The UK High Court has handed down a ruling which could give businesses greater freedom to undertake comparative advertising.  Comparative advertising is where a business makes a direct comparison between its product and a competitor’s equivalent product in an advert or other marketing communication.

Background

The ruling relates to a dispute between two of the UK’s supermarket giants, Tesco and Sainsbury’s, which began in 2013.  Tesco ran a comparative advertising campaign where it took a selection of its groceries products (including bottled water, eggs, ham and tea bags) and compared them with the Sainsbury’s equivalent, concluding that its (Tesco’s) products were cheaper.  Sainsbury’s complained to the Advertising Standards Authority (ASA), the UK’s independent advertising regulator.  The essence of Sainsbury’s complaint was that Tesco was not, in fact, comparing like for like.  Sainsbury’s said that its products had certain ethical and environmental characteristics, resulting in higher sourcing costs for Sainsbury’s and correspondingly higher prices for consumers.  For example, Sainsbury’s bottled water was spring water, its eggs were free-range, it sourced its ham wholly from the UK and its tea bags were Fairtrade (the Tesco products did not have these same characteristics).

Sainsbury’s argued that Tesco’s adverts had made no mention of these non-price attributes (which Sainsbury’s felt were significant factors in a consumer’s purchasing decision) and, as such, were misleading consumers by not comparing actual equivalent products (like for like).  This, Sainsbury’s claimed, breached the relevant advertising rule, namely rule 3.34 of the CAP code which requires comparative adverts to “compare products meeting the same need or intended for the same purpose”.  Decisions of Europe’s highest court, the Court of Justice of the European Union (CJEU), had interpreted rule 3.34, and other related advertising rules, as meaning that the goods being compared must “display a sufficient degree of interchangeability”, which was a question of fact for a court to decide.  Sainsbury’s argued that the additional non-price attributes of its products meant they could not be regarded as sufficiently interchangeable with the Tesco products and, as such, the Tesco adverts had breached the CAP code.

ASA ruling 

The ASA found there was no breach of the CAP code by Tesco.  It concluded that the products compared by Tesco met the same need or were intended for the same purpose and were, therefore, interchangeable.  It was satisfied that Tesco had only compared those Sainsbury’s products where, in its opinion, the non-price attributes were not the determining factor in the consumer’s purchasing decision, meaning that the products were, in effect, like for like.

Sainsbury’s then sought an independent review of the ASA’s adjudication on the ground that it was substantially flawed.  This was carried out by the Independent Reviewer of Advertising Standards Authority Adjudications (IR).  The IR was satisfied with the ASA’s ruling and upheld it.  Sainsbury’s then sought judicial review of the IR’s decision, arguing that it was wrong in law.  It is the High Court’s judgment in the judicial review proceedings which has just been handed down.  The High Court held that the IR’s decision was not wrong in law.  He had addressed the correct legal tests and his decision could not be overturned on the ground of irrationality. 

Implications

The real relevance of the judicial review ruling is not really whether the IR was wrong in law, but the fact that the practical effect of the High Court’s ruling is to uphold the ASA’s original adjudication.

Many have criticised the ASA decision, and even the IR found Sainsbury’s arguments to be “persuasive”. The difficulty with cases before the ASA (so goes the charge) is that the ASA is not a body of trained legal professionals, although they are applying a complex framework of legislation and a myriad of domestic and EU case law. In the judicial review proceedings the court was not determining whether the ASA decided the dispute correctly; it was only looking at whether the IR’s decision not to return the case to the ASA for reconsideration was the right one. Thus, once the ASA had come to its initial conclusion, Sainsbury’s had an uphill struggle to convince the court that the IR’s decision was “substantially flawed“. Had the court been deciding the case from the outset the outcome may well have been different.

The adjudication may have implications for businesses engaging in comparative advertising.  On the one hand, it seems to have broadened the scope of ‘interchangeability’ between products.  Products being compared do not need to be the same in every respect; only in their core identity.  For example, an egg can be compared with an egg and a teabag with a teabag, whatever its provenance.  This is good news for businesses wanting to comparatively advertise, and this form of advertising remains particularly effective in current post-recession markets where consumers are still very price conscious.  On the other hand, the primary enforcer of the relevant rules is the ASA, which does not operate a system of precedent (although it does try to be consistent). The judgment will not give the green light to, say, makers of cheap market stall watches to start making ‘like for like’ comparisons with bejewelled Swiss designer timepieces.

The rationale behind the laws around comparative advertising is to encourage fair competition, for the benefit of consumers.  The ASA was clear that Tesco’s adverts were lawful and so amounted to fair competition.  What is less clear is whether consumers would agree or whether they would expect a greater degree of similarity between products being compared in order to help them make informed purchasing decisions.