NON-FUNGIBLE TOKENS AND INTELLECTUAL PROPERTY RIGHTSJune 3, 2021
Me in a Minute – JoshSeptember 8, 2022
Comparative advertising can be defined as “an advertisement in which a particular product or service specifically mentions a competitor by name for the express purpose of showing why the competitor is inferior to the product naming it”, thus highlighting the advantages of goods or services offered by one proprietor over those of another proprietor. Some of the advantages of this are:
- it encourages a healthy form of competition between various products on the market;
- the consumer benefits the most due to competition;
- proprietors are forced to ensure superior quality of goods and services and will need to ensure reasonable pricing to compete; and
- it improves quality of information available to consumers.
The disadvantages are:
- the proprietors become open to misleading information and slating of their products and consumers run the risk of being misled.
Comparative advertising is generally prohibited in South Africa due to trade mark infringement. In the case of Verimark v BMW, it was decided that the use of a BMW in an advert selling car polish did not constitute trade mark infringement. According to the judgment, there needs to be a material link to the trade mark proprietor (BMW) and the trade mark needs to be used as a “badge of origin”. The presence of the BMW trade mark was found to be merely incidental and therefore the use thereof cannot be seen as infringement.
In the UK case of O2 Holdings v Hutchison 3G (UK), there were bubble images used to advertise telecommunication products. In these images, Hutchison claimed that there services were cheaper than those offered by O2. Proceedings were instituted against O2 for this reason but the price difference was accepted as true by Hutchison. The court decided that there was no infringement in this regard as the information provided was not misleading at all and in fact true, as admitted by the party instituting action.
There are various laws which apply to comparative advertising including: trade mark law, the common law of passing off and unlawful competition. Comparative advertising can also be divided into direct and indirect, the difference being that direct comparative advertising expressly mentions a competitor’s product and claims that its product is better, for instance: “Just one ADVIL is as effective as two regular strength TYLENOL.” Indirect comparative advertising is simply referring to the characteristics of another product.
Comparative advertising is very popular in the USA and the EU. A recent analysis found that 60% of advertisements in the USA contained indirect comparative claims, 20% contained direct comparative claims and the remaining 20% contained no comparative claims. Comparative advertising is mentioned in Section 43(a) of the US Trade Mark Act, otherwise known as the Lanham Act. This section essentially states that if the use of a competitor’s trade mark is likely to cause deception or confusion regarding where the product or service originates from, the advertisement will be prohibited. If, however, the proprietor can prove that it has clearly distinguished its brand from that of the competitor and the claims made are true, then it is permissible to mention and refer to a registered trade mark either to associate or differentiate brands.
The EU can be seen as relatively open to the idea of comparative advertising. There has been a draft directive that was published in October 1994 which will be binding on all European states. The basic principle of this directive is that comparative advertising must be allowed in all member states subject to very stringent conditions such as; the advertisement needs to always be objective, relevant and verifiable and must not mislead, cause confusion or discredit any goods or services of a competitor.
The previous Act that dealt with trade marks was the 1963 Trade Marks Act. Under this Act an action could only be brought if the goods or services which were being offered in the advertisement fell within the specification of goods or services for which the trade mark was registered. This made it rather difficult as direct comparative advertising would be permitted if the goods or services that were being offered differed slightly from the goods or services that the trade mark was registered for. Under the new 1993 Trade Marks Act, Section 34 deals with the infringement of a registered trade mark. Certain exceptions are worth mentioning such as Section 34 (2)(c) which allows the use of another proprietor’s trade mark if it is it is the bona fide intended purpose of that product. For instance, saying that a coffee capsule is Nespresso compatible.
Advertising Standard Authority (ASA) – The Regulatory Body*:
The ASA is an independently financed, self-regulated body which has produced a Code of Advertising Practice, the main purpose being: “The protection of the consumer and to ensure fair play amongst advertisers. In the latter case it lays down criteria for professional conduct while at the same time informing the public of the self-imposed limitations accepted by those using or working in advertising. Its rules form the basis for arbitration where there is conflict of interest within the business, or between advertisers and the general public.” According to this code, comparative advertising is allowed subject to certain strict requirement such as; the adherence to all legal requirements, verifiable claims which are not misleading, no infringement of goodwill or disparagement and the facts are fairly chosen. If an advertisement is found to be infringing in terms of the ASA rules, something called an “ad alert” is issued and serves as a warning that the advertisement should be withdrawn. If the advertiser decided to ignore this warning, the ASA is not empowered to enforce rulings beyond this.
An official complaint can be lodged at the ASA, with a turnaround time of 2-3 months and an average cost of approximately R24 000-00 in official charges. This is far quicker and more cost effective than seeking relief from the courts. In order to prove a claim, the complainant must have documentary evidence to support the claim being made. If judgement is handed down by the ASA and the infringing party is a non-member, it is not binding on them. The ASA has often been called a spineless association, leaving many aggrieved parties with no choice but to seek an urgent court interdict to prevent the advertisements being aired further. This incurs unnecessary costs and is often not granted by the courts.
*At present, the ASA is not operational as it was issued with a notice of liquidation in October 2018. It is believed that the ASA will be replaced by a new authority, called the Advertising Regulatory Board, however this has not yet been confirmed.
While international trends are removing restrictions against comparative advertising, South Africa has not yet embraced this global trend, and our legislature is outdated and needs to be looked at in this regard. The question is ultimately: do we protect the producer’s goodwill or does one benefit the consumer by providing it with the opportunity of being given greater information?
Jean van Vuuren – Candidate Attorney
Kim Rademeyer – Partner
The above does not constitute legal advice and, if you do have an issue relevant to this article, please contact our firm for an appointment.