Tort Of Product Disparagement Final

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Tort of Product Disparagement:Exploring the Legal Remedy

Hareesh Gupta,Dr. Ram Manohar Lohiya National Law University,

Lucknow.


To what extent should the comparative advertising be authorized or limited in India?

Whether the present Competition Act, 2002 (unlike the repealed MRTP Act, 1969., Section 36A(1)(x)) provides protection to the traders against unfair trade practice of disparaging advertisements which tends to creates unfair competition in the market?

Whether Section 29(8) of the Trade Marks Act, 1999 can be amended to include within its ambit the remedy for product disparagement in cases where the mark of the competitor is not depicted (i.e., product disparagement leading to implied infringement of the mark) ?

What is the legislative intent of Section 2(1)(r)(x) r/w Section 14(1)(hc) of the Consumer Protection Act, 1986? The said provisions provided for remedy for product disparagement to the complainant within the meaning of the said Act. The said remedy very often invoked.

Objective of the Study


According to Black’s Law Dictionary the word ‘disparage’ means

to connect unequally; or to dishonor(something or someone) by comparison; or to unjustly discredit or detract from the reputation of

(another’s property, product or business); or a false and injurious statement that discredits or detracts

from the reputation of another’s property, product or business.

That implies, ‘disparagement’ is false and injurious statement that discredits or detracts from reputation of another’s property, product or business.

What is Product Disparagement?

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Every extravagant phrase used in commendation of his own goods may be an implied disparagement of the goods of all others in the same trade;

it may attract customers to him and diminish the business of others who sell as good and even better articles at the same price;

but that is a disparagement of which the law takes no cognizance. In order to constitute disparagement which is, in the sense of law,

injurious, it must be shown that the:

(a) defendant's representations were made of and concerning the plaintiff's goods; (b) that they were in disparagement of his goods and untrue; (c) and that they have occasioned special damage to the plaintiff.

Unless each and all of these three things are established, it must be held that the defendant has acted within his rights and that the plaintiff has not suffered any ‘legal injuria’.

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In Evans V. Harlow, Lord Watson summarised the essential requirements for maintaining an action for disparagement, in the following lines:


Article 19(2) of the Constitution of India which deals with reasonable restrictions provide for restrictions on the freedom of commercial speech under Article 19(1)(a) of the Constitution of India.

Section 36A (1)(x) of the repealed Monopolies and Restrictive Trade Practices Act, 1969 had stated about “disparagement of another trader’s product” as an unfair trade practice.

Section 29(8) of the Trade Marks Act, 1999 deals with disparagement by infringement of the competitor’s mark. Defines what advertising would amount to infringement of a registered mark.

Remedy under the Consumer Protection Act, 1986, very often invoked by the consumers.

Exploring whether Section 4(2)(a) of the Competition Act, 2002 would cover within its ambit the remedy for product disparagement as the same leads to unfair market conditions. recognition.

Statutory and Constitutional remedy to product disparagement


In Tata Press Ltd. v Mahanagar Telephone Nigam Ltd., AIR 1995 SC 2438: held that advertising is “commercial speech”- Article 19 (1) (a) of the Constitution.

This freedom extends itself to public speaking, radio, television and press: limited by Article 19(2) which imposes certain reasonable restrictions

in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence.

These restrictions could be traced to the definition of the term "unfair trade practice" in Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969 (now repealed) and Section 2(1)(r) of the Consumer Protection Act, 1986.

Therefore, any advertisement which defames another’s product intentionally with a view to decrease the market share of the competitors would fall under the reasonable restriction clause under Article 19(2) of the Constitution of India.

Article 19(2): Reasonable Restrictions


The provision which pertains to comparative representation contained in Section 36A (1)(x) of the MRTP Act, 1969:

“Section 36A……’unfair trade practice’ means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provisions of any services, adopts any unfair or deceptive practice including any of the following practices, namely, the practice of making any statement, whether orally or in writing or by visible representation which;

(x) gives false or misleading facts disparaging the goods, services or trade of another person.”

MRTP Act, 1969 (repealed by Section 66 of the Competition Act, 2002)


1. Whether the compared product in the disputed advertisement is identifiable? In many cases the MRTP Commission took the view that as long as the product was not recognizable to the consumers, the advertisement could not be misleading or cause disparagement.

2. What is the effect on the common, reasonable man and what leads him to a wrong conclusion? In one case Supreme Court ruled that showing affiliation to a trade mark in an advertisement rather than its owner company, with which the advertiser has collaboration, does not lead to misrepresentation amounting to misleading of the consumers.

