This Article is written by Okunromade Mary Oluwaseyifunmi, of Afe Babalola University during her internship with LeDroit India
ABSTRACT
Disparagement in advertising has become a significant issue in today’s competitive markets, especially where brands use comparative advertising. While comparative advertising is allowed and even encouraged to help consumers make informed choices, it becomes illegal when it misrepresents or disparages products. This paper looks at the legal boundaries of deceptive and comparative advertising by analyzing the important cases between Horlicks and Complan, decided by the Delhi High Court. The study examines how misleading claims, selective information sharing, and visual or textual hints can mislead consumers and unfairly damage competitors.
It draws from laws like the Consumer Protection Act, 2019, and the Trade Marks Act, 1999, as well as self-regulatory guidelines from the Advertising Standards Council of India (ASCI). The paper points out the tough balance courts try to keep between supporting commercial speech under Article 19(1)(a) of the Indian Constitution and stopping unfair trade practices. The decisions in Horlicks v. Heinz India Pvt. Ltd. show that comparative advertising is legal as long as it is honest, factual, and not misleading, even if it contains some allowed exaggeration. However, if comparisons are likely to confuse consumers or belittle a competitor’s product, court action is needed.
The paper concludes that the changing legal views on advertising disparagement are crucial for protecting consumer trust, ensuring fair competition, and maintaining market integrity.
integrity.
INTRODUCTION
Deceptive advertising, a common practise in the business sector, involves the dissemination of incorrect or misleading information to promote products or services. Such practises can have serious effects for both consumers and competitors. Deceptive marketing can induce naïve consumers to make purchases based on misleading promises, resulting in unhappiness, financial losses, and a loss of faith in the marketplace. This not only affects customers but also undermines fair competition within industries by allowing unethical enterprises to obtain an unfair advantage over honest competitors. Understanding the impact of deceptive advertising is critical in this context for protecting consumer interests and ensuring a fair playing field in the corporate landscape. Deceptive marketing can reach a huge audience in the blink of an eye in the digital age, when information travels at the speed of light across a global network. As a result, buyers may base their purchasing decisions on false claims, inflated promises, or inadequate information. As a result, customers may receive items or services that fall short of their expectations, resulting in unhappiness, financial loss, and, in some situations, physical harm. Consumers face costs that go beyond monetary losses; false advertising can undermine customer confidence and faith in the integrity of businesses. Deceptive advertising also has a substantial impact on industry competitors. When competing with individuals who engage in deceitful practises, honest businesses who are committed to offering quality products or services can find themselves at a disadvantage. These dishonest competitors might obtain an unfair edge by enticing clients with misleading claims or reduced pricing that cannot be sustained without cutting shortcuts, sacrificing quality, or engaging in unethical practises. Legitimate businesses may struggle to compete in such an atmosphere, which can eventually restrict innovation and healthy competition within the industry.
Furthermore, deceptive advertising can weaken the entire integrity of the business environment, leading to a race to the bottom in which competitors are forced to engage in dishonest practises in order to survive or thrive in the marketplace. This unfair competition can have a cascading effect, affecting not just the competitors but also the larger industry and, by extension, consumers who are denied the benefits of a fairand transparent market. While deceptive advertising is not a new phenomenon, the digital era has brought with it new challenges and opportunities. With its broad diversity of platforms and channels, the online landscape has provided businesses with unparalleled access to potential clients, making it easier to disseminate false marketing to a global audience.
The growth of social media, e-commerce platforms, and digital marketing has magnified the impact of deceptive practises, resulting in an increase in consumer complaints and regulatory proceedings against unscrupulous advertising. Regulators, consumer protection organisations, and industry associations are all working hard to counteract misleading advertising. To combat this detrimental practice and hold corporations accountable for false or misleading promises, laws and regulations have been enacted. Businesses found guilty of deceptive advertising may incur penalties, fines, or legal action in some situations.
Furthermore, the digital world has given rise to new tools and technology that allow customers to report misleading advertising, discuss their experiences, and hold firms responsible on public forums. In an era of abundant information and digital connection, it is becoming increasingly vital for customers to exercise caution while making purchasing decisions. The capacity to distinguish between true and fraudulent marketing is a necessary skill for modern consumers. Consumers can benefit from education and awareness initiatives that teach them how to identify deceptive advertising practices, see red flags, and make informed decisions as the digital world evolves.
Similarly, organisations that are committed to ethical marketing and fair competition might obtain a competitive advantage by establishing a reputation for being trustworthy and transparent.
