Ethics in comparative advertising

1. IIM ROHTAK
16
Comparative Advertising
BUSINESS ETHICS
Aditya Sharma(PGP06.059)
Gagan Chanda(PGP06.074)
Jayant Singh Sidhu(PGP06.080)
Saurabh Kesari(PGP06.101)

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Introduction
Comparativeadvertising means that you directly compareyour business or
productto a competitor's offering. This ad approach is commonly used by
companies in a competitive positioning strategy. In highly competitive
marketplaces, comparativeadvertising is a way to potentially separate yourself
fromcompetitors in the minds of consumers.
The major purposeof comparativeadvertising is to establish whatyour
company or product offers that the competing brand doesn't. Essentially, you
providecustomers with a point of reference in promoting your benefits. Rather
than simply saying you offer "the best quality" or "good quality," you could
indicate that your productis made of a more durable material than the
competitor's version. To succeed, you need to focus on a trait or feature your
customers careabout.
Caution is important in comparative ads to avoid practical and legal risks. First,
the marketmay negatively react if you present a messagethat tears down a
loved or trusted brand. You also bring free attention to the brand you mention
by name in the ad. You need to make surethat your statements are accurate
to avoid being sued for business libel or falseadvertising. Competitors may
also respond to your comparativeads with their own messages thatcriticize
your company or product.
Comparativeadvertising generally possesses two components, puffery and
denigration. Puffery is wherethe advertiser seeks to draw the consumer’s
attention by making superlativeclaims about his productthat are assertions of
opinion, rather than verifiable statements of fact. Often puffery crosses the
limits of tolerance and seeks to portray the competing productin a negative
light. The sameis then said to amountto denigration, which the courts have
strictly prohibited. Thus, the material question that often arises is to what
extent comparative advertising may be restricted. The answer lies in
developing a clear understanding of the conflicting interests of the various

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stakeholders involved, including the advertiser, the competitor and the
consumer. The advertiser’s objectiveherein is to presenthis products in a
manner such that the consumer is most likely to purchaseit. On the other
hand the competitor would always try to prevent any advertising that aims at
denigrating his product or makes false claims, or uses his productas a standard
which the advertiser claims to exceed. The hapless consumer finds himself in
the midstof a cacophony of claims, and has the right to be accurately informed
about the quality or utility of the products available in the market.
EXISTING REGULATIONS
The task of regulating advertising in India has been taken up by a wide array of
governmentalauthorities and tribunals, but presently there is no dedicated
statutory mechanismto regulate the content of advertisements. Initially, all
matters related to untrueand misleading advertising were under the purview
of the Monopolies and Restrictive Trade Practices Commission, constituted
under the Monopolies and Restrictive TradePractices Act, 1969. However, the
MRTP Act was eventually repealed by virtue of Section 66 of the Competition
Act, 2002.
The matters related to unfair trade practices was vested with the consumer
grievanceforums established under the Consumer Protection Act, 1986. The
Consumer Protection Act has provided a way for consumers to address their
grievances, the Act provides no supportto the competing company against
whomsuch advertisements are made. The aggrieved parties can only take the
help of common law remedies in the formof monetary damages and injunctive
actions.
In the absence of an established statutory mechanism, the industry has
developed a model for voluntary self-regulation through the Advertising
Standards Councilof India. This Council is a non-statutory tribunal comprising
of an association of advertisers. Ithas been stated by ASCI that in view of free
competition and proper dissemination of information, advertisements can be
comparativesubjectto the following requirements:
(a) It is clear whataspects of the advertiser’s productarebeing compared with
what aspects of the competitor’s product.

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(b) The subjectmatter of comparison is not chosen in such a way as to confer
an artificial advantageupon the advertiser or so as to suggestthat a better
bargain is offered than is truly the case.
(c) The comparisons arefactual, accurate and capable of substantiation.
(d) There is no likelihood of the consumer being misled as a resultof the
comparison, whether about the productadvertised or that with which it is
compared.
(e) The advertisement does not unfairly denigrate, attack or discredit other
products, advertisers or advertisements, directly or by implication.
[Reference: http://www.ascionline.org/]
LEGAL PRECEDENCE
The part of puffery in comparativeadvertising was taken up by an Indian court
for the firsttime in Reckitt & Colman of India Ltd. v. M.P. Ramchandran. In the
case mentioned, the plaintiff and defendant weremanufacturers of clothing
detergent brands ‘Robin Blue’ and ‘Ujala’, respectively. Itwas argued by the
plaintiff that the defendant had intentionally displayed a container similar to
the plaintiff’s product. The advertisement further stated that the mentioned
product‘Blue’ was uneconomical, made fromobsolete technology and hence
highly ineffective. The advertisement also implied that the productwas
insoluble in water and hence left patches on white clothes
The question to be ascertained by the Court was whether the advertisement
was merely puffing the productof the advertiser or was denigrating the
plaintiff’s product. In the case, it was observed thatthe advertisement was
aimed at denigrating the plaintiff’s productby indicating to customers that the
productwas both ineffective and uneconomical. An order of injunction was
passed by the courtagainst the defendant prohibiting the airing of the
advertisement. The Courtinterpreted puffery with a very broad liberal attitude
supporting untrueand imprecise statements. The courtallowed advertisers to
enhance the perception of their products even at the expense of factual