3. Whether the disputed advertisement contained a false statement and was

misleading to the consumer, leading to disparagement?

4. Whether the knowledge of the consumers is sufficient to make an association with the compared product by implication?

The above shows that the MRTP Act was fractured and provided limited protection

and guidelines to companies. The trade mark issues were left out and fair competition was not the focus.

The study of cases decided under the old Act shows that the focus was primarily on the protection of the consumer rather than the use of the infringed trade mark. The

following questions usually arouse under the MRTP Act:


Section 29(8) discussing what form of advertising would amount to infringement reads:-

A registered trade mark is infringed by any advertising of that trade mark if such advertising-

takes unfair advantage and is contrary to honest practices in industrial or commercial matters; or

is detrimental to its distinctive character; or

is against the reputation of the trademark.

In effect, the provisions read together allow comparative advertising as long as the use of the Registered Trademark does not amount to infringement. Therefore, as long as an advertiser uses a registered trademark, however proving that he does not fall under the ambit of any of the clauses of Section 29(8), he may continue to practice comparative advertising. (As per Section 30(1). But the judicial precedents governing law as to product disparagement overrides the statutory protection in

cases where the disparagement occurs by non-use of mark .

Trade Marks Act, 1999


Section 29(8) and more particularly Section 29(8)(c) could cover within it the remedy for product disparagement. The claim of product disparagement or defamation means any form of advertising which affects the reputation of the trade mark. The word “any advertising of that trade mark” should includes within its meaning all forms of advertising.

Product disparagement occurs even where no mark is published or advertised. Such are cases of ‘implied infringement of the mark’ where the advertisement disparages the reputation of the ‘mark’ without depicting the mark visually. The trader own the mark and it is the mark through which the consumer views the product. Therefore, defamation in actual sense is the defamation of the mark. The existing view restricts the scope of Section 29(8). Defamation to be viewed from the point of view of the consumer not the trader.

Though the Section does not explicitly use the words “disparaging advertising”, it clarifies any advertising that takes unfair advantage or is detrimental to the distinctive character or against the reputation of a mark as a “disparaging advertisement amounting to infringement of the mark.

Whether disparaging advertisement by non-depiction of mark is covered by Section 29(8) of the Trade Marks Act, 1999 ?


Section 2(1)(r)(x) of the Consumer Protection Act, 1986 defines ‘unfair trade practices’

as a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice and includes within its meaning any practices which gives false or misleading facts disparaging the goods, services or trade of another person.

The law relating to unfair trade practice existing from 1969 under the MRTP Act and later imported into Consumer Protection Act, 1986 does not appear to have been taken advantage of by very many persons to prune misleading advertisements, despite the introduction of Cable Television Networks (Regulation) Act, 1995 and the Rules issued there under.

The Judicial precedents shows that the consumer had very rarely invoked the provisions of the Consumer Protection Act, 1986 claiming that the said disparagement has misled them in making selection of the quality of product they seek to buy and the practice is ‘unfair’ within the meaning of Section 2(1)(r) which defines ‘unfair trade practices’

Consumer Protection Act, 1986


Under the Competition Act, 2002, the law relating to disparaging advertisement falls under Section 4(2)(a) of the Competition Act, 2002 which deals with abuse of dominant position. It states that abuse of dominant position consists of directly or indirectly imposing unfair or discriminatory (1) condition in purchase or sale of goods or service; or (2) price in purchase or sale (including predatory price) of goods or service. Explanatory clause appended to the said sub-provision states that the unfair or discriminatory condition in purchase or sale of goods or service referred to above shall not include such discriminatory condition or price which may be adopted to meet the competition.

Advertising plays an important role in marketing of products’ which ultimately influences the consumers’ decision to buy or not to buy a particular product. Therefore, a disparaging advertising may impose unfair or discriminatory condition in the market influencing the consumers’ choice of buying a particular product. The Competition Act, 2002 which has replaced the MRTP Act, 1969 has taken into consideration the interest of the two competing marketing units. However, the said remedy has still not been availed and has not received judicial recognition.

