How does your advertisement compare?

This paper discusses the 1994 Trade Marks Act and its implications for comparative advertising. The new Act allows trade marks belonging to a third party to be used to identify goods and services.

How does your advertisement compare?

Comparative advertising is now permissible in the UK, but it is not without its dangers

David Rickard

This paper discusses the 1994 Trade Marks Act and its implications for comparative advertising. The new Act allows trade marks belonging to a third party to be used to identify goods and services. Comparative advertising using another person's reg

SOME WOULD ARGUE that the modern consumer is more informed, discerning, and less susceptible to more traditional forms of advertising, thus making the comparative advertisement an attractive option. To date, this type of advertising has been high risk, particularly in Europe. However, if it is used properly, it can be very effective. In the United States, more than a quarter of advertising campaigns in recent years have involved some form of comparative advertising - mostly in the form of direct product comparison. In that country, this form of advertising is widely accepted and used. However, in the UK and the rest of Europe, legislation has limited a similar approach. The laws of major trading countries vary significantly as to what types of comparisons are acceptable in advertising. Under the UK Trade Marks Act 1938, use of another person's trade mark for comparative advertising purposes was held by the courts to constitute an infringement, but when the UK Trade Marks Act 1994 came into force on 31st October 1994, the law relating to the use of trade marks in comparative advertising changed. The 1938 Trade Marks Act did not specifically deal with comparative advertising, in fact, it does not even mention comparative advertising, but trade mark law became the tool most frequently used to halt this type of campaign. For the first time, the 1994 Trade Marks Act addresses the need for legislation to regulate this important area, and it includes a provision which deals specifically with the use of trade marks in comparative advertising. In the United States, most comparative advertising has concentrated on making a direct comparison of competing products, and advertisements have tended to be far more aggressive than similar advertisements in Europe. Comparative advertising is considered a valuable tool in the United States and is said to stimulate competition. It is also the view in the United States that this type of advertising aids consumer choice by providing additional information to help the consumer to make a more informed decision. Accordingly, US law is very relaxed about non-deceptive comparative advertising. However, even in the United States where the right to free speech is strongly enforced, the courts are very active against deceptive advertising. Historically, comparative advertising has been a dangerous game to play in Europe. As we have already seen, the use of a competitor's registered trade mark has, until recently, been prohibited. Admittedly, the law was not always strictly enforced by trade mark proprietors. For example, it was common place in the motor trade for one manufacturer to state that 'the X does more miles to the gallon' or 'has more features' than equivalently priced vehicles from rival manufacturers. For various reasons, a number of different industries have accepted the use of registered trade marks in this way, despite the fact that it was strictly an infringement. In those particular industries, the overriding reason seems to have been a unilateral belief in the benefits of comparative advertising. With the recent changes in law in the UK and possibly elsewhere in Europe, many advertisers are likely to be tempted to engage in this form of advertising by the desire for increased sales. However, it remains dangerous. Although comparative advertising is seen as offering benefits in Europe, the principles of the free market and freedom of speech must, according to the legislators, be balanced against the dangers of allowing misleading, deceptive and libellous advertisements. Advertisements which compare one product with the product of a competitor can take a number of forms. The most basic form is the so-called 'knocking copy'. This form is rare, but still exists. Typically, the comparison will be made with the brand leader and will include a statement such as 'our product is as good as/better than/cheaper than X's'. Alternatively, an advertisement may imply that a product is better than that of a competitor, but may leave it to the public to make the direct comparison and to reach a conclusion of superiority. In other cases, advertisements compare specifications such as size, weight or facilities. The potential benefits of comparative advertising are obvious, particularly if one looks at the Federal Express campaign in the US. The company was able to position itself and establish a very substantial market by making critical reference to 'America's leisurely postal service'. More recent examples can be seen in the multi-million pound washing powder industry, where Persil Power and Ariel Ultra have been slugging it out over the relative benefits and disadvantages of their new washing powders. Consumers remain sceptical of some comparative advertisements but are clearly swayed by others. If the consumer perceives that accurate comparative information about the product of interest is provided and that they are, as a result, better informed, then they tend to regard the advertisement as 'valuable'. However, traders with well-known brands regard some forms of comparative advertising as unfair competition, particularly where the well-known brand is being used to sell cheaper goods of apparently the same quality by listing the products side by side. This is an example of 'parasitic trading'. Some well-known illustrations of comparative advertising include: The new UK Trade Marks Act allows trade marks belonging to a third party to be used in advertisements to identify goods and services. It provides that a trade mark may be used by any person to identify a proprietor's goods, provided: Accordingly, cerain types of comparative advertising using another person's registered trade mark are now permitted. In determining the allowability of advertisements, certain value judgments have to be made. What are 'honest practices in industrial or commercial matters'? When is 'unfair advantage' taken of the repute of the trade mark? What is 'detrimental to the distinctive character or repute of the mark'? These questions may well be interpreted differently in relation to different industries. For example, comparative advertising has been used for some time in the motor and airline industries, and although certain practices have become generally accepted within them, such may not be the case with other industries. Indeed, what is considered acceptable in any specific industry as a result of practice will probably change from time to time; it is probable that familiarity will breed acceptance. The courts do not like grappling with such questions. In the debate on this section of the 1994 Trade Marks Act when it was progressing through the House of Lords, Lord Strathclyde stated: At each end of the spectrum, whether the claims in an advertisement are honest or not, will be fairly clear, for example an attribute claimed in goods but not possessed will not be regarded as honest. However, there is bound to be a grey area where the answer is not clear, for example, if that attribute exists only in certain conditions. When interpreting 'honest