Relaxed rules see ads push law to the limits

Vodafone and Orange are awaiting the outcome of their High Court spat; Hertz is suing Holiday Autos while Volkswagen and Citroë settled out of court over allegations of deliberately misleading consumers (MW June 28).

The flurry of legal actions threatened by a relaxation on comparative advertising 18 months ago is now upon us. And the flurry is likely to intensify as companies come to exploit the fact that comparative advertising can offer a market share advantage today, at a possible legal cost in the future.

With market share ever more important, this is increasingly considered a price worth paying. Orange and Citroë would seem to agree. Companies are now willing deliberately to risk legal action to win market share, even if it is just a short-term advantage.

I have in the past been approached by companies saying: “We want to run this ad. We know it’s a bit naughty but can you advise us on how far we can go without getting an injunction on day one.” It is now part of commercial strategy to risk legal action if that action will not damage the campaign at the outset. And by the time any action is taken the company will have stolen a march on its rivals.

A European directive which will pass into law later this year defines comparative advertising as “advertising that, either implicitly or explicitly, identifies a rival or the goods and services provided by a rival”. No blinding insight there – it mirrors UK law.

But as the Vodafone legal action against Orange over its “Orange users save 20 a month” campaign will no doubt confirm, there is nothing to stop one company pointing out the advantages of its products over those of a competitor if its use of the competitor’s trademark is “honest”. Indeed, the aggrieved brand owner will have to show that the ad wasn’t honest before proving any trademark infringement.

The judge in the Orange case is now considering the evidence given during five days in court. A decision is expected early this month.

So why do we care? Because the new caring Nineties seems to be inspiring copywriters to provide full information and educate consumers – usually by spelling out why their product is better than a rival’s grubby little offering.

Not only that, but with 1994’s trademark law explicitly encouraging comparative advertising, we are set for an explosion of “knocking copy” if only because you can now, for the first time, use someone else’s trademark to identify a rival’s product. The reality is that as long as you don’t go too far you can have your cake and eat it. You can run a campaign and not get it pulled by the courts.

So, how low can you go?

To comply with relevant codes, the first requirement is to deal fairly with the competitor involved and avoid misleading the consumer. And no choosing artificially advantageous comparisons – which Volkswagen alleged against Citroë in their war of the air-conditioning.

It’s got to be “like with like”. But more companies are asking why bother with the rules? For the answer they only need to look at Dell. In 1992, the company came dramatically unstuck by comparing computers with different-sized hard drives.

Then there is malicious falsehood. If all else fails, the victim of comparative advertising may well rely on this. All it needs to prove is that the offending comparison is false, that it was made maliciously and that it is damaging.

But if the campaign is not calculated to cause damage why would a rival be running it? If the comparison is also false then bingo! – slapped wrists. Which is exactly what happened to Dell. Both the Vodafone case against Orange and Hertz’ decision to sue Holiday Autos for its “Nobody beats our prices” campaign, allege malicious falsehood.

If the campaign gets over the hurdles of fairness and clarity, some sort of reference will need to be made about the competing brand or company. That reference will no doubt involve use of a brand or company name. Are these trademarks? Are they registered? Do rivals have to worry about that anymore?

A trademark owner can only prevent use of his mark where it is “contrary to honest practice in industrial or commercial matters and would take unfair advantage of the mark or be detrimental to its distinctive character or repute”. But there is no definition of what amounts to “honest practices” in the relevant legislation and so all that remains to be seen is how much will be spent on legal fees to interpret the definition.

Indeed, that spend has already started. We now know, from the fight between Barclays and RBS Advanta, that if a reasonable reader of an ad is likely to consider that ad to be “honest” then the test is passed. The judge in that case even left us thinking that the ad would have to be significantly misleading before he could pull it. He wasn’t impressed by a suggestion that he should study the various advertising codes to decide whether the advertising was “honest”.

The ads produced under the new law so far demonstrate that, in all sectors, the gloves are coming off. Comparative advertising is not illegal. Its recent resurgence may well prove to be the tip of a much greater iceberg.

My advice would not be don’t do it. Quite the reverse in fact. Just be careful especially as advice is increasingly being sought from people like me about other people’s campaigns. Purely from an educational point of view, you understand.