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Disparaging Advertising and the Media War
Advertisements no doubt play a very pertinent role in the success of a product but where do we draw the line is the question which needs to be answered; the objective of this article is to do just the same writes Apurv Tyagi.
 
 
Introduction

The recent Hindu-Times of India advertisement war takes us back to the Cola wars where both Pepsi and Coke were fighting out their battle in the public domain for a greater market share through the use of ad campaigns.

It would be useful to briefly outline the facts surrounding this battle. The Times of India first came out with an advertisement ‘asking’ Chennai, an area dominated by The Hindu, to wake up to TOI. The Hindu, quite uncharacteristically responded to this ad campaign of TOI by coming out with a series of advertisement where TOI was quite blatantly targeted. This can be seen from Figures 1 2, 3 and 4 and a link to the ad on YouTube.
Figure 1 Figure 2 Figure 3 Figure 4
So, in order to properly understand the nature of this dispute, it is important to have a fair amount of idea as to what the law of the land has to say on this point. In the next few passages, it has thus been attempted to crystallize the law on this front. After which this ad campaign will be monitored from an economic perspective as well.

MEANING & SCOPE

‘Disparaging advertising’ is a concept which was first taken up in the now repealed MRTP Act of 1969. Under the Act, Section 36A defines unfair trade practices, sub section (1)(x) in particular deals directly with the concept of ‘disparaging advertising’ and reads as thus: (x) gives false or misleading facts disparaging the goods, services or trade of any other person. But now given that the same Act has been repealed by the Competition Act of 2002, how exactly would such cases be treated becomes important.

It is pertinent to note the while the MRTP Act stands repealed now, this does not affect the law in substance to change since the MRTP Act will still be applied but not by the MRTPC but either by CCI (Competition Commission of India), the Appellate Tribunal under the Competition Act or the National Commission under the Consumer Protection Act. As per Section 66 of the Competition Act of 2002 which was amended by the Competition (Amendment) Act, 2007 and notified in 2009, the MRTPC commission shall stand dissolved but the proviso further adds that it will continue to exercise jurisdiction and power under the repealed Act for a period of 2 years from the date of the commencement of the Competition Act in respect of the pending cases.

After the expiry of the stipulated period of 2 years, the cases related to monopolistic or restrictive trade practices including unfair trade practices pending before the MRTPC (Monopolies and Restrictive Trade Practices Commission) shall be transferred to the Appellate Tribunal and shall be adjudicated by the Tribunal in accordance with the provisions of the repealed Act as if the Act had not been repealed. Prior to the Competition (Amendment) Act, 2007, the cases were supposed to be transferred to the CCI and decided as per the repealed Act but post the amendment, the forum has been changed to the Appellate Tribunal which can be found under Section 53A of the Competition Act.

Cases filed before the MRTPC and currently being decided by the CCI carry a special mention as MRTP case and it is thus easy to distinguish between the transferred cases and the new cases to come before the Appellate Tribunal. Varca Druggist v. Chemist & Druggist Association is one such case to be decided by the CCI in 2012 which was initiated before the Director General under the MRTP Act in 2009. Interestingly enough, while as per law, the case should have been decided on the basis of the repealed Act, it has in fact been decided in accordance with the Competition Act.

Nevertheless, moving on to the Trademarks Act of 1999, which grants some respite in the form of Sections 29 and 30 as they speak about Infringement of Registered Trade Mark and Limits on effect of Registered Trade Mark respectively. Section 29(8) is particularly relevant for the purpose of our discussion and the same is reproduced as it is:

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

  1. takes unfair advantage of and is contrary to honest practices in industrial or commercial matter; or
  2. is detrimental to its distinctive character; or
  3. is against the reputation of the trade mark.

Section 30 further limits the effect of the preceding section and can be for the purpose of understanding taken as a proviso to Section 29. The concept of ‘disparaging advertising’ is thus one that has come mainly from the judicial pronouncement and will be dealt comprehensively in the succeeding part.

