Dissecting the Legality of Comparative Advertisements

As quoted by Gianni Versace, “It is nice to have valid competition; it pushes you to do better.” Every industry strives hard to compete against each other in order to highlight its achievements. Advertising of goods and services is being steadily exercised for scaling up of marketing and business operational plans of corporations. An advertisement may be defined as “any audio or visual publicity, representation, endorsement or pronouncement made by means of light, sound, smoke, gas, print, electronic media, internet or website and includes any notice, circular, label, wrapper, invoice or such other documents.”

One of the most common method of advertisements adopted by corporations is ‘comparative advertising’. Though not statutorily recognised, the term ‘comparative advertising’ refers to advertisements in which the products or services of one corporation are contrasted with the products or services of other corporation(s).

The reverent stance of notable adjudicators on the widespread practice of comparative advertising and the revised jurisprudence on misleading advertisements, triggers anguish in competing businesses when the advertiser issues, circulates or publishes such advertisements comparing competing businesses of either same industries, or businesses engaged in manufacturing, production, trade, commercial activities, and operations. It is imperative to understand the nuances of legal implications of comparative advertisements as such advertisements are created to eulogize the products of one corporation against the competing products, if not conducted in a controlled manner, may hamper the entire ecosystem of healthy business functioning.

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Analysis

Section 2(28) of the Consumer Protection Act, 2019 outlines misleading advertisement in relation to any product/service as (i) falsely describing a product or service; or (ii) giving a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or (iii) conveying an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or (iv) deliberately concealing important information.

Upon perusal of the Trademarks Act, 1999, we observe that while Section 29(8) creates a restriction with respect to advertising a particular trademark which intends to take unfair advantage of another mark or which is detrimental to the distinctive character of a trademark or is against the reputation of the said trademark, Section 30 authorizes the usage of registered trademark for the purpose of identifying goods or services of the competitor which is done in accordance with honest practices in industrial or commercial matters and is not intended to take any unfair advantage or be detrimental to the distinctive character or repute of the said trademark. Therefore, in the light of the above, usage of trademark in accordance with Section 30 justifies the concept of comparative advertising.

Assessing goods through an illustrated contrast between two competing goods, with the aid of comparative advertising, certainly attracts a definite extent of adoration and publicity that cannot be evaded and thus such forms of advertisements clearly act as a kaleidoscope of opportunities. The judicial proposition in this regard can provide a better outlook on the concept of comparative advertisements. 

It can be inferred that the products of the industrial competitors shall be inadequate, if evaluated upon detailed comparisons with the advertiser’s products. In the acclaimed judgment on this subject matter, ‘Colgate Palmolive Company and Ors. vs. Hindustan Unilever Ltd.’, the Delhi High Court vindicated that a certain amount of disparagement is tacit, and one shall not initiate a claim against the other party for the infringement of their rights with regard to disparagement or denigration of their brand, business, or goods through comparative advertising.

The prerogative lies with the advertiser who shall, limited to certain puffing, involve the competitors’ goods in such advertisements but ensure that the products of the competitors are not denigrated but simply compared while certainly showcasing that the products of the advertiser are better than that of its competitors.  

Under another imminent judgment delivered by the High Court of Delhi in 2015, ‘Havells India Ltd. and Ors. vs. Amritanshu Khaitan and Ors.’, it was held that comparative advertising shall be permissible due to cutthroat industrial competition and for the reasons pertaining to public insight. 

The distinct intention for publishing any advertisement persists to waver opinions of those to whom the advertisements are addressed, public and consumers of the products or services. The Havells case (supra), further, postulated requisite conditions on which comparative advertising of similar products shall be permitted: (i) where the goods or services meet the same needs or are intended for the same purpose; (ii) encompassing one or more material, relevant, verifiable, and representative features; and (iii) products with same designation of origin, as the case may be. Comparative advertisements are conferred rightful and lawfully accepted wherever the compared products align with each other’s parameters and objectives. 

The Delhi High Court in ‘Dabur India Ltd. vs. Colortek Meghalaya Pvt. Ltd. & Anr.’ reviewed the propositions on comparative advertisements as held by the Calcutta High Court and held that while glorifying advertisements is acceptable, the same cannot transgress grey areas of permissible assertion and if still done by the advertiser, then the advertiser must have reasonable factual basis for those assertions. However, advertisers shall not falsely state that their products are better than those of their industry rivals and the fact remains that unsubstantiated claims for products shall not be viable, ethical, and reasonable in principle.

Therefore, it can be reiterated from the abovementioned judgments that as long as advertisements are considered puffery, the courts shall not warrant any interference in the comparative advertising practices of the entrants. For an ease of understanding, puffery involves expression of opinions and neither intends to make representations to facts nor considered as statements of fact for the target consumers. 

Furthermore, when it comes to infringement of intellectual property rights i.e., trademark, aggrieved claiming such violation partakes the onus of proof since comparative advertising consists of mere trade puffery, although uncomfortable for the competitor being the owner of a registered trademark, such comparative advertisement need not fall under the ambit of trademark infringement. The Trademarks Act, 1999 does not impose any obligation on the courts to attempt enforcement through trademark legislation, no infringement shall occur by mere use of the competitor’s trademark for the purposes of advertising one’s brand while comparing similar products of a competitor.