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inaccuracy. The emphasis of the court was on ensuring that the competitor’s
products werenot shown in bad light and paid no stress on the effect of
comparativeadvertising on the consumer
A major evolution in the use of false and imprecise statements in puffery was is
the caseof Colgate Palmolive (India) Limited v. Anchor Health and Beauty Care
Private Ltd. The parties involved weremanufacturers of dental care products
including toothpastes, with the plaintiff asking for an injunction to the airing of
the advertisementin question. The plaintiff contended that the defendant
claimed that their productwas the only toothpaste that contained 3
ingredients, namely calcium, triclosan and fluoride. Itwas also claimed that the
productwas the firsttoothpaste that offered all round protection. The plaintiff
claimed that the defendant denigrated their productas it also contained all the
3 ingredients and was a respectable market shareowner also providing all
round protection.
The Courtrejected the defendant’s argumentwhich showed a significant
development in the reasoning of the Court. This was the firsttime that an
element of consumer protection was introduced in the law regulating puffery,
recognizing the consumer as a major stakeholder in the wholeissue.
The case of Dabur India Ltd. v. M/S Colortek Meghalaya Pvt. Ltd. laid down
certain principles to help ascertain the importof implied disparagementin
comparativeadvertising. The appellant in the case was a manufacturer of
mosquito repellent cream, namely ‘Odomos’. Therespondentalso
manufactured a mosquito repellent cream namely ‘Good Knight Naturals.’ The
appellant contended that the respondentdenigrated its productin an
advertisement. The question in the case was whether there wws any impied
denigration and if the court should order an injunction.
The Court observed that any manufacturer has the right to representhis
productto increase sales but this right does not allow the manufacturer to
misrepresentfacts but allows description of permissibleassertions. Thus the
seller can affirmthat his products are of superlativequality through proper
representation.

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ASCI (Advertising Standards Council of India).
A self regulatory voluntary organization of the Advertising Industry.
The Advertising Standards Council of India (ASCI), established in 1985, is
committed to the causeof Self-Regulation in Advertising, ensuring the
protection of the interests of consumers. ASCI wasformed with the supportof
all four sectors connected with Advertising, viz. Advertisers, Advertising
Agencies, Media (including Broadcasters and the Press) and others like PR
Agencies, Market Research Companies etc.
The Consumer Complaints Council is ASCI's heartand soul. Itis the dedicated
work put in by this group of highly respected people that has given
tremendous impetus to the work of ASCI and the movement of self- regulation
in the advertising.
ASCI Codes
The Advertising Standards Council of India (ASCI) (1985) has adopted a Code
for Self-Regulation in Advertising. Itis a commitment to honestAdvertising and
to fair competition in the market-place. Itstands for the protection of the
legitimate interests of consumers and all concerned with Advertising -
Advertisers, Media, Advertising Agencies and others who help in the creation
or placement of advertisements.
ASCI haveone overarching goal: to maintain and enhance the public's
confidence in advertising. ASCI seek to ensurethat advertisements conformto
its Code for Self-Regulation which requires advertisements to be:
1. Truthful and Honest toconsumers andcompetitors.
2. Withinthe bounds of generally acceptedstandards of public decency and
propriety.
3. Not usedindiscriminately for the promotionof products, hazardous or
harmful to society or toindividuals particularly minors, toadegree
unacceptable tosociety at large.
4. Not derogatory tocompetition. Noplagiarism.

