Comparative advertising

Comparative advertising is an advertisement in which a particular product, or service, specifically mentions a competitor by name for the express purpose of showing why the competitor is inferior to the product naming it. Comparative advertising, also known as ‘knocking copy’, is loosely defined as advertising where “the advertised brand is explicitly compared with one or more competing brands and the comparison is oblivious to the audience.”^[1]

This should not be confused with parody advertisements, where a fictional product is being advertised for the purpose of poking fun at the particular advertisement, nor should it be confused with the use of a coined brand name for the purpose of comparing the product without actually naming an actual competitor. ("Wikipedia tastes better and is less filling than the Encyclopedia Galactica.")

In United States, the Federal Trade Commission (FTC) defined comparative advertising as “advertisement that compares alternative brands on objectively measurable attributes or price, and identifies the alternative brand by name, illustration or other distinctive information.”^[2] This definition was used in the case Gillette Australia Pty Ltd v Energizer Australia Pty Ltd.^[3] Similarly, the Law Council of Australia recently suggested that comparative advertising refers to “advertising which include reference to a competitor’s trademark in a way which does not impute proprietorship in the mark to the advertiser.”^[4]

Comparative advertisements could be either indirectly or directly comparative, positive or negative, and seeks “to associate or differenetiate the two competing brands”.^[5] Different countries apply differing views regarding the laws on comparative advertising.

History

The earliest case concerning comparative advertising dates back to 1910 in United States – Saxlehner v Wagner^[6].^[7] Prior to the 1970s, comparative advertising was deemed unfeasible due to related risks. For instance, comparative advertising could invite misidentification of products, potential legal issues, and may even win public sympathy for their competitors as victims.

In 1972, the FTC began to encourage advertisers to make comparison with named competitors, with the broad, public welfare objective of creating more informative advertising^[8]. The FTC argued that this form of advertising could also stimulate comparison shopping, encourage product improvement and innovation, and foster a positive competitive environment^[9]. However, studies have shown that while comparative advertisements had increased since 1960, the relative amount of comparative advertising is still small^[10].

Laws Related to Comparative Advertising

United Kingdom

In the UK, most of the use of competitor’s registered trademark in a comparative advertisement was an infringement of the registration up till the end of 1994. However, the laws on comparative advertising were harmonized in 2000. The current rules on comparative advertising are regulated by a series of EU Directives. The Business Protection from Misleading Marketing Regulations 2008 implements provisions of Directive (EC) 2006/114 in the UK.^[11]

One of the classic cases of comparative advertising in UK was the O2 v Hutchison case. The European Court of Justice (ECJ) held that there could have been a trademark infringement when a comparative advertiser used the registered trademark for the advertiser’s own goods and services^[12]. It was also held that a trademark proprietor could not prevent a competitor’s use of a sign similar or identical to his mark in a comparative advertisement, which satisfies all the conditions of the Comparative Advertising Directive. If the Advocate General's decision in the O2 case were followed by the ECJ, competitors will not be able to use trademark legislation either to prevent a comparative advertisement through an injunction or to charge in respect of its use. Conversely, in British Airways plc v Ryanair Ltd^[13]. a lenient approach was adopted by the UK courts. The use of competitors’ trademarks was no longer restricted for businesses competing within an industry, provided that compliance of the conditions set out in the legislation were performed. This meant that businesses are able to use the trademarks of other companies and trade names to distinguish the relative merits of their own products and services over those of their competitors^[14].

The United States of America

The FTC and the National Advertising Division of the Council of Better Business Bureaus, Inc. (NAD), govern the laws of comparative advertising in the United States including the treatment of comparative advertising claims. FTC stated that comparative advertising could benefit consumers and encourage comparative advertising, provided that the comparisons are “clearly identified, truthful, and non-deceptive”.^[15] Although comparative advertising is encouraged, NAD has stated “claims that expressly or implicitly disparage a competing product should be held to the highest level of scrutiny in order to ensure that they are truthful, accurate, and narrowly drawn.”^[16] Another major law is the Trademark Lanham Act, which states that one could incur liability when the message of the comparative advertisement is untrue or uncertain, but has the intention to deceived consumers through the implied message conveyed.