Central Consumer Protection Authority: Guidelines for Prevention of Misleading Advertisements

The ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’, was issued by Central Consumer Protection Authority (“CCPA”) under Section 18 of the Consumer Protection Act, 2019 with an intent to seek restraint on misleading advertisements and endorsements to secure the interest of the consumers. These guidelines are particularly aimed to expand the existing framework and enumerate clear criterions for the advertisers with respect to the guidelines required to be followed for advertisements.

Penalty of INR 10,00,000 can be imposed by the CCPA on manufacturers, advertisers, and endorsers for displaying misleading advertisements and a penalty up to INR 50,00,000 for subsequent contraventions. Further, the endorser of misleading advertisements can be prohibited from making any endorsement for up to one year and for subsequent contraventions the prohibition can be extended up to three years.  

Advertisements and Freedom of Speech

The Constitution of India guarantees the fundamental right of speech and expression under Article 19(1)(a) subject to restrictions mentioned under Article 19(2). The Hon’ble Supreme Court of India in ‘Tata Press Ltd. vs. Mahanagar Telephone Nigam Limited and Ors.’ extended this right to promote the view on commercial speech as a fundamental right as attributed in the Indian Constitution. Further, the right to information also falls within the ambit of Article 19(1)(a) which empowers the citizens of the country the right to know thereby protecting the structure of the Constitution of India. 

Notably, advertising as ‘commercial speech’ entails two aspects wherein advertising is nonetheless dissemination of information regarding the advertised product and the public is benefited by the information available through such advertisement. The democracy of economic system would be hampered without freedom of commercial speech and therefore it has been held that any restraint or curtailment on advertisements would affect the fundamental right under Article 19(1)(a) of the Constitution of India on the facets of propagation, publication, and circulation. Further, consumers have right to receive the commercial speech and that Article 19(1)(a) not only guarantees freedom of speech and expression but also the right of individuals to receive commercial speech.

It is pertinent to note that consequently most advertising instances reflect in essence the freedom of speech and expression of the individuals/entities issuing, circulating or publishing the comparative advertisements, thus, protected under the Indian Constitution in accordance with the Article 19(1)(a) as a facet of ‘commercial speech’ which can only be restricted as per Article 19(2). 

Conclusion

It is a well-established principle that an advertisement shall be deemed to be valid and not misleading if it contains truthful and honest representation and does not deceive consumers by inflating the accuracy, scientific validity, practical usefulness, capability, performance, or service of the goods. In addition, the courts have held that statements making comparisons to a competitor's product are not defamatory, libelous, confusing, or misleading if they are true and factually accurate, according to their interpretation and opinions in various cases. 

It is apparent that the amendment to provisions of the Consumer Protection law has subsequently incorporated the attributes of misleading/false advertisements. This necessitates superior fortification of consumer rights specifically pertaining to advertisements, such that penalties have been asserted under the Consumer Protection Act, 2019 upon which the advertisers publishing false and misleading advertisements call for stricter parameters in instances of such advertisements.

The courts have ruled that advertising shall be capable to identify a unique quality/trait that distinguishes their goods from those of their rivals and to draw comparisons as long as such comparisons contain true and accurate facts. Even though the jurisprudence on misleading and disparaging advertisements in the disguise of comparative advertisements has been well-settled, nevertheless, what remains critical is the interpretation of the relevant authorities adjudging the impugned disputes.

Frequently Asked Questions

1. Whether comparative advertisements are allowed in India?

Comparative advertisements are valid to the extent advertisements observe fairness in competition and ensure non-occurrence of exertion of undue influence upon the consumers, infringe competitor’s trademarks, or issuance of disparaging statements directed towards the competitor’s products. However, it must be noted that the settled law remains that although it is open for individuals as advertisers to exaggerate claims relating to their products, but not open for the individuals to disparage other’s products being compared under the advertisements. 

2. Whether there are certain laid down legal standards or advertising regulations in India?

The Department of Consumer Affairs through the Central Consumer Protection Authority notified ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’ established under Section 10 of the Consumer Protection Act, 2019. These guidelines were released for the purpose of regulation of matters in pursuance of consumer rights, unfair trade practices and false/misleading advertisements that are detrimental to public and consumer’s interests.

3. Considering there is an infringement of a trademark by the advertiser, what recourse does the rightful owner of such trademark has and what must be proved?

In the event an advertiser utilizes the trademark of its competitor for the purpose of drawing comparisons between its products and its competitor’s products, and thereof disparages the competitor, then such an advertiser’s action invokes disparagement and misleading comparative advertisements. It shall be deemed to be infringement of the competitor’s trademark in case the competitor truly contests that its trademark has been utilized wrongly under the Section 29(8) of the Trademarks Act, 1999 for the purpose of comparative advertising and advertiser wrongfully utilizes the trademark.