The practice of developing and disseminating advertisements that contain inaccurate, misleading, or exaggerated information in order to influence or deceive people is referred to as deceptive advertising. A deceptive advertisement is one that misleads people, alters reality, and impacts consumer purchasing behaviour. False or misleading advertising is unlawful in most jurisdictions due to advertising rules. It is prohibited from misleading the quality of any product or its relevant specifications such as composition,manufacture, price, or country of origin. The term “false” refers to the misrepresentation of facts; misleading information can lead to an unacceptable number of individuals making incorrect decisions, but consumers are at risk from advertising when given with a unique setting.Such advertisements are intended to fool or mislead people into believing false or misleading promises about a product or service. False assertions, misrepresentations, overstated benefits, hidden fees, or the removal of critical information are all examples of deceptive advertising. It is often regarded as immoral and, in many jurisdictions, illegal, as it can hurt consumers by encouraging them to make purchases based on misleading information. To prevent and remedy deceptive advertising practices, consumer protection laws and regulations are frequently in place. Section 2(28) of the Consumer Protection Act, 2019 (hereafter the Act) defines misleading advertisement concerning any product or service as one that “falsely describes such product or service; or conveys an express or implied representation which, if made by the manufacturer, seller, or service provider thereof, would constitute an unfair trade practices; or deliberately conceals important information; gives a false guarantee to, or is likely to give a false guarantee to, such product or service”
Unfair trade practices are defined in Section 2(48)(f) of the Act as “making a false or misleading representation concerning the need for, or the usefulness of, any goods or services .
Other such acts are the Monopolies and Restrictive Trade Practices Act 1969, whose main goal is to ensure that the operation of the economic structure fails to result in the concentration of economic powers in the hands of a few hands. However, the MRTP Act typically failed to protect any provinces against misleading and false advertisement, but the 1984 amendments to the MRTP Act incorporated, among other things, new provisions for the regulation of unfair trade practises, such as False claims, misleading ads, bargain sales,bait and switch selling, hoarding and destruction of items, and so on are all examples Misleading Advertisement and Consumers Protection Act .
The government established the Central Consumer Protection Authority (CCPA), sometimes known as the Central Authority, under Chapter III of the Act and gave it certain authorities and functions to defend and safeguard consumer interests. One of the Central Authority’s missions is to ensure that “no false or deceptive advertisements for any goods or services are published that contravene the terms of this Act or the rules or regulations made thereunder”. It also seeks to prohibit anyone from participating in the dissemination of these advertising . Section 10 of the COPRA 2019 establishes the CCPA and empowers it to rule on consumer rights violations, unfair trade practises, and misleading and false advertisements that are detrimental to the welfare of the public and consumers, as well as to promote, protect, and adhere to the right of consumers as a group .Comparative advertisement and product disparagement are sensitive subjects to manufacturers of goods and services. Comparative advertising is a strategy used by companies to represent their product as superior in comparison to that of a competitor. When a comparative advertisement makes a comparison that is misleading and/ or derogatory, it crosses over into what is referred to as product disparagement. Clearly, there is a fine line to be drawn between the two concepts, and one that invites considerable attention from trademark owners, especially because consumer behaviour can be easily influenced through such advertisements to a brand’s advantage or disadvantage. With advertising being a largely self-regulated industry in India, there is limited vigilance on the manner in which corporate entities market their brands. The law on trademarks makes reference to when comparative advertisements can be regarded as infringement, and when disputes get out of control, the courts step in. This happened recently in the case between two health food drinks, where the Delhi High Court discusses the difference between the concepts of comparative advertising and disparagement (Horlicks Ltd. vs Heinz India Private Limited, [CS(COMM) 808/2017], Delhi High Court, delivered on 17 December 2018).
COMPARATIVE ADVERTISING
Comparative advertising is ordinarily legal and permissible if it meets certain basic conditions. The Advertising Standard Council of India (ASCI) in its Code for Self Regulation of Advertising content in India (see: ), offers a few thumb rules for making comparative claims. For example, so long as advertisements are evidently “in the interests of vigorous competition and public enlightenment”, and there is clarity regarding the aspects being compared, there is likely to be limited or no problem.
Additionally, comparative advertising is usually to be resorted to in relation to like products that meet the same needs and are intended for the same purpose. The comparison between rival products must also be factual and accurate, in a manner that can be substantiated. Most importantly, the comparison between the products should not mislead consumers either about the advertised product or that with which it is compared; and the advertisement must not unfairly malign, attack or discredit other products.
The Trademarks Act, 1999, lists the circumstances when the use of a registered trademark in advertisements may be considered infringing. Section 29(8) of the Act states that infringement takes place if the advertisement in question, (a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters; or (b) is detrimental to its distinctive character; or (c) is against the reputation of the trade mark.