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Functional Advantages of Comparative Advertising
Comparativeadvertising enable advertisers to objectively demonstrate the
merits of their products. Comparativeadvertising improves the quality of
information available to consumers enabling them to make well-founded and
more informed decisions relating to the choice between competing
products/services by demonstrating themerits of various comparable
products. Based on this information, consumers may makeinformed and
therefore efficient choices.
Comparativeadvertising which aims to objectively and truthfully informthe
consumer promotes the transparency of the market. Markettransparency is
also deemed to benefit the public interest as the functioning of competition is
improved resulting in keeping down prices and improving products.
Comparativeadvertising can stimulate competition between suppliers of goods
and services to the consumer's advantage.
Advantages fromthe Consumer's Point of View
Fromthe Consumer's pointof view, Comparativeadvertising has more
advantages than disadvantages. For example, Comparative advertising
represents an inevitable partof the consumer decision-making process,
particularly at the evaluation stage.
Consumer wants needs and looks for more information to help him in making
decisions. Comparativeadvertising can facilitate efficient decision-making, and
fill the gap in the consumer's search for meaningfulinformation.
Risks of Comparative Advertising
Comparisons between goods and services of different undertakings carry with
them somesignificant risks. Thereis a danger that once undertakings address
the merits and inadequacies of competing goods or services, they may be
tempted to denigrate them or derive unfair advantages fromsuch inaccurate
comparisons. Justlike traditional forms of advertising, comparativeadvertising
seeks to both assistthe development of the undertaking concerned and to
informconsumers. Although both forms of advertising seek to attract
customers, in case of comparativeadvertising, commercial relationships may
be exposed to the constantthreat of unfair practices.

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LEGAL AND ETHICAL ISSUES:
No Indian statute defines the term, but the UK Regulation defines comparative
advertising as meaning any advertisement which “explicitly or by implication,
identifies a competitor or goods or services offered by a competitor”. In this
backdrop, the Delhi High Courtsummarized the law on the subjectin the case
of Reckitt &Colman v. Kiwi TTK , as follows:
• A tradesman is entitled to declare his goods to be the best in the world,
even though the declaration is untrue
• He can also say that his goods arebetter than his competitor’s, even
though such statement is untrue
• 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 grantan order of injunction restraining repetition of
such defamation.
• For the purposeof saying that his goods are the best in the world or his
goods are better than his competitor’s he can even compare the
advantages of his goods over the goods of others.
• He, however, cannotwhile saying 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.
• 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 grantan order of injunction restraining repetition of
such defamation.
Indian law, although interpreted to allow comparative advertisement,
does not address theissue in a direct or comprehensivemanner in any
legislation. The Monopolies and Restrictive Trade Practices, 1984 (herein
after “MRTP Act”) and the Trade Marks Act, 1999 work in tandem to

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providethe basic structurethat govern ComparativeAdvertising. They
have to be read together to understand the concept of CA.
Research has shown that the information offered with negative marketing
tends to remain with the consumer for a very long time. The consumer
explores his emotions about the information given and that gets results for the
advertiser and increases sales. The company on the flip side worked hard to
get its productrecognized in a positive way. Their productname associated
with negative marketing can costthem a great deal of money in the long run.
The effect that negative advertising can have on these companies is
unbelievable.Itis formof slander which questions the integrity and
professionalismof a company. Many feel that they are backed in corner and
have no option. They would rather initiate it firstand reap its benefits than to
wait for opponent to start and suffer.
•
LAWS IN DIFFERENTCOUNTRIES:
• China: The Advertising Law is primarily directed towards the protection
of consumers’, as distinctfromcompetitors’, interests. In fact, Articles 7
and 12 of the Advertising Law effectively disallow comparative
advertising. Vagueness of the law scares the companies out of opting for
comparativeadvertising
• United Kingdom: The European Standing Committee of the UK
Parliament debated the issueof comparative advertising in November
1995 and stated that the governmentviewed this type of advertising as
‘a legitimate, useful and effective marketing tool’ which ‘webelieve
stimulates competition and informs the consumers.
• USA : In US comparative advertising has been a well-recognised and
acceptable formof advertising , and enjoys the additional protection of
freedom of speech laws. The 1969 FederalTrade Commission (FTC)
Policy Statement on Comparative Advertising encouraged the use of
comparisons thatname the competitor or the competitive product.
However, the negative consequences of falseand confusing comparative

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claims led the FTC to require “clarity, and, if necessary, disclosureto
avoid deception of the consumer.
References
1. http://www.mondaq.com/india/x/371760/Trademark/Comparative+Adv
ertising+How+Far+Can+One+Go
2. http://www.legalserviceindia.com/article/l182-Comparative-Advertising-
laws.html
3. http://www.icmrindia.org/casestudies/catalogue/Marketing/Complan%
20Vs%20Horlicks-Comparative%20Advertising-Ethics.htm
4. https://en.wikipedia.org/wiki/Comparative_advertising