legal aspects of comparative advertising and a strategy for its use

Legal Aspects of Comparative Advertising and a Strategy for Its Use

Matthew Anthony Murphy*

Introduction Comparative advertising is growing in popularity, both in Australia and overseas.' The laws regarding the use of comparative advertising vary in form from country to country and involve complex combinations of both common law and statute based regulation. Belinda Mills in a recent article describes comparative advertising by reference to advertising in general:

A survey of advertisements reveals that there are three categories into which all advertisements fall: (1) advertisements that refer only to one brand of product and make no reference to

competing products either directly or indirectly - 'non-comparative' advertisements;

(2) those that refer only to attributes of one brand of product but that refer indirectly to the attributes of rival or competing products - 'indirectly comparative' advertisements;

(3) advertisements that directly compare attributes of one product with attributes of a specifically named or recognisably presented, competing brand - 'directly com- pa ra t i~e ' . ~

Recently the Intellectual Property Committee of the Business Law Section of the Law Council of Australia suggested the following definition:

'comparative advertising' means advertising which includes reference to a trade mark of which the advertiser is not the owner in a way which does not impute proprietorship

* BBUS (Accy), LLB 1 D Harland 'The Control of Advertising - A Comparative Overview' (1993-94) 1 CCLJ 95 at 110. 2 B Mills 'Comparative Advertising: Should it be allowed?' [I9951 9 EIPR 417 at 417.

in the mark to the advertiser and for the purpose of comparing the goods or services of the advertiser to those of the owner of the mark."

A recent analysis of television advertisements in the US found that approxi- mately 60% contained indirect comparative claims, 20% direct comparative claims, and 20% contained no comparative claim^.^ It is a particularly attractive form of advertising for a trader to use in relation to a new brand of product where it will be competing with an established market leader. If the advertiser is able to success- fully associate the two products, but differentiate them so as to avoid a claim for passing off, trade mark infringement or breach of the trade practices legislation, it can enable that new brand to obtain a "free-ride" on the reputation of that established brand.

Concerns have been expressed that comparative advertising does not improve a consumers decision making ab i l i t~ .~ This paper will not examine the economic benefits and adversities associated with this form of advertising, but rather consider its use from the perspective of the trading reputations of the advertiser and competitor. Although protection of the public is the basis of this question due to the importance of s52 of the Trade Practices Act 1974 (Cth), the issue before a Court will be whether the consumer will be mislead or deceived rather than whether comparative advertising has assisted them in making an informed decision.

This paper will consider the web of laws governing the use of comparative advertising in Australia, with some attention given to the law in Europe and the US. It should also be acknowledged that in Australia at least, there exists a plethora of industry associations enforcing a range of voluntary codes. These include the industry-wide codes of the Media Council of Australia (MCA), codes adopted by associations of media proprietors, such as the Federation of Commercial Television Sta- tions (FACTS) and the Federation of Australian Broadcasters (FARB). The Adver- tising Standards Council (ASC) is an independent Council which deals with com- plaints that advertisers breach MCA codes. All advertisements must be approved by the appropriate body before they are broadcast (eg FACTS for television advertisements). An appeal is available to the ASC regarding a decision. Clause 11 of the MCA Advertising Code of Ethics is breached if an advertisement contains 'a spe- cific identifiable, misleading and/or unfair disparagement of a particular product or service provided by a competitor'. Thus for a commercial to be broadcast on television for example, FACTS must have considered it not to have breached t h s clause. If litigation follows, this decision will be relevant to the Court as considered by von Doussa J in Glev Pty Ltd and Glev Franchises Pty Ltd v Kentucky Fried Chicken Pty LtdG:

3 See P Armitage 'Aspects of Imitation and Comparison Marketing Under Intellectual Property and Trade Practices Law,' (1995) 25 Intellectual Property Forum 24 at 27.

4 Supra n.2 at 417. 5 Bid; also supra n.1. 6 (1994) ATPR 41,978 at 41 982.

12 QUTLJ Legal Aspects of Comparative Advertising

The conduct of the respondent, if it is conduct that is misleading and deceptive, is quite unwitting, or so it appears at the moment. The relevant material relating to the respondent's promotional campaign, including the leaflet of Pizza Haven circulated from 8 February 1994, was submitted to FACTS ... who vetted it and approved it as reasonable comparative advertising. That is not decisive, but in my view it is a matter to be taken into a c ~ o u n t . ~

Current Law and Comparative Advertising

Before embarking on a comparative advertising campaign, consideration must be given to trade mark law, passing off, trade practices legislation, as well as several other common law based actions.