Section 30(1) offers a defence for the use of trademarks in comparative advertisements, effectively reiterating key terms from Section 29(8), stating that advertisements would not be considered infringing if they are (a) in accordance with honest practices in industrial or commercial matters, and (b) do not take unfair advantage of or are detrimental to the distinctive character or repute of the trade mark.
While the ASCI Code offers some guidelines, the legal test of when comparative advertising leads to disparagement has been left to the courts to decide. A Division Bench of the Delhi High Court in Colgate Palmolive Company & Anr. vs. Hindustan Unilever Ltd., 2014 (57) PTC 47 [Del](DB] held that in comparative advertising, a certain degree of trade puffery is acceptable which does not show the competitor’s product in bad light, and thus there could be no actionable claim against the same. In Havells India Ltd. Vs. Amritanshu Khaitan, [2015 (62) PTC 64 (Del)], the High Court declared that “It is settled law that an advertiser can call his product the best, but at the same time, cannot rubbish the products of a competitor.”
A key test for determining if an advertisement making comparisons has switched over to being disparaging is whether it contains misleading information. As per the European trademark decision in Lidl SNC v Vierzon Distribution [SA [2011] E.T.M.R.], a misleading advertisement should satisfy two essential elements: (a) the misleading advertising must deceive or have the potential to deceive the persons to whom it is addressed to; and (b) as a consequence of its deceptive nature, the misleading advertising must be likely to affect the economic behaviour of the persons to whom it is addressed or harm a competitor. This test was referred to by the Delhi High Court in its decision in Havells India Ltd. Vs. Amritanshu Khaitan, [2015 (62) PTC 64 (Del)].
Comparative advertisements tend to pick on specific features of rival products and place them beside each other for the consumer. As was also the case in the present matter of Horlicks v. Heinz, competitors get peeved that other features that would have ordinarily shown them in better light are not revealed.
The Delhi High Court in the present case was fairly clear that there was no obligation to show all parameters, and that it was “open to an advertiser to highlight a special feature/characteristic … which would set its product apart from its competitors… as long as it is true.” There are no guidelines about the minimum number of parameters that should be compared in a comparative advertisement, as the court observed, and there is no mandate in law to disclose each and every factor/characteristic in comparative advertisement.
There were attempts by the Plaintiffs to argue that the fundamental right to freedom of speech under Article 19(1)(a) of the Indian Constitution was only available to a citizen of India, and not to a corporate entity. Similarly, they tried to argue that under Article 21 of the Constitution, the Plaintiffs could rightfully restrict any commercial use of its mark which denigrated its goodwill and reputation.
These arguments were categorically rejected by the Court. It said that advertisements are a facet of commercial speech that is covered under Article 19(1)(a) and could be restricted only in accordance with law enacted under Article 19(2) of the Constitution. It further observed, “In a democratic country, free flow of commercial information is indispensable, and the public has a right to receive the commercial speech. In fact, the protection given to an advertisement under Article 19(1)(a) of the Constitution is a necessary concomitant of the right of the public to receive the information in the advertisement.”
In the present case, the Court was clear that there was no distortion of the distinctive character of the HORLICKS mark, as there was a clear distinction between the two products. HORLICKS was also clearly the source indicator of the Plaintiffs and COMPLAN is the source indicator of the Defendant. The Court further said that the Plaintiffs could not prevent the use of their trademark for the purpose of identification of their product.
Finally, it noted that the law allows comparative advertising as long as the use of a competitor’s mark is “honest.” The Court said that the test of honest use was an objective test which depends on whether the use is considered honest by members of a reasonable audience. In this context, the failure to point out a competitor’s advantages is not necessarily dishonest, and by corollary, highlighting the advantages of the competitor’s product by the advertiser in the advertisement is not a dishonest practice either.
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In a recent judgment dated 17th December, 2018 the Delhi High Court has ruled that the law allows comparative advertising as long as the use of competitors mark is honest .
CONCLUSION
Horlicks and Complan being the two oldest rival brands in India are in constant tussle with each other since decades when it comes to comparative advertising. Comparative advertising is permitted under law with regard to section 30(1) of Trademark act, 1999 unless it hit by section 28(8). Through these sections, harmony is established between the rights of consumer interest in comparative advertising and rights of trademark owner. The balance between the right of consumers and trademark holder has been interpreted in various leading precedents by the judiciary, still the brands with umpteen reputation enters into comparative advertising exhibiting false and untrue information.