JUDICIAL UNDERSTANDING

The Supreme Court of India has not contributed much to develop the jurisprudence on ‘disparaging advertising’ which is largely based on High Court cases. The Supreme Court in the case of Colgate Palmolive v. Hindustan Unilever (1999) glanced upon the concept of disparaging advertising mentioning it only, but twice. Here the judges (U.C. Banerjee & B.N. Kirpal) were more concerned about the concept of injunction, when and under what circumstances can it be granted. They referred to the landmark judgment of American Cynamide Co. v. Ethican Ltd. and imported the guiding principles of the grant of interlocutory injunction.

The relevant bit of the judgment is mainly limited to ascertaining the impact of the advertisement on the common man, or for that matter on a reasonable man. Reference is made to Halsbury Laws of England which states that – ‘A representation will be deemed to be false if it is false in substance and in fact; and the test by which the representation is to be judged is to see whether the discrepancy between the facts as represented and the actual fact is as would be considered material by a reasonable representee’.

Another test referred to, by the Supreme Court was the ‘injury test’; where it was ruled that, "for holding a trade practice to be unfair trade practice, it must be found that it causes loss or injury to the consumer" The Court also agreed to the idea of commercial speech being guaranteed by the Constitution under Article 19(1)(a) and some latitude being granted to the advertiser and with these observations granted the appeal.

The High Courts’ as mentioned above have comprehensively adjudged the same matter time and again and are fairly consistent in their stance. Most of the cases have religiously cited the Calcutta HC judgment of Reckitt and Colman of India Ltd. v. M.P. Ramchandran and Anr. where the law on the subject is stated as follows:-

  1. A tradesman is entitled to declare his goods to be 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 such 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 even compare the advantages of his goods over the goods of others.
  4. He however, cannot, while saying that his goods are better than his competitors', say that his competitors' goods are bad. If he says so, he really slanders the goods of his 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 to the manufacturer of such goods no action lies, but if there is such defamation an action lies and if an action lies for recovery of damages for defamation, then the Court is also competent to grant an order of injunction restraining repetition of such defamation.

Apart from the above mentioned points, the Delhi High Court in Pepsi Cola and Ors. v. Hindustan Coco Cola Ltd. and Anr., the Court laid down certain points which should be kept in mind when deciding a question of disparagement. These are, Intent of the commercial, Manner & Story line of the commercial.

The manner of the commercial is very important, if it ridicules or condemns the product of the competitor then it amounts to disparaging but if the manner is only to show one’s product better or best without derogating other’s product, then that’s not actionable.

Furthermore, a division bench of the High Court in a recent case of 2012 dealt with the same subject matter. The case in question is Dabur India Ltd. v. Colortek Meghalaya (2010) where another point about hypersensitivity was made. It was stated that given the fact that under Indian Law, commercial speech is protected by virtue of the Constitution, an advertiser must be given enough room to play around. Also, a plaintiff ought not to be hypersensitive as market forces, the economic climate, the nature and quality of a product would ultimately be the deciding factors for a consumer to make a choice.

LIMITS/BOUNDARIES

There is a very thin line of difference between what constitutes ‘disparaging advertising’ and what doesn’t but again, broadly speaking ridiculing the other product brazenly will definitely constitute ‘disparagement’ but doing it very subtly might not. Justice MB Lokur carves out a fine distinction between calling your product superior and calling the other product inferior.

Basically discrediting the product of a competitor through commercials would amount to disparagement. Taking a cue from the recent judgment of Glaxosmith, here the main rivals were Horlicks and Complan. Both came out with advertisements which bordered on being disparaging but the Court excused Horlicks on the ground of stating the truth and puffing up while the advertisements of Complan apart from stating the facts, went on to pass judgments on the same front calling the ingredients "cheap". Another very important point that should be mentioned is about the thumb rule of truthful portrayal, which if maintained, will not attract an action for alleged disparagement.

REMEDIES

The main remedy that is sought in all such cases of ‘disparaging advertising’ is injunction and that too interim injunction. Damages assume only a secondary position here. In almost all the cases, an application for interim injunction is moved and the Court on the basis of the tests laid down in American Cynamide case either accepts the application or rejects it. The Court apart from taking into account the tests for interim injunction also focuses on the manner, intent and the effect of the commercial. In GlaxoSmithKline v. Heinz (2009), the interim injunction was granted on grounds of the advertisement of Complan blatantly and flagrantly disparaging Horlicks by calling it cheap. This particular remedy was not granted in Dabur India Ltd. v. Colortek Meghalaya, mainly because the advertisement of the defendants was merely puffing up of the good and nothing more or nothing less.