Australia

In Australia, no specific law governs comparative advertising although certain cases regarding this matter have occurred.^[17] Comparative advertising that is truthful, and does not lead to confusion is permitted.^[18]

Generally, Australian advertisers should make sure that the following are complied when exercising comparative advertising to avoid breaches regarding misleading advertising under Australia Consumer Law^[19]:

1. Product compared should be like products as per HCF Australia Ltd v Switzerland Australia Health Fund Pty Ltd^[20] , or else comparison must be made clearly to consumers as per Gillette Australia Pty Ltd v Energizer Australia Pty Ltd^[21];
2. Test results are presented as it is as per Makita v Black & Decker^[22];
3. Test used are appropriate and conducted according to industry guidelines as per Duracell Australia Pty Ltd v Union Carbide Australia Ltd^[23]; and
4. Mock up test results truly reflects how is product functioning in real life as per Hoover (Australia) Pty Ltd v Email Ltd^[24][25].

Asia – Hong Kong

The law in Hong Kong regarding comparative advertising is the law that existed in the UK prior to the enactment of the UK Act 1994.^[26] Hong Kong has no legislation exclusively intended at limiting false or misleading advertisements. Still, the Trade Descriptions Ordinance (Cap 362) bans the use of false trade descriptions in advertisements. The tort of trade libel also exists to deal with false or misleading advertisements designed to injure the competitor.^[27] Consumer Council may have the authority to publish information with a perspective to amending false or misleading advertisements^[28], while the Association of Accredited Advertising Agencies of Hong Kong have the authority to take action against members who organize advertisements that are inaccurate.^[29]

Effectiveness of comparative advertising

Comparative advertising has been increasingly implemented through the years, and the types of comparative advertising range from comparing a single attribute dimension, comparing an attribute unique to the target and absent in the referent and comparisons involving attributes unique to both brands.^[30] The contributing factors to the effectiveness of comparative advertising include believability^[31], which refers to the extent a consumer can rely on the information provided in comparative advertisements, the level of involvement^[32], and the convenience in evaluation^[33],provided by spoon feeding the consumer with information that does not require extra effort in recall^[34].

Comparative advertising is generally coupled with negativity, as evidenced by early industry condemnation.^[35] Stating reasons such as participation in comparative advertising damaged the honour and credibility of advertising. Studies have suggested that negative information can be stored more effectively^[36], thus generating the impact that any advertisement is purposed for, and more importantly, strong recall^[37]. On the contrary, such negativity can either be transferred directly to the brand and the consumer’s impression of the brand, various studies through the years have proven that comparative advertising has been responded to negatively^[38].

Examples

Comparative advertising has been used effectively by companies like The National Australia Bank (NAB), and its “break up” campaign has made such an impact it has won an award from Cannes, and a substantial increase in its consumer interest.^[39] Internationally acclaimed Apple Inc. has effectively utilized its Mac vs PC advertisements as part of its marketing efforts to increase its market share over the years. Such companies prove the academic view that comparative advertising is more successful when used by established brands^[40],justified by the credibility and attention an established brand brings. Other famous examples include L’Oreal SA v Bellure NV^[41] and Coca Cola v Pepsi^[42]. Comparative advertising has to be executed with caution and deep consideration for the targeted markets as the novelty of the concept affects the effectiveness of the stipulated campaigns.^[43]

In the 1980s, during what has been referred to as the cola wars, soft-drink manufacturer Pepsi ran a series of advertisements where people, caught on hidden camera, in a blind taste test, chose Pepsi over rival Coca-Cola.