Competition Act, 2002


Reckitt & Colman of India Ltd v MP Ramachandran. (1999)19 PTC 741This decision followed an unreported decision of the same Court dated September 30 1994 in the case of Chloride Industries Ltd v Standard Batteries Ltd. The case set a trend in this branch of law and the five principles laid out in it became the benchmark for deciding such cases. The five principles were:

1. A tradesman is entitled to declare his goods to be the best in the world, even though the declaration is untrue.

2. He can also say that his goods are better than his competitors even though this statement is untrue.

3. For the purpose of saying that his goods are the best in the world or his goods are better than his competitors he can compare the advantages of its goods over the goods of others.

4. He, however, cannot while saying his goods are better than his competitors, say that his competitors' goods are bad. If he says so he slanders the goods of the competitors. In other words he defames his competitors and their goods, which is not permissible.

5. If there is no defamation to the goods or the manufacturer of such goods no action lies, but if there is such defamation an action lies and the Court is competent to grant both damages and an injunction restraining the repetition of such defamation.

Judicial precedents on product disparagement


The Court explained that although a seller has the latitude to represent his product in such a manner that he attracts more customers than he normally would have, such latitude would translate into description and “reasonable assertion” of the product, but not to misrepresentation. In other words, factual representations are perfectly legitimate.

The Apex Court went a step further to state that “commendatory expressions” (puffing) are not dealt with as serious representations of fact.

When the SC says that “commendatory expressions” are not dealt with as serious representations of fact, it does not mean that such representations are untrue or misleading. On the contrary, what it means is that such representations cannot be taken seriously and that there is no obligation on the part of the seller to the customer with regard to the true quality, rather standing of goods merely because the seller has resorted to puffing.

However, the Supreme Court also cautioned that these principles are by no means conclusive since, by and large, cases of puffing are borderline cases, and that there exists a very thin line which separates puffing from falsehood.

Colgate v. Hindustan Lever (1999),


In Colgate Palmolive (India) Ltd v. Hindustan Lever Ltd, AIR 1999 SC 3105, the

Supreme Court crystallized specific considerations for a Court in the matter of grant of interlocutory injunction as follows:-

extent of damages being an adequate remedy;

protect the plaintiff's interest for violation of his rights though, however, having regard to the injury that may be suffered

by the defendants by reason thereof;

the Court while dealing with the matter ought not to ignore the factum of strength of one party's case being stronger

than the other's;

no fixed rules or notions ought to be had in the matter of grant of injunction but on the facts and circumstances of each case

the relief being kept flexible;

the issue is to be looked at from the point of view as to whether on refusal of the injunction the plaintiff would suffer

irreparable loss and injury keeping in view the strength of the parties' case;

balance of convenience or inconvenience ought to be considered as an important requirement even if there is a serious

question or prima facie case in support of the grant;

whether the grant or refusal of injunction will adversely affect the interest of the general public which can or cannot be

compensated otherwise.

Factors to be considered while granting injunction in cases of product disparagement


Essentials of Product Disparagement:

A false or misleading statement of fact has been made about his product; That the statement is either deceived, or has the capacity to deceive, substantial segment of

potential consumer. The Court held that although a seller is entitled to glorify his product, in the process, he is not to denigrate or disparage a rival’s product.

The deception is material, in that it is likely to influence consumer’s purchasing decisions. As to question of disparagement the Court said three things has to be kept in mind: (a) intent

of the commercial; (b) manner of the commercial; and (c) storyline of the commercial and the message it seeks to convey.

In Dabur India Ltd. v Wipro Ltd., 2006, the Court held that: (WIPRO Sanjeevani Honey and Dabur’s Honey.

“It is one thing to say that the defendant's product is better than that of the plaintiff and it is another thing to say that the plaintiff's product is inferior to that of the defendant."

In Pepsi Co Inc and Ors v Hindustan Coca Cola Ltd and Another, 2003 (27) PTC 305


In Dabur India Limited v. Colgate Palmolive India Ltd, AIR 2005 Del 102, the Delhi High Court held that generic disparagement of a rival product without specifically identifying or pin pointing the rival product is equally objectionable. Clever advertising can indeed hit a rival product without specifically referring to it. No one can disparage a class or genre of a product within which a complaining plaintiff falls and raise a defence that the plaintiff has not been specifically identified.

The defendant in argument relied on English Judgment by Willes J, wherein the Court held that, “Assuming the article to be libelous, it is not a libel on the plaintiff; it only reflects on a class of persons dealing in such objects; and it is immaterial in this view whether they are genuine or not. If a man wrote that all lawyers were thieves, no particular lawyer could sue him unless there is something to point to the particular individual, which there is not there”. The Indian Court disagreed saying that as the case of libel and not a commercial advertisement. It further said that, “the practice of undue obeisance to English jurisprudence without any thought to the merit and reasoning of such judicial wisdom should also be discouraged.”