1. Trade Mark Law

In Australia at least, in most cases where another's trade mark is used in a comparative advertisement, no resultant action for trade mark infringement will be justiciable. The Trak Marks Act 1955 (Cth) did not provide an express exemption from infringement for use of a rivals registered trade mark in comparative advertising. A literal reading of ss58 and 62 would suggest that such a use could constitute infringement8, however the High Court in Mark Foys Limited v Dauies Coop and Co LimitedY in following the House of Lords decision in Irving's Yeast-vite Limited u F A Hosenaillo, construed that infringing use within ss58 and 62 of that Act was limited to use as a trade mark so as to indicate a connection in the course of trade between the goods and the registered proprietor. This interpretation meant that it was very difficult to bring a successful trade mark infringement action concerning comparative advertising." However, this was not to say that traders could ignore the trade marks legislation completely. If the advertisement was framed so that it was possible to claim that the advertiser was "using" another's registered trade mark (ie indicating a connection in the course of trade), then in addition to an action for breach of s52 of the Trade Practices Act 1974 (Cth), a trade mark infringement claim may have been successful. Under the new Act (discussed below) and the old Act, the plaintiff must prove that the mark being used in the advertisement is being used to falsely denote the origin of the particular goods or services in relation to which the plaintiff has the mark registered. The following case demonstrates the difficulties with this claim.

7 Also note DorfZndustries Pty Ltd v Toose and Others (1994) 127 ALR 654, where the Court refused to interfere with the decision of the ASC on the issue of whether an advertisement contained anything which in the light of generally prevailing community standards was likely to cause serious offence to the community.

8 Supra n.3 at 26. 9 (1956) 95 CLR 190. 10 (1934) 51 RPC 110. 11 Note that with the introduction of the Trade Marks Act 1994 (UK), the United Kingdom appears to

have reverted to a similar position to that of Australia on infringing use and comparative advertising after legislation had previously been enacted to avoid the outcome in the Yeast-vite case - supra n.2 at 422.

In Shell Oil Company of Australia Limited v Esso Standard Oil (Australia) Lim- ited12 (the "Oil Drop Man case"), Esso sought to restrain Shell Oil from using a humanised oil drop in its advertising. Esso had registered a stylised form of oil drop as a trade mark for products and preparations for lubricating, heating, illuminating and fuel and power generating purposes. Kitto J, with Dixon CJ, Taylor and Owen JJ in agreement, considered that Shell's use of its oil drop man was not "use" as a trade mark:

But in my opinion it is implied both in s58(1) and in s62(1) that the use which is there referred to is limited to a use of a mark as a trade mark.13

With the aid of the definition of trade mark in s6 of the Act, the adverbial expression may be expanded so that the question becomes whether, in the setting in which the particular pictures referred to were presented, they would have appeared to the television viewer as possessing the character of devices, or brands, which the appellant was using or proposing to use in relation to petrol for the purpose of indicating, or so as to indicate, aconnexion in the course of trade between the petrol and the appellant. Did they appear to be thrown on to the screen as being marks for distinguishing Shell petrol from other petrol in the course of trade?I4

Esso were unsuccessful in their claim, however if similar circumstances arose again today, it is possible that the Court would find that the advertisement constituted a breach of s52 of the Trade Practices Act 1974 (Cth). In view of this case, much will depend upon the context in which the trade mark is used. In advertisements where another's trade mark is given prominence, a connection may be suggested, with the consequence that infringing use of that trade mark has occurred.15

An advantage of a trade mark infringement claim is that reputation does not need to be proved, as compared with passing off and s52 of the Trade Practices Act 1974 (Cth). Nevertheless, the trade mark infringement route is impeded by the entitlement of a defendant to seek rectification of the register in an appropriate case.16 The appendage of a s52 trade practices claim to an infringement action is therefore, usually an essential requirement due to this possible impediment and that discussed above.

2. Passing Off

Considering the limitation involved with a trade mark infringement claim, many actions regarding comparative advertising have been brought on the basis of passing off as well as s52 of the Trade Practices Act 1974 (Cth). The elements of a passing off action have been put as follows:

12 (1963) 109 CLR 407. 13 Ibid at 422. 14 Ibid at 425. 15 See S Ricketson The Law ofIntellectua1 Pwe t t y Law Book Company Limited Sydney 1984 at 702. 16 C Golvan 'Section 52 of the Trade Practices Act' (1991) IPLB 93 at 95.


(i) A misrepresentation (ii) Made by a trader in the course of trade (iii) To prospective customers of his or her or ultimate consumers of goods or services

supplied by him (iv) Which is calculated to injure the business of goodwill of another trader (in the

sense that this is a reasonably foreseeable consequence) and (v) Which causes actual damage to a business or goodwill of the trader by whom the

action is brought or will probably do so.17

The focus of this tort is on a misrepresentation rather than "use". Consequently, the scope of the tort regarding comparative advertising is greater given the restric- tive interpretation of "use" by the Courts in relation to the trade marks legislation.

In R & C Products Pty Ltd v S C Johnson & Sons Pty LtdI8, the respondent used certain elements of the applicants television advertising which were so identified with the applicant, so that the use by the respondent was held to constitute a breach of s52 of the Trade Practices Act 1974 (Cth) and a passing off by the respondent of its products as products associated with the applicant. The case is interesting from both a comparative advertising and imitative advertising perspective. The applicant manufactured insect sprays including "Mortein" and "Pea Beau" brands. The respondent produced and distributed similar products marketed under the name "Raid". The applicant has used the services of John Laws to promote Mortein in television advertisements, which had included the statement "When you're on a good thing, stick to it." The respondent .commenced television advertising featur- ing John Laws saying "When you find a better thing, switch to it". Davies J in the Federal Court noted:

In relation to get-up, the special relationship has sometimes been referred to as a "secondary meaning" which associates the goods with a particular trade ... Unless the elements of the get-up acquire that secondary signification of identifying products with a particular trader, the use of those elements by others in the trade will not mislead or deceive. In the present case, we are concerned not with get-up but with television advertising. But I apprehend that the principles are the same.lg

His Honour was prepared to hold that the adoption of elements of the advertising by another trade may give rise to a misrepresentation unless the other trader has taken steps to sufficiently distinguish its products from those of the applicant. Thus the Court concentrated on the imitative advertising rather than the comparative aspects in issuing the i n j u n c t i ~ n . ~ ~ Consider the effect of the advertisement if another person was to have been featured? It is probable that no injunction would

17 Erven Warnink Besloten Vennootschaap v J Townend [I9791 AC 731. 18 (1993) 26 IPR 98. 19 Zbid at 107. 20 Cf. Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd (1981) 55 ALJR 333.

have been granted since such a statement on its own would be viewed as subjective puffery.

In Sabre Corporation Pty Ltd v Laboratories Pharm-A-Care Pty Lt@l, the comparative advertising was to be found on the labels of the hair care products of the respondent. The applicant had the sale and exclusive distribution rights to hair care products manufactured in the US by Joico Laboratories Inc.. The respondent manufactured and distributed "Hairdressers Formula" with the following words included on the labelling:

If you like Joico Lauci you'll love Hairdresser's Formula Extra Body Shampoo for Fine, Thin and Limp Oily Hair. Compare and Save. Joico and Lauci are the trade marks of Joico Laboratories Inc. There is no connection between Joico and Hairdressers Formula. We believe this product is as good as Joico Lauci even though its formulation and fragrance may have some differences. Try it and see!

The applicant contended the respondent had contravened ss52,53(a), 53(c) and (d) of the Trade Practices Act 1974 (Cth). It also alleged such conduct constituted passing off in that "the respondent had passed off the Hairdressers Formula products as having the same ingredients, formulations, quality, characteristics, level of satisfaction and distinctiveness as the Joico products, and that the sales of the Hair- dresser's Formula products by reference to the Joico products has debased and will debase the reputation of Joico's distinctive hair care products."

Beazley J in refusing to issue an interlocutory injunction, considered the case primarily on the basis of the s52 breach claim. For the same reasons that the conduct did not breach s52, the Court concluded that the conduct did not constitute passing off. It is suggested that if the disclaimers were removed from the labelling, then passing off would have been established as well as contravention of the Trade Practices Act. This case illustrates the value in carefully worded disclaimers so as to enable comparative advertising to avoid claims of passing oV2, and possibly trade mark infringement.

In cases where registered trade marks are used, it is clear that an action in passing off will probably be more attractive than a trade mark infringement action due to the flexibility of common law.23 Judicial attitudes are tending to align the tort of passing off with s52 of the Trade Practices Act 1974 (Cth), and if this continues, it will continue to grow in its capacity to regulate unfair competition. It should also be noted that in the US where comparative advertising is very popular, the relevant

21 Unreported decision of Beazley J, Federal Court, 15 March 1995 - NG117/95. 22 Cf McDonald's Hamburgers Ltd v Burger King (UK) Ltd [I9861 FSR 45 where in an advertisement,

Burger King used the phrase "Not just Big, Mac". The court found there was a risk of confusion since although there was a disclaimer, it was in fine print and probably would not be noticed.

23 As will be discussed, the new Trade Marks Act will not alter this situation.


statute governing its use is s43(a) of the Landham Act - a statutory enactment, which appears to include the elements of passing off and s52 of the Australian trade practices 1egislatio1-1.~~ This states:

"Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which - (1) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation,

connection or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(2) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities or geographic origin of his or her or another person's goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."

3. Section 52 of the Trade Practices Act 1974 (Cth)

Section 52 of the Trade Practices Act has been descried as a plaintiffs " e ~ o c e t " ~ ~ . It is twenty three words in length, but it is probably the most wide ranging piece of legislation in Australia. In essence it requires corporations to act reasonably and honestly as regards competitors and most importantly, consumers. As discussed above, the appendage of a s52 claim is necessary in almost every claim concerning comparative advertising.

In Country Road Clothing Pty Limited u Najee Nominees Pty Ltd2" the principle that advertisers must compare "like with like" had an interesting application. Some commentators have criticised this decision as being inconsistent with other author- ity on the issuez7, and it is agreed that it is probably unwise to rely on the decision but rather confine it to its own particular facts.

In this case, Najee published a double page advertisement in a colour supple- ment to a Melbourne newspaper, of the same man in three different shots wearing a navy plaid double breasted suit. Each picture was labelled "pure new wool gaberdine suit" but then each had respectively - "Country Road $995", "Hugo Boss

24 Supra n.2 at 425. 25 W Pengilley 'Causation and Reliance in Misleading and Deceptive Conduct Law' (1994) 2 CCLJ

134 at 136 - "An exocet is a weapon which has the capacity to sink enemy missile and armed boats before they are near enough to launch their own attack. It is one of the most formidable naval weapons ever conceived."