The use of comparative advertising has been well established in political campaigns, where typically one candidate will run ads where the record of the other candidate is displayed, for the purpose of disparaging the other candidate. The most famous of these type ads, which only ran once on TV, consisted of a child picking daisies in a field, while a voice which sounded like Barry Goldwater performed a countdown to zero before the launch of a nuclear weapon which explodes in a mushroom cloud. The ad, "Daisy", was produced by Lyndon B. Johnson's campaign in an attempt to prevent Goldwater from either winning the nomination of his party or being selected.

Another example took place throughout starting in circa 1986, between the bitter rivalry between Nintendo and Sega. "Genesis does what Nintendon't" immediately became a catchphrase following the release of the Sega Genesis (known as Mega Drive in PAL countries).

References

1. ^ T.E. Barry & R.L. Tremblay, “Comparative advertising: perspectives and issues”, Journal of Advertising, Vol. 4, No. 4, 1975, pp. 15-20.
2. ^ Federal Trade Commission Commercial Practice Rule 16 CFR §14.15 n 1 (2002)
3. ^ (2002) 193 ALR 629
4. ^ P. Armitage in M.A. Murphy, “Legal aspects of comparative advertising and a strategy for its use”, Queensland University of Technology law journal, Vol. 12, 1996, pp. 41-59.
5. ^ B. Mills, “Comparative advertising: should it be allowed?”, European Intellectual Property Review, Vol. 17, No. 9, 1995, pp. 417-430.
6. ^ 16 US 375, 30 S.Ct. 298, 54 L.ED 525 (1910)
7. ^ B. Mills, “Comparative advertising: should it be allowed?”, European Intellectual Property Review, Vol. 17, No. 9, 1995, pp. 417-430.
8. ^ F. Beard, “Comparative advertising wars: an historical analysis of their causes and consequences”, Journal of Macromarketing, Vol. 30, No. 3, 2010, pp. 270-286.
9. ^ C.L. Beck-Dudley & T.G. Williams, “Legal and public policy implications for the future of comparative advertising: a look at U-Haul v Jartran”, Journal of Public Policy & Marketing, Vol. 8, No. 1, 1989, pp. 124-142.
10. ^ D.W. Jackson Jr., S.W. Brown & R.R. Harmon, “Comparative magazine advertisements”, Journal of Advertising Research, Vol. 19, No. 6, 1979, pp.21-26.
11. ^ M, Peitz & F, Barigozzi, “Comparative Advertising and Competition Policy”, School of Business Administration, Working Paper 19/2004, August 2004.
12. ^ P. England, “Advocate General says comparative advertising is not a matter of trade mark law”, Journal of Intellectual Property Law & Practice, Vol.3, No. 5, 2008, pp.284-285.
13. ^ [2001] ETMR 235
14. ^ “Use of Competitors’ Trade Marks and Comparative Advertising in the United Kingdom and Europe”, Gillhams Solicitors and Lawyers 2008, http://www.gillhams.com/articles/389.cfm, viewed 1 September, 2011.
15. ^ J. E. Villafranco, “Devoted to Intellectual Property Litigation & Enforcement”, Woltens Kluwer Law & Business, Aspen Publishers, Vol. 16, No. 1, 2010, http://www.kelleydrye.com/publications/articles/1335/_res/id=Files/index=0/Villafranco_Law%20of%20Comparative%20Advertising%20in%20the%20US_010210.pdf, viewed 2 September, 2011.
16. ^ Sherwin-Williams Company, Report # 3988 ( NAD/CARU Case Reports December 2002), citing AT&T Broadband, Report # 3914 ( NAD/CARU Case Reports June 2002).