practices', the court will consider evidence from experts in the relevant industry. There is no hard and fast rule. Each situation will have to be dealt with on its own merits. The closer you sail toward the wind the more risk you run. Whether or not unfair advantage is seen to have been taken will again depend on particular facts. Clearly, advertising a cola flavoured soft drink using the distinctive Coke can and style alongside a similarly coloured product would be taking unfair advantage. However, simply showing two cans of cola soft drink side by side with the different prices underneath would not generally be so. Once again, each case will be decided on the specific facts. In a case which recently came before the courts, a smell-a-like perfume manufacturer provided salesmen with manuals, which were shown to customers. These manuals compared the original and smell-a-like products. Smell-a-likes do not usually have the same quality of ingredients. Under the 1938 Act this was held to be trade mark infringement. Under the 1994 Act this is likely to be held to be 'detrimental' because such an advertisement includes an inference that the copy is of the same quality as its original when it was not. Whilst comparative advertising is now allowed, it is likely that the courts will be called upon requently, at least in the early days, to determine whether honest and fair comparisons have been made. To decide whether or not use is legitimate, the courts will take account of the nature of the information contained in the advertisement. Although each case will be different, one thing is clear: despite the 1994 Act there is still considerable risk involved in using another's trade mark for comparative advertising purposes. One point of note, unchanged by the new Act, is that in circumstances where a trade mark forms part of a full company name, the risk of challenge is reduced if that company name is used to identify the product by reference to the manufacturer rather than the trade mark. In a relatively recent case Duracell Batteries Limited, who owned a registration of the trade mark Duracell, alleged that Ever Ready Ltd had infringed that trade mark by use of the following words in an advertisement: The judge stated that his inclination was 'to recoil from the suggestion that use of a name (as part of a corporate title) can be an infringement of a trade mark'. Further, in Mr. Justice Aldous stated 'An advertisement saying Compaq Computer Ltd manufacture computers depicted below … I would have thought was permissible'. When engaging in comparative advertising, account must be taken not only of the Trade Marks Act 1994, but also of: Copyright can subsist in original, literary works, artistic works, films and sound recordings and it may subsist in the design or label of a competitors product. For example, the Mirror Group's use of the 's masthead logo was considered to be an infringement of the artistic copyright in that logo. Passing off is based on the concept of someone using the reputation in a trade mark or get- up to confuse or deceive consumers into suspecting that there may be some association. In the case of ('BK'), BK advertised its hamburgers using the words, 'It's not just a Big Mac' and referred to its 'Whopper' as 'Unlike some burgers it's 100 per cent pure beef, flame grilled never fried, with a unique choice of toppings'. The Judge found that a significant number of people reading the advertisement might be misled into thinking that a 'Big Mac' could be obtained from BK. The three main ingredients required to support a trade libel action are: In the 'Big Mac' case referred to above, a claim of trade libel failed. The Judge was not satisfied that BK intended to suggest that McDonalds' hamburgers were not 100 per cent pure beef. In the case of , Compaq alleged that two systems which Dell had compared in advertisements were not essentially the same, since they had different storage capacity and access times. Mr. Justice Aldous held that no jury could find the two systems were essentially the same. He went on to say that malice would be inferred if the words were calculated to prove damage, and the defendant knew that the words were false or was reckless as to whether they were false or not. The Trade Descriptions Act 1968 provides that it is a criminal offence to advertise using a statement which constitutes a false indication, direct or indirect, of various matters relating to goods including fitness for purpose, any physical characteristics and origin. Under the Trade Descriptions Act 1968, it is an offence to supply or to offer to supply goods by reference to a false trade description. Accordingly, if in the advertisement it is explicitly stated or implied in the comparison being made that the goods or services being advertised have a particular advantage or attribute which they do not have, then an offence will be committed. Price comparisons in advertisements are regulated by the Consumer Protection Act 1987 and the Code implemented by the DTI under that Act. This Act makes it an offence to give a misleading price indication, which includes 'price comparison'. According to the Code, where products are compared the name of the other trader should be given and the price quoted should apply to the same or substantially the same products. The British Code of Advertising Practice provides a nonstatutory body of rules regulating advertisements. The fundamental principle of the Code is that all advertisements should be 'legal, decent, honest and truthful'. It further states that 'All advertisements should conform to the principles of fair competition generally accepted in business'. The detailed provisions of the Code provide that advertisements containing comparisons should deal fairly with competitors, and should be designed so that there is no likelihood of a consumer being misled. Although this Code applies to printed media, there is also a Code of Practice containing similar principles which governs the broadcasting industry. In addition, there are the Control of Misleading Advertisement Regulations 1988. These provide that an advertisement is misleading if it deceives or is likely to deceive the persons to whom it is addressed or whom it reaches; where due to its deceptive nature it is likely to affect economic behaviour; or because it injures or is likely to injure a competitor. The other piece of legislation which may affect comparative advertising in the future is a Draft EU Directive on Comparative Advertising. However, the EU States remain unable to reach agreement and it is unlikely that the Directive will be implemented for some considerable time. The draft permits comparative advertising, provided that it objectively compares the 'material, relevant, verifiable and fairly chosen features of competing goods', subject to it not being misleading, causing confusion in the marketplace between the advertiser and a competitor, and not discrediting or bringing a competitor or his trade marks into contempt. This Directive is not expected to come into force until December 1995, if at all, and there are likely to be substantial changes before a final version is settled. As comparative advertising becomes more prevalent, the amount of regulation relating to its various forms is likely to increase. For the advertiser and the advertising agency the 1994 Trade Marks Act means that, within certain limits, products and services can now be advertised with reference to the registered trade marks of a competitor. A new form of advertising is now available in the UK, but it should be noted that despite the new Statute, the use of comparisons is not totally without risk.