26 (1981) ATPR 41-1096. 27 See W Pengilley 'Federal Court Rules on Najee Ad' (1991) 7 TPLB 27; W Pengilley 'Unconscion-

able and Misleading Conduct: How the Trade Practices Act is used and the Duty to Advise' (1992) QUTLJ 35 at 47; C Golvan 'Section 52 of the Trade Practices Act' (1993) 6 IPLB 75 at 80.

$795" and "Najee $349". At the top of the advertisement were the words "Why pay more?" and at the bottom "Compare suits, then compare prices".

Country Road alleged breach of s52 in that the advertisement mislead consumers by creating the impression that each of the suits were of the same quality. Heerey J dismissed the claim. The Court held that the advertisement was not misleading since it was not conveying the message that the three suits were the same apart from the price and label. Pengilley states:

A factor in the advertisement was that there was no suggestion that any of the factual assertions were untrue. No complaint was made of the presentation of the photographs. There was no suggestion that any trick was being used to make the Najee suit look more desirable or other suits less desirable. The only objection was that of technicality in that a fine weave was said to be a very different fabric to Gaberdine.28

This case will not enable comparisons to be made between bottom of the range model cars and those that are fully optioned without disclosure of the basis of the c o m p a r i s ~ n . ~ ~ The judgement is not expressed in broad terms but rather purposely limited to the facts of the case. It is suggested that a Ford Laser could be compared with a BMW on the basis of price for example, and no contravention of s52 would have occurred.

Makita (Australia) Pty Ltd v Black and Decker (Australia) Pty Ltdjo, concerned a "torture test" advertisement where a Black and Decker 1166 industrial drill was pitted against the Makita 6010 BVR drill. The Makita drill was not named as a Makita but the Court found that given Makita's market share, there must have been many people who associated that blue colour used for the unnamed drill in the advertisement with Makita products. The "blue drill" was turned on followed by the Black and Decker drill. The Black and Decker drill almost instantaneously reversed the blue drills shaft rotation which caused a little smoke initially followed by intense smoke. The commercial had been edited to reduce the period which elapsed between the time when the Black and Decker drill was turned on and first emission of smoke from the Makita drill. There was unchallenged evidence that in five out of six tests by experts, the Black and Decker drill also emitted smoke.

Wilcox J considered the duty of care in comparative advertising to be one of "heavy responsibility" to ensure that comparisons were accurate. The fact that in independent tests both drills emitted smoke when given the same power, together with the editing of the advertisement persuaded the Court to conclude that a misleading impression was created, which constituted misleading and deceptive conduct within s52 of the Trade Practices Act 1974 (Cth). Pengilley proposes the following:

28 W Pengilley 'Federal Court Rules on Najee Ad' (1991) 7 TPLB 28 at 28. 29 Ibid. 30 (1990) ATPR 40-030.


Although the case does not give rise to any new principles for those who have followed the trend of s52 cases, it will, hopefully, be a lesson to advertisers that advertisements must be accurate in all respects. There must be no unconcealed premises which give rise to misleading irnpres~ions.~~

A similar form of "doctoring" occurred in Hoover Australia Pty Ltd u EmaiP2. In this case Gummow J considered a video which had been distributed to sale repre- sentatives, in which Email compared one of its washing machines with one of Hoo- vers machines, when they both were washing with uneven loads. The video stated that a weight was used to represent "a couple of towels, a few shirts and pillow cases" but it was in fact lead shot. The video showed the Hoover machine moving or "walking" with the uneven load whilst the Email machine remained stable. The Court accepted that the video contained representations to the effect that the Hoo- ver machine would "walk" when it was washing a couple of towels, a few sheets and pillow cases, whilst this was not the case. In finding that Email had engaged in misleading and deceptive conduct, the Court acknowledged a trade audience may be better informed as to performances of competing washing machines than consumers, but they were not likely to consider the effect of a 2kg weight in a comparative advertisement and that its use may produce inaccurate results.

To avoid successful litigation by a competitor, a comparative advertisement must be true in fact and create a truthful impre~s ion .~~ Mr Justice Lockhart provided a convenient summary of the relevant principles to be considered in relation to s52 in Henjo Investments Pty Ltd u Collins Marickuille Pty Ltd34:

"- the concept of s52 is broad and is designed to have a broad reach: - the concept of s52 is aimed to protect the consuming public from unfair trading

practices, namely from being mislead or deceived; - intent is not a necessary element in breach of the section; - "mislead" means to lead astray in action or conduct, to lead into error, to cause to

err; - "deceive" means to ensnare, to take unaware by craft or guile, to overcome, over-

reach, get the better of by trickery, to beguile or betray into mischief or sin, to mislead;

- the two words "misleading" and "deceptive" are not necessarily synonymous. There will, however, clearly be areas which overlap between the two;

- misleading or deceptive conduct is not necessarily confined to some sort of representation;

- it is necessary to look at the actual conduct involved in order to assess whether it is misleading or deceptive. Dictionary definitions of the term are not necessarily controlling. Neither are technical meanings of words necessarily controlling;

31 W Pengilley 'Comparative Advertising and "Torture Test"' (1990) 6 TPLB 37 at 38. 32 (1991) ATPR 41-149. 33 W Pengilley 'Unconscionable and Misleading Conduct: How the Trade Practices Act is used and

the Duty to Disclose' supra n.27 at 36. 34 (1988) ATPR 40-850.