17. ^ Murphy, Matthew Anthony. "Legal aspects of comparative advertising and a strategy for its use." Queensland University of Technology Law Journal 12 (1996): 41-59. LegalTrac. Web. 2 Sep. 2011.
18. ^ Lieberman, Guidebook to Australian Trade Marks Law and Practice (2nd ed) (Sydney CCH, Australia, 1985) p.75
19. ^ Advertising and selling, Commonwealth of Australia, 2011.
20. ^ [1988] ATPR 40-846
21. ^ [2002] FCAFC 223
22. ^ [1995] ATPR 41-030
23. ^ [1988] ATPR 40-918
24. ^ [1991] ATPR 41-149
25. ^ B. Clarke, B. Sweeney & Mark Bender, Marketing and The Law, 4th edn, LexisNexis Butterworths, New South Wales, 2011.
26. ^ Pendleton, Garland and Margolis, The Law of Intellectual and Industrial Property in Hong Kong (Hong Kong: Butterworths, 1994) pp 210-240.
27. ^ Ratcliffe v Evans [1892] 2 QB 524
28. ^ Consumer Council Ordinance, Cap 216, ss 4(1)(a) and 5(2)(d).
29. ^ Tackaberry, Paul. "Comparative advertising in Hong Kong: denigration and competition." Asia Pacific Law Review 5.1 (1996): 77. LegalTrac. Web. 2 Sep. 2011.
30. ^ S. Zhang, F.R. Kardes & M.L Cronley, “Comparative Advertising: Effects of Structural Alignability on Target Brand Evaluations”, Journal of Consumer Psychology, Vol. 12, No. 4, 2002, pp. 303-311.
31. ^ T.E Barry & R.L Tremblay, “Comparative Advertising: Perspectives and Issues”, Journal of Advertising, Vol. 4, No. 4, 1975, pp. 15-20.
32. ^ I. Soscia, S. Girolamo & B. Busacca, “The Effect of Comparative Advertising on Consumer Perceptions: Similarity or Differentiation?”, Journal of Business and Psychology, Vol. 25, No. 1, 2009, pp. 109-118.
33. ^ K.E. James & P.J. Hensel, “Negative Advertising: The Malicious Strain of Comparative Advertising”, Journal of Advertising, Vol. 20, No. 2, 1991, pp. 53-69.
34. ^ A. Chattopadhyay, “When Does Comparative Advertising Influence Brand Attitude? The Role of Delay and Market Position”, Psychology & Marketing, Vol. 15, No. 5, 1998, pp. 461-475.
35. ^ F. Beard, “Comparative Advertising Wars: An Historical Analysis of Their Causes and Consequences”, Journal of Macromarketing, Vol. 30, No. 3, 2010, pp. 270-286.
36. ^ A.B. Sorescu & B.D. Gelb, “ Negative Comparative Advertising: Evidence Favoring Fine-Tuning”, Journal of Advertising, Vol. 29, No. 4, 2000, pp. 25-40.
37. ^ C.W. Nye, M.S. Roth & T.A. Shimp, “Comparative Advertising in Markets Where Brands and Comparative Advertising are Novel”, Journal of International Business Studies, Vol. 39, 2008, pp. 851-863.
38. ^ F. Beard, “Comparative Advertising Wars: An Historical Analysis of Their Causes and Consequences”, Journal of Macromarketing, Vol. 30, No. 3, 2010, pp. 270-286.
39. ^ ArtsHub ,“Breakup Campaign Wins Cannes Lions”, http://www.artshub.com.au/au/news-article/news/arts/breakup-campaign-wins-cannes-lions-184492, viewed 30 August, 2011.
40. ^ C.W. Nye, M.S. Roth & T.A. Shimp, “Comparative Advertising in Markets Where Brands and Comparative Advertising are Novel”, Journal of International Business Studies, Vol. 39, 2008, pp. 851-863.
41. ^ [2010] R.P.C. 23.
42. ^ R.D. Petty & P.M. Spink, “Comparative advertising law in the European Community: Will the proposed directive harmonize across the Atlantic?”, Journal of Public Policy & Marketing, Vol.14, Issue 2, 1995, pp. 310-317.
43. ^ C.W. Nye, M.S. Roth & T.A. Shimp, “Comparative Advertising in Markets Where Brands and Comparative Advertising are Novel”, Journal of International Business Studies, Vol. 39, 2008, pp. 851-863.