instead, its power essentially derives from its ability to publish adjudication reports, which are often reported in the media and subject offending parties to adverse publicity. The ASA can also report consistent offenders to the OFT and the communications regulator, Ofcom.
Part 3 of the Business Protection from Misleading Marketing Regulations places a duty on the OFT, Trading Standards and the Department of Enterprise, Trade and Investment in Northern Ireland to enforce the regulations. Powers include the ability to file injunction proceedings and court orders to provide evidence to support claims made in advertisements or to publish a statement correcting an offending advertisement. These measures carry considerable weight and a breach of an injunction can lead to an unlimited fine and up to two years’ imprisonment. However, these issues are typically resolved by the OFT in discussions with offending advertisers.
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.