- silence may give rise to an actionable misrepresentation when there is a duty to reveal the truth. "Half truths" thus infringe the section because, in these circumstances, there is a duty to speak up and complete the full story; and

- it is no answer to a breach involving misleading or deceptive conduct to say that if a person had made his own enquiries, s h e would have discovered the true position "5

In Australian Unity Friendly Society v Health Insurance Commission and Mutual Community Limited v Health Insurance Commission3" an advertisement by. the Health Insurance Commission which trades under the name of Medibank Private was found to be misleading and deceptive. Involved was a comparative advertisement where Medibank attempted to show that it provided a far better service than its two main competitors. The complaint related to the comparisons being made by HIC between premiums of the health insurers, where the price quoted by HIC was subject to certain conditions, yet this was not disclosed. In finding contravention of s52, Northrop J stated:

It is argued that there is only a small percentage of the group of people who do not in fact seek this cover and who do not comply with the condition, it being said that some 85% pay at the rate of $14.95 per week or less, which leaves 15% paying a t the higher rate. In my opinion, that is not really important, the important fact is that a figure is given which is not correct and no warning is given that it is subject to conditions. It is argued that that does not really matter because if a person did apply to Medibank Pri- vate to take out such a cover the booklet provided to explain it all, together with advice given by counter staff, would make it quite clear that the $14.95 would not be the appropriate figure unless the conditions were complied with. The misleading and deceptive conduct, in my opinion, occurs at the earlier stage when the advertisement is seen by the general public.:j7

In coming to this conclusion, His Honour emphasised the rationale in the cases discussed above, that it is always important in the area of comparative advertising to realise that any comparison must be accurate as deficiencies or errors can give or form the basis for relief by the person claiming to be not properly identified or whose benefits are not properly described.3R

In Stirling Winthrop Pty Ltd v The Boots Company (Australia) Pty Ltd39, the Ap- plicant sought injunctions concerning advertisements in medical journals relating to a drug called "Nurofen". The Applicant was the manufacturer and marketer of

35 W Pengilley 'Unconscionable and Misleading Conduct: How the Trade Practices Act is used and the Duty to Advise' supra n.27 at 37.

36 Unreported decision of Northrop J, Federal Court, 17 November 1994, VG 392194 and VG 403/94. 37 Ibid at 3. 38 Ibid at 4; also note St Luke's Health Insurance v Medical Benefits Fund of Australia Ltd, Unre-

ported Decision of Northrop J, Federal Court, 21 June 1995, TG15195. 39 (1995) ATPR 41-433.


products among which is the well-known pain reliever "Panadol". The Respondent advertised Nurofen by comparison with Panadol by asserting the advertisements that:

... single does of non-prescription Ibuprofen are well tolerated and demonstrate a side effect profile that is indistinguishable from that of Acetaminophen (Paracetemol) and P l a c e b ~ . ~

The Applicant claimed this campaign misleading since this information was taken out of context from an expert paper detailing the results of drug trials. The quote was alleged not to convey the whole truth, the truth being that the quoted study of Nurofen evaluated only a single dose, and not a study of the effects of every day use.

In granting the interlocutory injunction, Tamberlin J referred to the authorities discussed above concerning comparative advertising and the need for the advertiser to take particular care to ensure that products are accurately compared. Dis- closure of all relevant facts is essential and this had not occurred:

In my view, there is a serious question raised, on the material before me, that the statements in advertisements (1) and (2) relating to single doses are misleading in a sense that they could be taken by persons to whom they are and may be directed, including pharmacists, doctors and experienced stockists, to indicate that a series of doses ex- tending up to perhaps several days, is well tolerated and demonstrates the specified side effect profile. In fact, the article only substantiates that claim to the extent of one single dosage of either 200 or 400mg.41

These cases illustrate various factual circumstances which can give rise to a s52 claim in relation to comparative advertising. Clearly the recurrent message is that disclosure of relevant facts concerning the basis of comparison is essential to avoid litigation.

The remedies often sought in pursuing a s52 claim regarding comparative advertising include injunctions, damages and correct advertising. Initially, there was some debate as to whether a judge could order corrective advertising on an action by a body other than the Trade Practices Commi~s ion .~~ However, it would appear to be settled law that corrective advertising may be ordered in the appropriate circumstances. Section 80A of the Trade Practices Act 1974 (Cth) grants this power to the Federal Court only on the application of the Minister or Trade Practices Com- mission. However in Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd43 and Hospital

40 Ibid at 40, 876. 41 Ibid at 40, 877. 42 PH Clarke 'Liability under the Trade Practices Act for Comparative Advertising' (1988) ABLR 98

and supra n.1 at 114. 43 (1986) ATPR 47,285.

Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd44, it was held that the Federal Court has this power also under s80 in conjunction with the issuance of an i n j ~ n c t i o n . ~ ~ In Hoover (Australia) Pty Ltd v Email &, the Court confirmed that the relevant question is whether corrective advertising is appropriate having regard to the nature and likely effect of the advertisement and the proposed corrective advertising. The time which has elapsed since the publication of the misleading advertisement will usually be a relevant factor.47 It was also discussed that the corrective advertising should not be disproportionate to the extent of the publication of the misleading material. In this case, no corrective advertising was ordered. In Australian Unit Friendly Society v Health Insurance Cornrnis~ion~~, corrective advertising was sought but not ordered - it was indicated in this case that such an order would seldomly be given on an interlocutory appl i~a t ion .~~ Simi- larly, in St Luke's Health Insurance v Medical Benetits Fund of Australia LtdSO, the claim for corrective advertising was rejected by Northrop J adding that in this case the question of time was decisive. In Makita (Australia) Pty Ltd v Black and Decker (Australia) Pty LtdS1, corrective advertising in the "Australian Hardware Journal'' was ordered by Wilcox J since it was considered that a publication in this journal would be likely to reach an important segment of the audience affected by the misleading advertisement. In making this decision, His Honour gave the test as whether such an order was "an appropriate course to take having regard to the nature and likely effect of the advertisement and of the proposed corrective advert i~ing."~~

4. Other Actions

Depending on the circumstances of the case, other actions to those discussed above may also be brought. These include slander of goods, trade libel, injurious falsehood and deceit. However, due to various evidential and other difficulties associated with these actions in relation to comparative advertising, they seldomly arise as compared with s52 and passing off.* It is the writer's opinion that it will often not

44 (1988) ATPR 49,004. 45 Cf. Hanimex Pty Ltd v Kodak (Aust) Pty Ltd (1982) 74 FLR 447 where this proposition was consid-

ered but the application was rejected. 46 Supra n.32. 47 Ibid at 79. 48 Unreported Decision of Northrop J, Federal Court, 17 November 1994, VG392194 and VG403194. 49 Ibid at 5. 50 Unreported Decision of Northrop J, Federal Court, 21 June 1995, TG15/95. 51 Supra n.30. 52 Supra n.31. 53 For example, in Clarke u Meigher (1917) 17 S.R. (N.S.W.) 617, where although the Defendant said

the Plaintiff's goods were infected with meningitis germs and had caused several cases of illness, the action for injurious falsehood failed because there was no evidence of malice even though the Defendant had no reasonable ground on which to make this publication. See also RG Hammond 'Intellectual and Industrial Property' [1991] NZLR 290 and L & HReid Engineering Ltd v Ramset Fasteners (NZ) Ltd (1990) 20 IPR 15 where injurious falsehood was also pleaded in conjunction with breach of the Fair TradingAct 1986 ( N Z ) .

12 QUTIJ Legal Aspects of Comparative Advertising

be necessary to plead these additional causes of action in a case involving comparative advertising, due to the wide scope of s52 and passing off. However if these two (2) areas of the law were to undergo significant changes either in the attitudes of the judiciary or amendment by the legislature, these other torts may become important with regard to comparative advertising.

The Future of the Legal Aspects of Comparative Advertising. As technology effectively reduces the distance between countries, lawyers must gain an understanding of the laws of other nations. As discussed above, the US position is similar to Australian law in that comparative advertising is allowed subject to misleading assertions or the probability of confusion in the minds of the consumers. The position in Europe is less clear at present. In Germany, for example, neither indirectly nor directly comparative advertisements are permitted.54 The United Kingdom however now allows both forms of comparative advertising within limits. Pursuant to s4(l)(b) of the Trademarks Act 1994 (UK), which in general terms implements the European Community Trademarks Harmonisation Direc- tive, use of a registered trademark by someone other than the registered proprietor for the purpose of identifying the goods or services of the proprietor does not amount to trademark infringement.55 Consequently, the common law position as given in Irving's Yeast-vite Ltd v RA. Hor~esnail~~ has been restored in the UK. Once the EC Directive on comparative advertising is uniformly implemented, the law in Europe will largely be similar to Australia - Article 3(a) is similar to a combined misleading and deceptive conduct provision with elements of passing off, whereas Article 4(2) includes as a possible remedy, corrective advertising.

Of major significance to Australian practitioners is the Trademarks Act 1995 (Cth) which commenced in January, 1996. As regards comparative advertising, it has not changed the law, but has clarified the suspected position, ie, use of a trademark for "comparative advertising" will not constitute infringement.57 The Act does not contain a definition of "comparative advertising", but it is anticipated that a definition similar to that offered by the Intellectual Property Committee of the Busi- ness Law Section of the Law Council of Australia will be adopted by the Courts - ie, if use of the trade mark imputes proprietorship in the mark to the advertiser, even though the advertisement may be a comparative advertisement as such, it will not be permissible under s. 122 of the Act. Any other view would be contradictory to the very essence of trade mark law.

54 Supra n.2 at 417. 55 This use is subject to "honest practices" and it is anticipated that this qualification will continue to

prevent trade mark dilution. 56 Supra n.10. 57 Section 122(1) provides that a person does not infringe a registered trademark when the use by

that person is for one of the purposes enumerated in s. 122 - included is when a person uses the trademark for purposes of "comparative advertising".

