The recent surge in comparative advertising is an illustration of just how attractive a marketing tool it can be in order to achieve consumer recognition. However, marketers need to be aware of a number of potential traps in this area as not all comparative advertising is lawful.
Simply defined, comparative advertising occurs when the goods or services of one trader are expressly or implicitly compared with the goods or services of another trader in an advertisement in any medium. It has always been the prerogative of a company to talk up or puff its own goods or services - for example, Carlsberg’s well known claim that it is ‘probably the best lager in the world’. Such a statement does not fall foul of the law on the basis that courts, as a matter of policy, do not want to be turned into a mechanism for determining which product is the best in any particular market.
However, historically problems have arisen when a comparative advertisement makes use of a competitor’s intellectual property rights, such as trademarks, to identify the competitor or the competitor’s goods or services. But the recent European Court of Justice decision in O2 v Hutchinson 3G has now made it clear that once the conditions of the EU directive on misleading and comparative advertising are complied with, then a competitor cannot stop a comparative advertisement on the basis of trademark infringement. This decision highlights just how important it is for comparative advertisers to ensure compliance with such conditions in order to avoid the wrath of a competitor in court.
LAWFUL COMPARATIVE ADVERTISING
There are eight conditions under the EU directive, which have been enacted in Ireland under the European Communities (Misleading and Comparative Marketing Communications) Regulations 2007. The Regulations succinctly state that a trader shall not engage in a prohibited comparative marketing communication. In order to be permissible, a comparative advertisement must comply with the following conditions contained in the Regulations:
- Not deceive or mislead any consumer or trader.
A comparative advertisement is considered misleading if it is deceptive and is likely to either affect a person’s economic behaviour or injure a competitor. In other words, a consumer makes a decision to buy the comparative advertiser’s product, or not buy a competitor’s product, having viewed the deceptive comparative advertisement.
A number of factors are taken into account in determining whether a comparative advertisement is misleading and these include representations regarding the characteristics or origin of the product, the price of the product, the manner in which the price is calculated or any approval or sponsorship of the product.
A comparative advertisement can be considered misleading in what it says, but also in what it fails to say. Therefore, if material information that a consumer would need to make an informed purchasing decision is omitted or concealed, then the comparative advertisement will be considered misleading. An example of where a comparative advertisement may be held to be misleading is where a supermarket claims that shopping in its store is cheaper than a competitor on the basis of till receipts, when the products purchased are not always identical.
If a comparative advertisement is misleading, then it could also be considered a prohibited misleading commercial practice under the Consumer Protection Act 2007, which may involve the National Consumer Agency.
- Only compare products that meet the same needs or are intended for the same purpose.
For example, an advertisement for strong painkillers should not make a comparison between the results it achieves and the results of an ordinary cough medicine as the two products are not intended to meet the same needs.
- Only objectively compare material, relevant, verifiable and representative features of a product (which may include price). For example, a comparative advertisement must not compare features that would be subjective in nature such as the taste of two competing soft drinks.
- Not discredit or denigrate the trademarks, trade name or products of a competitor.
An example of this condition would be a comparative advertisement that leads consumers to falsely believe that a competitor is misrepresenting its own products: for example, falsely advertising that X Ltd’s goods are not waterproof as claimed, but that the comparative advertiser’s goods are.
Previous case law has determined that if a comparative advertisement deals solely with a price comparison, then it will not be considered to discredit or denigrate a competitor’s trademark, notwithstanding that the price comparison will invariably be unfavourable to the competitor.
- Only compare products with the same designation of origin.
For example, an advertisement for sparkling wine from the Alsace region should not include a comparison with champagne.
- Not present goods or services as imitations or replicas of goods or services bearing a protected trademark or trade name.
For example, a comparative advertiser describing its own goods by using statements such as ‘type’ or ‘style’ appended to a competitor’s trademark.
7/8. Not create confusion or take unfair advantage of the reputation of a trademark or trade name of a competitor.
This might occur where a competitor’s trademark (such as a logo) is used in a comparative advertisement in a way that causes a consumer to believe that both of the products advertised were made by the same or connected persons, namely the trademark owner. Such a comparative advertisement could also amount to trademark infringement under the Trademarks Act 1996, which may enable a competitor to avail of the various remedies under that Act, including seeking damages for the improper use of its trademark.
Finally, in addition to the Regulations, a number of broader legal principles must be adhered to by a comparative advertiser in order to ensure that its advertisement is lawful, including not committing passing-off by misrepresenting that there is an association between two competitors or their respective products or services; not defaming a competitor or its goods or services; and not maliciously publishing incorrect information so as to commit a malicious falsehood.
SUBSTANTIATION, SUBSTANTIATION, SUBSTANTIATION
The key rule of thumb for comparative advertising is that it must be accurate. Under the Regulations, the onus is on the comparative advertiser to prove that any factual claim in the advertisement is true on the balance of probabilities: in other words, that the claim is more likely true than not true.
If a comparative advertiser fails to meet this burden, then the representation is presumed untrue and a court can make an order against the comparative advertiser without requiring proof of any intention or negligence on the part of the comparative advertiser. Therefore, it is important to retain all appropriate documentation to substantiate any factual claims made. Document retention and claim verification is also a significant component of various industry and sector-specific regulatory standards, for example the Code of the Advertising Standards Authority for Ireland.
If a comparative advertiser does not comply with the conditions under the Regulations then a competitor can bring a private action before the Irish Courts, which have jurisdiction to make orders:
- prohibiting the comparative advertisement; and/or
- requiring a corrective statement to be published at the comparative advertiser’s expense.
A prohibition order is the sole remedy available to a competitor under the Regulations as there is no express provision made for damages. However, costs may be awarded against the comparative advertiser in respect of any action taken by a competitor under the Regulations.
Damages may be awarded against a comparative advertiser if an action is successfully taken by a competitor for breaches of other laws such as trademark infringement, passing-off or malicious falsehood, or by a consumer for a misleading commercial practice under the Consumer Protection Act 2007. In respect of the latter, certain misleading commercial practices may also incur criminal liability.