Comparative advertising: what it is and how to manage risk
06 April 2020
In highly competitive industries, the line between extolling the virtues of one’s own product and comparing it with others can be a very fine, and sometimes blurry, one. Most advertisers will make claims about their products. Those claims might be straightforward, such as claims as to battery life, suitability for certain tasks or conditions, or relating to price. Other claims might suggest that the advertiser’s product is the best, cheapest or superior in some other way. There is a category of advertising though that can be much more high stakes – comparative advertising.
What is comparative advertising?
The UK’s comparative advertising rules are now entirely derived from EU law (and will be for the foreseeable future, unless and until the UK government decides to replace them with something home grown). The current law is derived from Directive 2006/114/EC, commonly known as the comparative advertising directive (“CAD”). The CAD was implemented by the UK in the form of the Business Protection from Unfair Advertising Regulations 2008 but for present purposes, we can refer to the CAD alone.
The CAD defines advertising as essentially any representation made by a business to promote its products. Advertising becomes comparative if it “explicitly or by implication identifies a competitor or goods or services offered by a competitor”. It is, as a concept, exceptionally broad. It clearly covers traditional advertisements, but it can also apply to telephone calls, emails, and other communications to customers or potential customers. A concerted email campaign making comparative claims against a competitor, for example, will typically fall within the definition.
At its least contentious, comparative advertising involves an implicit identification of a competitor. We have all seen ads referring to the detergent of a “leading competitor”. These comparative ads are likely to be scrutinised carefully by the mystery competitor(s), but they are a tamer species as they do not make use of any of the competitor’s intellectual property rights.
The other end of the spectrum is the comparative ad that calls out the competitor by name and makes a direct comparative claim. Perhaps the most straightforward example of an explicitly comparative ad is an advertiser comparing its price favourably against a competitor.
Why is use of explicit comparative ads such a high-risk strategy?
There are legal, commercial and human reasons for this. From a legal perspective, the primary issue is that an ad that refers to a competitor by name will inevitably be using its trade mark (and possibly copyright works). The commercial reasons are primarily that if an advertiser considers it worth attacking its competitor so openly, then the subject of the comparison will also see value in fighting back. Finally, human nature kicks in and, when attacked, the instinct of the recipient of that attack is to gather its forces and fight back.
What legal and regulatory issues are in play?
Most forms of advertising are subject to the Committee of Advertising Practice’s “CAP” and “BCAP” codes. Advertisers who fall foul of these rules are likely to find themselves under investigation by the UK advertising watchdog, the Advertising Standards Authority (“ASA”).The ASA does not have the ability to levy fines and, (save where advertisers are seriously ignoring the advertising rules and its rulings), has fairly limited powers to reign in miscreant advertisers. However, its rulings are public and, where brands are newsworthy enough, are usually picked up by the press as having been ‘banned’. The vast majority of responsible advertisers therefore look to comply with the codes and correct their advertising when they cross a line.
Comparative ads are very likely to be subject to complaints. Long-running battles are often waged between competitors looking to secure, or prevent their competitors from securing, a competitive advantage, or to prevent competitors from misleading consumers.
Trade mark issues
Outside the specific arena of comparative advertising, a brand that adopts a competitor’s trade mark to advertise its identical products would normally be liable for trademark infringement. Specifically, it could be liable for ‘double identity infringement’, i.e. identical goods for identical services, which is as close as civil trade mark law comes to strict liability. It could also be liable for taking unfair advantage of the competitor’s trade marks, or using the mark in a way that harms that mark in some way.
However, the law recognises the benefit of robust competition between brands, and the Trade Marks Directive, EU Trade Marks Regulation, and the national laws of the EU member states and the UK, all provide an exemption for use of a third party’s trade mark in lawful comparative advertising. The key to designing a comparative ad is therefore to fit it within the CAD.
A comparative ad must:
- not be misleading;
- compare goods or services meeting the same needs or intended for the same purpose;
- objectively compare one or more material, relevant, verifiable and representative features of those goods and services, which may include price;
- not discredit or denigrate the competitor or its trade marks;
- for products with designation of origin, relate in each case to products with the same designation;
- not take unfair advantage of the reputation of the competitor’s trade mark;
- not present goods or services as imitations or replicas;
- not create confusion among traders, between the advertiser and a competitor, or between the advertiser's trade marks, trade names, other distinguishing marks, goods or services and those of a competitor
Importantly, the CAD and UK copyright law do not (expressly) provide a defence for copyright infringement. Advertisers that use competitors’ logos are therefore at risk of infringing the rights in those logos.
Following recent developments in copyright law, which have arguably extended the scope of copyright protection to works that previously would not have benefitted from copyright protection (at least in the UK), including images of products could also carry risk.
Where an ad contains a false claim, it might also represent a malicious falsehood (i.e. a statement that is false and its publication is calculated to cause the competitor damage), or be defamatory (i.e. statements that lower another person’s reputation in the minds of ‘right-thinking people generally’, causing the competitor serious financial loss).
Top tips for risk-free comparative advertising
There have not been many cases on comparative advertising that have reached trial in England. One of the reasons for this is the cost, uncertainty, and optics of bringing such a claim.
An example of the potential pitfalls of bringing such a claim are best shown in the Ryanair v British Airways case. In that case, the judge, Sir Robin Jacob, said, “So I must decide the case, however immature it may seem for two large companies to be fighting this sort of dispute in the courts. It seems particularly odd commercially that BA should persist in its claim that the price comparisons are misleading. The complaint amounts to this: that Ryanair exaggerate in suggesting BA is 5 times more expensive because BA is only 3 times more expensive”.