Generic Disparagement

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In a Judgment, the High Court of Madras held that false claims by traders about the superiority of their products, either directly or by comparing them against the products of their rivals, were not permissible.

The Court asserted that consumer interest is an element which must be considered when assessing comparative advertising. This appears to be first time a court has included discussion of consumer interest in its analysis of such advertising.

The Madras decision however seems to have done away with this rationale for distinguishing between subjective and objective claims by holding that all puffing is an actionable wrong

The Madras High Court observed that: “Recognizing the right of producers to puff their own products even with untrue claims, but without denigrating or slandering each other’s product, would be to ‘de-recognize’ the rights of the consumers guaranteed under the Consumer Protection Act, 1986.”

The Court has taken a strong objection to any untrue statement in an advertisement held that: “To permit two rival traders to indulge in puffery, without denigrating or slandering each other’s products, would benefit both of them, but would leave the consumer helpless. This observation was based on the court’s assumption that comparative advertising, even if it did not amount to a disparagement of other’s goods, could result in consumers being misled.

This balancing of trader interests with consumer interests means that an advertisement which makes false claims, whether comparative or not, may be subject to an injunction or restraining orders from a court.

However, the High Court of Madras failed to notice a recent order of the Delhi High Court in the case of Reckitt Benckiser v Hindustan Lever, which held that mere ‘generic puffery’ is not actionable, 2008 (38) PTC

139 (Del)

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Consumer’s interest taken into consideration for the first time in Colgate Palmolive (India) Limited v Anchor Health & Beauty Care Private

Limited, (2008) 7 MLJ 1119


Under Reckitt Benckiser v. Hindustan Lever, 2008 (38) PTC 139 (Del), claim of commercial disparagement to succeed, the Court to approach the issue from the perspective of the hypothetical “average person of imperfect recollection” picked from the target group of consumers.

For example; “CCD sells the best coffee” is unlikely to make much of an impact on a group of coffee lovers; “CCD sells the cheapest coffee” may well cause them to think about switching over to CCD from Barista. Thus, drawing out from this rationale, the Delhi decision concluded that a tradesman is entitled to declare that his goods are the best in the world – even if such a declaration is untrue (as it almost inevitably will – at least, it will be impossible to prove as true). Mere puffing (by definition, exaggerated subjective opinion) was not an actionable wrong.

Madras High Court which ignored the Delhi High Court Judgment Court went on to hold that any puff must amount to an “unfair trade practice” under the Consumer Protection Act. It was held that allowing competitors to puff their products was not in the public interest, and could not be permitted. Undoubtedly, this is true only insofar as consumers are likely to believe the claims to be true. But are claims of obvious subjective exaggeration (for instance, “best coffee in the world”) really prejudicial to consumer interest?

It appears that this decision presents a clear conflict between the Delhi and Madras High Courts on the issue of the permissibility of puffing. This conflict can possibly be resolved by confining the observations made in the Madras decision to objective claims about product quality rather than clearly subjective puffs.

Delhi High Court’s view on puffing which came prior to Madras High Court Judgment


The approach taken on comparative advertising up to the Madras High Court judgment was consistent is saying that, while the law allows you to say that your goods are better, it stops you from saying that your competitor's goods are inferior.

But the Madras High Court is now of the view that the moment you say that you are better when in fact you are not, you are implying that others are inferior and also misleads the consumer. This means that businesses should not risk making any untrue or exaggerated statements in advertisements.

Position before the Madras High Court Judgment


Most recently, the latest on-air communication of homecare brand Rin has openly taken on rival, P&G’s Tide, without the typical airbrushing or pixellation to hide the rival brand name on TV. The Rin washing powder commercial, which went on air in Friday, 02nd March, 2010, claims to be a better quality product in comparison to Tide.

The visual clearly shows a variant of Tide, Tide Naturals, shown against Rin with the audio saying ‘Tide se kahin behatar safedi de Rin’ (Rin gives better whiteness than Tide). Within a day of its going on air, the campaign has landed up in Madras High Court. HUL claimed that their assertion is backed by laboratory data and certification of superior quality product.