Damages are normally not granted in such cases but in cases of exceptional disparagement on the face of the record, the same can be granted. In GlaxoSmithKline, the court awarded Rs 75,000 in favour of Horlicks but this was more about costs of maintaining the application more than damages. Damages, though were granted in the case of Reckitt v. HUL where the Court in light of the advertisements disparaging the goodwill and reputation of the plaintiff awarded punitive damages to the extent of Rs 5,00,000.

CONTEXT

A case worth mentioning on this front is a recent case of 2010, wherein by a common order three applications for the grant of temporary injunction were disposed off. Here GlaxoSmithKline and Heinz among others were the plaintiff and the defendant respectively. One of the issues raised was that the ad campaign undertaken by Complan was in response to the ad campaign of Horlicks where Complan was disparaged. The Court while attracted by this found itself handicapped and stated that the subjective context cannot colour the Court’s primary task to determine whether the advertisement complained of indeed disparaged the rival’s goods. At best, the context can provide the Court with the clue about motivation of the complained conduct.

So now since we have a decent amount of idea as to what the law has to say on this, we can further analyse whether the ad campaign of both the Media Giant would come within the ambit of Disparaging advertising or not. This question is open to debate in absence of a final answer as the matter did not reach the Court.

But interestingly enough, if one were to think about the impact these ad campaigns had on public, we might tilt the balance in favour of the Hindu. This is the first time Hindu has reacted in such a befitting manner as up till now Hindu has maintained a reputation of being a silent witness to all the attacks that were hurled at it. Some describe this paradigm shift in the ideology of Hindu to the recent change in the administration of the Hindu while some say anyone placed in this situation would have reacted in a similar manner.

As a concluding remark, I would like to note that even before coming out with such advertisements, The Hindu would have definitely considered the economic and legal implications associated with responding in such a fashion and it should be conceded that it was a calculated move. Even if the Hindu would have been found guilty of disparaging advertising, still it would have gained much more in terms of popular support in the youth than it would have had to lose out on damages. Overall, the Hindu can be adjudged the winner of this war.
 
APURV TYAGI is a fifth year student pursing B.A., LL.B (Hons.) from National Law School of India University, Bangalore. He may be reached at apurvtyagi1990@gmail.com. The author would like to thank Ms. Ramyaa Veerabathran for her valuable inputs.
 
REFERENCES
  1. The Times of India Advertisement, available on http://www.youtube.com/watch?v=PaO8fyUvH28
  2. The Hindu Advertisement, available on http://www.youtube.com/watch?v=xNbGPH53EOo&feature=related
  3. Section 66(3) of the Competition Act, 2002 as amended by the Competition (Amendment) Act, 2007 is the relevant provision which mentions that after the expiry of two years, matter pending before the MRTP Commission shall stand transferred to the Appellate Tribunal and be decided in accordance with the provisions of the repealed Act. The said sub-section is also herewith reproduced.
    Section 66(3): All cases pertaining to monopolistic trade practices or restrictive trade practices pending (including such cases, in which any unfair trade practice has also been alleged), before the Monopolies and Restrictive Trade Practices Commission shall, after the expiry of two years referred to in the proviso to sub-section (1) stand transferred to the Appellate Tribunal and shall be adjudicated by the Appellate Tribunal in accordance with the provisions of the repealed Act as if that Act had not been repealed.
  4. In Re: MRTP Case No. C-127/2009/DGIR (4/28).
  5. American Cynamide Co. v. Ethican Ltd. 1975 (1) All E.R. 504.
  6. Reckitt and Colman of India Ltd. v. M.P. Ramchandran and Anr 1999 PTC (19) 741.
  7. Pepsi Cola and Ors. v. Hindustan Coco Cola Ltd. and Anr. 2003 (27) PTC 305.
 
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