On the other hand, legal proceedings may often be the only way to achieve restitution and prevent continuing unlawful attacks on a brand. Claims are sometimes brought to ‘draw a line in the sand’ in a way that complaints to the ASA cannot. Defendants will be wary of a public judgment against them and in favour of a competitor, leading to significant cost, adverse publicity, and embarrassment.
Nevertheless, there have been enough cases to draw a number of lessons.
Top tip 1: Choose your words carefully
Advertisements will usually be judged by the words they use. In advertising, many words will be taken to have specific meanings. For example, a claim to be “No.1” or “leading” will typically be understood to represent a claim to have the greatest amount of sales (i.e. best-selling). This means that the advertiser needs to have definite evidence of that fact before running the ad.
Similarly, claims to be the “best tasting” or “most effective” can be objective claims requiring good substantiating evidence.
While the risk profile will naturally increase, there is nothing in law preventing advertisers from being moderately offensive or derogatory about the competitor. The ad should, however, not stray into becoming “denigratory” (unfairly critical), defamatory (attacking the competitor’s reputation or standing), or (under the CAP Code) “likely to cause serious or widespread offence”.
Whether an ad will cause light offence or widespread offence can be a fine judgement. Cautious advertisers will usually avoid any risk of offence. Disruptors and rebellious advertisers might actively seek it out.
A good example, again, is the Ryanair v British Airways case, where Ryanair had run a comparative advertising campaign using the headline “EXPENSIVE BA….DS”. The ASA upheld a complaint against that headline, deciding that it “was likely to cause serious or widespread offence”. When it came to a trade mark infringement trial, while the judge seemed to relish calling it the “Bastards headline”, he considered that the ad would probably have been unlawful under the pre-cursor to the CAD.
Top tip 2: Make sure you can back up your claims
If a claim is false and the advertiser knows it to be false, it can leave the advertiser exposed to claims for malicious falsehood.
That is exactly what happened to the now-defunct electrical retailer, Comet. Comet had published a series of ads claiming that its prices were lower than those offered by its rival, Currys, when this was not, in fact, the case. Currys sought and successfully obtained an injunction, and would have been entitled to damages as a result.
Even if the ad falls short of being a malicious falsehood, it is likely still to be considered misleading and therefore in breach of the CAD. If the ad features the competitor’s trade mark, it is likely to infringe it. Even if the competitor does not choose to sue, it is likely still to make a complaint to the ASA, possibly leading to an embarrassing climb down and possible adverse ruling.
The approach to the level of evidence needed to back up claims could be the subject of an entire article on its own. The ASA has applied an extremely rigorous standard to some advertisers’ evidence, challenging, not always fairly, the methodology and results of tests. Many judges are even more keen to, and more capable of, delving into the detail than the ASA.
The key take-away point, though, is that comparative advertising claims tend to involve a highly motivated competitor helping the ASA or court to find the problems with the evidence, and therefore present higher risks to the advertiser.
Top tip 3: Always compare like with like
There are two ways in which the concept of comparing like with like comes into play. Firstly, comparing products that do not meet the same needs, or are not intended for the same purpose, will fail to comply with the CAD. However, there are less obvious instances where the comparison is accurate, e.g. a widget sold by X is £x, and the same widget sold by Y is £x+1, but the ad is nevertheless unlawful.
A good example is seen in a 2017 case involving French supermarket Carrefour and its competitor Intermarché. In that case, the Court of Justice of the European Union held that a comparison of the prices of supermarket products did not comply with the CAD where the comparison was between products sold in the advertiser’s large stores, and the same products sold in the competitor’s local/metro stores.
Similarly, we have seen cases where advertisers have run into legal difficulties after comparing their premium, higher-spec product with the competitor’s lower-spec product, despite an equivalent being available.
Top tip 4: Avoid using competitors’ logos or other potentially copyright works in comparative ads
Two well-known UK publishers were sued, separately, for using images of a competitor’s magazine cover in an ad for their own product. The cases are rather old now, both pre-dating the CAD, but the court found against both advertisers and the precedent is still a useful one.
The CAD does not expressly apply to the use of competitors’ copyright works, and advertisers will have a great deal more work to do defending claims where they have used a copyright work when simply using the comparator’s name would have done.
There is also the risk that the individual person who created the copyright work could assert ‘moral rights’, which is an even more significant issue in continental Europe.
Top tip 5: Make sure the claim made in the ad is verifiable
We see lots of cases come across our desks where the advertiser might be able to back up some or all of the claims, but failed to make the ad “verifiable”.
Advertisers have some scope in how they choose to verify their comparative claims, but they must at least provide a signpost indicating where the recipient of the ad could check the veracity of the claims made.
The conditions in the CAD are cumulative so, while an ad might be a reasonable comparison, not be misleading, denigratory, etc., it might still be unlawful by virtue of it not being verifiable.
The tiger and the rabbit
There is no doubt that comparative advertising is a useful tool for businesses in competitive sectors.
The CAD also points to the myriad of benefits that comparative advertising can bring to consumers, arguing that comparative advertising can “stimulate competition between suppliers of goods and services to the consumer's advantage”.
Comparative advertising can also be a useful tactic for market disruptors, and new competitors entering established markets. Where a new market entrant has spotted a gap in the market, or designs a better product, it is vital that it is able to inform customers in a meaningful way, and comparison with existing products can be ideal.
However, intellectual property rights are also extremely valuable to competition, and of huge value to the businesses that own them. Organisations targeted by comparative advertising, and especially those that are market leaders, are likely to seek to defend themselves vigorously against comparative advertising tactics.
To summarise, advertisers wishing to make the most of comparative ads while minimising the risk of legal come-back might seek to be like the tiger and the rabbit of the Chinese Zodiac – brave but cautious