The recent Rin v. Tide issue pending in the Madras High Court


The recent battle between P&G and HUL was infact long drawn, with its roots linked to an earlier suit, filed by HUL against P&G in Chennai on 25th February 2010, wherein HUL was successful in obtaining injunction against P&G for its Tide Natural commercial claiming that the detergent contains natural ingredients such as lemon and 'chandan' (sandalwood). P&G was not able to substantiate their claim of natural ingredients and that it provided "whiteness with special fragrance".

P&G filed an application before the Madras High Court for injunction restraining HUL from airing the rin advertisement and has also filed an application for vacating the previous injunction order against them restraining their detergent ad.

Background of Rin v Tide


Pending the Madras High Court Judgment on the advertisements of the

rival HUL and P&G, the Calcutta High Court however, on 05th March,

2010 restrained FMCG major Hindustan Unilever from telecasting its

controversial comparative Rin v/s Tide TV commercial. Delivering its

Judgment on a petition filed by rival Procter and Gamble (P&G), the

maker of the detergent Tide, Justice Patheriya ruled that the present

commercial amounts to a clear case of disparagement i.e., a manufacturer

is not entitled to say that his competitor's goods are bad so as to puff and

promote his goods.

Calcutta High Court on the Rin v Tide matter


On a submission by HUL that there were technical difficulties pertaining to satellite feeds in

immediately withdrawing the commercials, the order will be applicable from Monday, 08th March,

2010. In the meanwhile HUL has agreed to reduce the frequency of the ads, till its withdrawal.

The injunction has been granted on the following grounds:

a) The HUL ad depicted Tide Naturals whereas the voice-over was for Tide;

b) The laboratory reports produced by HUL under cover of two affidavits in support of its claim of

superior whiteness had inherent defects i.e., the ad drew comparison of samples of Tide and Tide

Naturals;

c) The Judgments quoted by HUL pertained to print media and not television or electronic media,

which have a wider impact and reach. Thus the Judgments were not applicable.

Grounds for Injunction in Calcutta High Court


This is what Unibic India found soon after the launch of their biscuit ‘Great Day’. Accompanied with the tagline, “Why have a good day, when you can have a great day!”, this obvious stab in the direction of competitor Britannia’s ‘Good Day’ biscuits, has led to the issuance of an injunction order by the Bangalore City Civil Court on December 12 in 2007. The order also now restrains Unibic from placing any further advertisements that disparage ‘Good Day’ in any manner especially as in their copy where they urge consumers to try Great Day and not ‘any other mere biscuit’

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Perhaps, Unibic can take a leaf out of the Kingfisher book which cheekily pulled off an advertising campaign without being subject to any injunction! Early this year, when both Jet and Kingfisher Airlines started flights to New York daily, Jet Airways put up a hoarding with the phrase “We’ve Changed!”. In probably one of the most brilliant campaigns that the Indian advertising scene has exhibited, Kingfisher almost immediately put up a hoarding right above, with the words “We made them change!”.

The result: Jet Airways almost immediately pulled down its hoarding, with no reply to Kingfisher’s tongue-in-cheek advertising. And to top it all off, at least the present Indian law has no room for Jet to successfully sue Kingfisher, since there was no disparaging of the brand, nor a use of Jet’s trademark in any manner.

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The following conclusions are drawn from the study:

The Advertising Code of Self-Regulation formulated by the Advertising Standards Council of India which was later given legal recognition by notifying amendment in the Cable Television Networks (Amendment) Rules, 2006 is not implemented properly and needs judicial recognition. It does not create an enforcement mechanism which has necessary teeth.

Recourse must primarily be made to the existing legal protection under the Consumer Protection Act, 1986. Reliance on the common law remedy must be made in addition to and in supplementary of the existing statutory protection, not independently.

Section 29(8) of the Trade Marks Act, 1999 needs to be amended or interpreted in a way to include within its ambit the cases of disparagement by non-depiction of the mark or the cases of disparagement which includes implied infringement.

Need to explore whether the remedy under the Competition Act, 2002 can be claimed in the cases of product disparagement. Supreme Court in recent judgment has stated that in absence of the protection as prevailed under the MRTP Act, it can approach Competition Commission, but has not pointed out the relevant provisions of the Act.

Litigation raised by the manufacturers only to gain popularity of their products. The recent rin v tide is the example of the said situation. HUL stated that their claim is based on laboratory tests done through globally accepted protocols in independent third-party laboratory test, but later it failed to substantiate their claims. Injunction should not be granted unless damages claimed.

Fair Competition, Consumer’s interest and trader’s interest – Balancing.

Conclusion

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Documents

Tort Of Product Disparagement Final