Without s52 of the Trade Practices Act 1974 (Cth), Australian trade reputation law would require major amendments regarding comparative advertising. Perhaps advertisers could mount an argument for more precise legislation concerning comparative advertising, so as to remove the uncertainty which exists as regards "use" of a trade mark and clarification of the law concerning puffery. However, due to the variety of circumstances in which comparative advertising may occur, it is suggested that codification of the law in a general sense would be the only alternative and either the same problems would exist or other interpretation problems would arise. The rules which have evolved regarding s52 and passing off, are sufficiently certain yet flexible in their application. The EC Directive should be commended for its clarity and certainty, but it is probably not necessary for Australia to adopt similar legislation. It is also anticipated that the Courts will continue to expand passing off so as to cover any gap which may open between trademark infringement and the trade practices legislation concerning the business' trade reputations8 - indeed, some practitioners may feel that the action is evolving towards a general action for unfair competition or the American doctrine of mi sap prop ria ti or^.^^. Consequently, the statute based s52 action, together with passing off will continue to provide a trader with the armoury necessary to confront confusing or misleading comparative advertising.

A Strategy for Comparative Advertising Successful and legal comparative advertising involves both the association and suf- ficient differentiation of products or services. Often no denigration of the competitors product occurs and indeed often a competitor complements the other.60 This type of comparative advertising enables a product (often a new product on the market) a "free-ride" on the reputation of the other established product. This practice may seem unfair, however if it was prohibited, it would create another barrier to entry for the unestablished trader. It only comes under criticism when it is done in a misleading or confusing way and fortunately it is in these circumstances that such an advertisement is able to be stopped.

In developing a strategy for a comparative advertising campaign, the starting point is to recognise that the law in this area centres around consumer protection. Both s52 and passing off involve the question of the outcome of the advertising on the consumer - ie, whether they are likely to be mislead, deceived or confused.

Some industries are fraught with dangers when it comes to comparative advertising. For example, in recent times several cases have surfaced in the Federal

58 See R and C Products Pty Ltd v S.J. Johnson & Sons Pty Ltd (1993) 26 IPR 98 cf. Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd (1981) 55 ALJR 333.

59 See Hogan & Anor v Koala Dundee Pty Ltd & Ors (1988) AIPC 90-530; Ricketson, 592-597; and cf. Moorgate Tobacco Co Ltd v Philip Morris (No 2) (1985) 59 ALJR 77.

60 See Sabre Coeoration F'ty Ltd v Laboratories Phann-A-Care F'ty Ltd, Unreported Decision of Beazley J, Federal Court, 15 March 1995, MG117195, for example.

12 QUTIJ Legal Aspects of Comparative Advertising

Court concerning health insurance. It will be very difficult to devise a campaign that does not break the law where it is almost impossible to compare like with like. In these cases, it will be much less dangerous and simpler to use broad statements, such as "the best value cover you could rather than attempt to disclose all of the conditions relating to the various policies and premiums offered by different companies. Direct comparison in such an industry may be possible if the benefits and policies for each premium compared are the same.

Another point to keep in mind is that some comparative advertisements will cause adverse reactions from consumers, even if competitors can't stop them. For example, Bucknill describes an advertisement where oil and grease were fired at two (2) stain removing bottles - one remained gleaming like new whilst the other was covered in filth:

As a marketing weapon, comparative advertising has its dangers. Research has suggested that it can reduce the creditability of the advertiser and can even engender sym- pathy for the named competitor. For instance, where the stain remover advertisement described above was shown, the rate at which the advertiser was losing market share increased and outraged viewers even telephoned the competitor to express their sym- path^.^^

Further, the advertiser must ensure that its assertions willaot aTtract corrective advertising if the matter proceeds to Court, since irreparable damage may be done to the credibility of the business. Of course, if the assertiqrls are not false or misleading, the publicity associated with a successful defence of the advertisement in Court may be very valuable indeed.

Of prime importance is that information offered in a comparative advertisement must be objectively true and not leave the consumer with a false impression. The basis of comparison should be disclosed in such a way so as not to cause confusion.'j3 It is important to put oneself in the shoes of the consumer rather than the competitor, when considering this issue.

The defence of "puffery" is often raised in comparative advertising cases. It will be useful where broad unsubstantiated statements are made, which possess subjective characteristics. The Court takes the view that consumers are unlikely to accept such bold and broad statements and will not usually be mislead or deceived by them.'j4 In

61 Hospital's Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988) 78 ALR 483.

62 M Bucknill 'Comparative Advertising - The Legal Implications' (1985) 11 NZULR 233 at 234. 63 See for example Hoover (Australia) Pty Ltd v Email (1991) ATPR 41-149. 64 In Stuart Alexander & Co (Interstate) Ply Ltd v Blenders Ply Ltd (1981) 37 ALR 161, the price of the

applicants instant coffee was compared to that of the defendants brand in a television advertisement by the accumulation of silver coins in jars representing the products of the respective par- ties. The pile of coins in the applicants "Maconna" jar was about twice as high as that in the respondents "Andronicus" jar, which the applicant alleged falsely implied that its brand was twice the price of the respondents coffee, when in fact is was only 50% more expensive. The Federal

Australia Unity Friendly Society v Health Insurance Commission", Northrop J stated:

In this type of advertisement, there is always room for what has been described as "puffing", expressions of belief and claim that the person making the advertisements believes that its products are better than that of anybody else. The Court does not prevent those types of statements appearing. To a large extent, part of the text in this advertisement comes within that category. Medibank Private is conscious of the problems it faces because it says it does not make the claims lightly but it does go to some detail in relation to the capping of out of pocket expenses and matters of that kind, often referred to as excesses, and whether those payments are to be unlimited or up to a certain amount. It is a very complex and difficult area and in cases where any detail is given, it is often more easy to prove misleading or deceptive conduct than in cases where a broad claim only is made.@

Well drafted disclaimers may also enable comparative advertising to remain within the law,,provided they are prominent in an advertisement and do in fact alle- viate any confusion or misleading conduct which may have existed. A good example of this is the Sabre Corporation Pty Ltd v Laboratories Pharm-A-Care Pty Ltd'j7 case which was discussed above:

"In addition, the clear statements elsewhere on the bottles which state that there is no connection between the two products, that Hairdresser's Formular and Joico are competitors and that the formulations differ would dispel any uncertainty which might arise in a consumer's mind as to any association between the product^."^

Comparative advertisers must also constantly watch the competitor's products so that their advertisements do remain objectively true. If prices change, for example, an advertisement may require editing. This point should also be remembered if another asserts comparisons regarding your client's products - if it is economi- cally viable, a small change to a products price for example, may render the unob- servant comparative advertiser liable for misleading and deceptive conduct - in this way, s52 may be used as a sword and a shield.

It has been discussed above in relation to the Najee case that a principle of comparative advertising is that advertisers should compare "like with like". Some

Court found for the res~ondent - at 164-5: "...a robust a ~ ~ r o a c h is called for when determinine . . whether television cokmercials of this kind are false, misleading or deceptive. The public is accustomed to the puffing of products in advertising. Although the class of persons likely to see this commercial is wide, it is inappropriate to make distinctions that are too fine and precise."

65 Unreported Decision in Nor thro~ J, Federal Court, 17 November 1994, VG392194 and VG403194. 66 Ibid at 5; also see Sabrre orp poi at ion Pty Ltd v ~aboratories ~hann-A-care Pty Ltd, Unreported

Decision of Beazley J, Federal Court, 15 March, 1995 NG117195. 67 Ibid. 68 Ibid at 13; also note INXS v South Sea Bubble Co Pty Ltd (1986) ATPR 40-667 and Musidor BV v

Robert William Tansing, Unreported Decision of Full Court of Federal Court, 5 August, 1994, VG47194.


commentators have expressed concern as to the law after the decision in Najee. The better view is that this principle is not in effect a principle but a useful guide to be followed so as to avoid contravention of s52. Each case must be evaluated on its own facts, however it is advisable that advertisers be advised that in order not to mislead consumers, like products or services should be compared. Confidence should not be put in a contrary view based on the Najee case.

Another type of comparative advertising which may be hazardous but very effective it the approach taken in cases such as the "Shell Oil Man" case. This case was decided prior to the enactment of the Trade Practices Act 1974 (Cth), and it is an interesting exercise to consider how it would be decided today. Indeed, the view which may be taken is that such an advertisement may be misleading and possibly amount to passing ofP9 unless it is made clear that there is no association between the device used and the advertiser. This is indeed possible. In Ciba Giegyplc u Parke Davis & Co70, the Defendant used a picture of an apple with a bite taken out of it with the caption:

Diclomax takes a chuck out of your prescribing costs. Diclomax Retard offers every- thing you'd expect from Diclofenac Retard [the generic name of the drug] with one crucial difference. The price.

The Plaintiff had for many years used the device of an apple in connection with their brand of the drug. Ciba Gieyplc sued for passing off and injurious falsehood, however they were unsuccessful since they were unable to show that there was an actionable misrepresentation on the part of Parke Davis such that consumers were mislead or confused as to the origin of the brand Diclomax Retard.71 Consequently, as long as successful product differentiation occurs, this type of advertising should be possible under the current law, as well as being effective from a marketing perspective.

Conclusion

Comparative advertising provides consumers with information and can enhance decision making. It can also lead to confusion and misinformed decisions. Essen- tially, it can allow for a trader to receive a free ride on the reputation of another trader and in some cases may even allow for poaching of that reputation.

Comparative advertising will continue to be a valuable and effective form of

69 See R & C Products Pty Ltd v S.C. Johnson & Sons Pty Ltd (1993) 26 IPR 98. 70 [I9941 FSR 8. 71 Supra n.2 at 421; cf. Deere & Co v MTD Products Inc, Unreported Decision of Court of Appeals of

Second Circuit (US) in New York, 1995, where it was held that the Defendant's use of a version of the Plaintiff's famous "leaping deer" logo in comparative advertising on television was trademark dilution under the New York anti-dilution statute. The Defendant showed this deer running in fear from the Defendant's tractor. The Court considered that this caused confusion and blurred product distinction.

advertising. Traders should be made aware of the pitfalls and risks associated with it for planning of their own advertising campaigns and the interruption of a competitor's if they cross the wavering line of legality.

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