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Sunday, November 7, 2010

Disparaging Advertisements : The Law

The Delhi High Court recently had the opportunity of dealing with a matter relating to alleged Disparaging Advertisements by Colortek Meghalaya Pvt. Ltd. (Goodknight Naturals) against the products of Dabur India Ltd (Odomos). The Bench while dealing with the matter culled out the principles and the law with regard to disparaging advertising in India. The Delhi High Court inter alia held:
10. In Tata Press Ltd. v. MTNL & Ors., (1995) 5 SCC 139 (paragraph 25) the Supreme Court held that "commercial speech" is a part of freedom of speech and expression guaranteed under Article 19(1)(a) of the Constitution. However, what is "commercial speech" was not defined or explained. In fact, it does not appear to be possible to clearly define or explain "commercial speech" and, in any event, for the purposes of this case it is not necessary for us to do so. The reason for this is that the Supreme Court has said in Tata Press Ltd. (paragraph 23 of the Report) that advertising as a "commercial speech" has two facets thereby postulating that an advertisement is a species of commercial speech. The Supreme Court further said as follows:- "23. .Advertising which is no more than a commercial transaction is nonetheless dissemination of information regarding the product advertised. Public at large is benefited by the information made available through the advertisement. In a democratic economy free flow of commercial information is indispensable. There cannot be honest and economical marketing by the public at large without being educated by the information disseminated through advertisements. The economic system in a democracy would be handicapped without there being freedom of "commercial speech" .."
11. Earlier, the Supreme Court referred to Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council Inc., (1975) 421 US 748 and observed in paragraph 15 that it is almost settled law in the United States that though "commercial speech" is entitled to the First Amendment protection, the Government was completely free to recall "commercial speech" which is false, misleading, unfair, deceptive and which proposes illegal transactions.
12. In Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd., (1999) 7 SCC 1, the Supreme Court observed in paragraph 36 of the Report that a distinction would always have to be made and latitude given for an advertisement to gain a purchaser or two. This latitude cannot and does not mean any permission for misrepresentation but only a description of permissible assertion. In this context, reliance was placed by the Supreme Court on Anson's Law of Contract (27th Edn.) which says that commendatory expressions are not dealt with as serious representations of fact. The view remains the same in the 28th Edition (page 239). "A similar latitude is allowed to a person who wants to gain a purchaser, though it must be admitted that the borderline of permissible assertion is not always easily discernible."
13. The Supreme Court recognized and applied in Colgate Palmolive (India) Ltd. the rule of civil law, "simplex commendatio non obligat" simple commendation can only be regarded as a mere invitation to a customer without any obligation as regards the quality of goods. It was observed that every seller would naturally try and affirm that his wares are good enough to be purchased (if not better than those of a rival).
14. On the basis of the law laid down by the Supreme Court, the guiding principles for us should be the following:-
(i) An advertisement is commercial speech and is protected by Article 19(1)(a) of the Constitution.
(ii) An advertisement must not be false, misleading, unfair or deceptive.
(iii) Of course, there would be some grey areas but these need not necessarily be taken as serious representations of fact but only as glorifying one's product.
To this extent, in our opinion, the protection of Article 19(1)(a) of the Constitution is available. However, if an advertisement extends beyond the grey areas and becomes a false, misleading, unfair or deceptive advertisement, it would certainly not have the benefit of any protection.
15. There is one other decision that we think would give some guidance and that is Pepsi Co. Inc. & Ors. v. Hindustan Coca Cola Ltd., 2003 (27) PTC 305 (Del.) (DB). In this decision, a Division Bench of this Court held that while boasting about one's product is permissible, disparaging a rival product is not. The fourth guiding principle for us, therefore, is: (iv) While glorifying its product, an advertiser may not denigrate or disparage a rival product. Similarly, in Halsbury's Laws of England (Fourth Edition Reissue, Volume 28) it is stated in paragraph 278 that "[It] is actionable when the words go beyond a mere puff and constitute untrue statements of fact about a rival's product." This view was followed, amongst others, in Dabur India Ltd. v. Wipro Limited, Bangalore, 2006 (32) PTC 677 (Del). "[It] is one thing to say that the defendant's product is better than that of the plaintiff and it is another thing to say that the plaintiff's product is inferior to that of the defendant."
16. In Pepsi Co. it was also held that certain factors have to be kept in mind while deciding the question of disparagement. These factors are: (i) Intent of the commercial, (ii) Manner of the commercial, and (iii) Story line of the commercial and the message sought to be conveyed. While we generally agree with these factors, we would like to amplify or restate them in the following terms:- (1) The intent of the advertisement - this can be understood from its story line and the message sought to be conveyed. (2) The overall effect of the advertisement does it promote the advertiser's product or does it disparage or denigrate a rival product?
In this context it must be kept in mind that while promoting its product, the advertiser may, while comparing it with a rival or a competing product, make an unfavourable comparison but that might not necessarily affect the story line and message of the advertised product or have that as its overall effect.
(3) The manner of advertising is the comparison by and large truthful or does it falsely denigrate or disparage a rival product? While truthful disparagement is permissible, untruthful disparagement is not permissible.
17. In our opinion, it is also important to keep in mind the medium of the advertisement. An advertisement in the electronic media would have a far greater impact than an advertisement in the print media. In D.N. Prasad v. Principal Secretary, 2005 Cri LJ 1901 the Andhra Pradesh High Court observed that a telecast reaches persons of all categories, irrespective of age, literacy and their capacity to understand or withstand. The Court noted that the impact of a telecast on the society is phenomenal. Similarly, it was observed in Pepsi Co. that a vast majority of viewers of commercial advertisements on the electronic media are influenced by visual advertisements "as these have a far reaching influence on the psyche of the people " Therefore, an advertiser has to virtually walk on a tight rope while telecasting a commercial and repeatedly ask himself the questions: Can the commercial be understood to mean a denigration of the rival product or not? What impact would the commercial have on the mind of a viewer? No clear-cut answer can be given to these questions and it is for this reason that this Court has taken a view that each case has to be decided on its own facts. (See Reckitt Benckiser (India) Ltd. v. Cavinkare Pvt. Ltd., ILR (2007) II Delhi 368, paragraph 17). Consequently, this Court has been called upon to decide the same issue time and time again resulting in the same and very large number of decisions being cited.
Find the entire Judgment here.

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