Comparative Advertising in Malaysia – Allow or not allow?
Comparative advertising occurs when one advertiser compares its goods or services directly or indirectly with others. Such comparison will usually refer to differences in price, quality or value. For instance, where an advertiser lists his goods or services alongside the competitor using the competitor’s trademark.
Comparative advertising is commonplace in the US,[1] but it is not widely used in most other countries, due to cultural norms or government regulation. In the UK, the English courts had decided that when an advertiser used the competitor’s registered trademark for comparative advertising, this was a form of trademark infringement under S.4(1)(b) Trade Marks Act 1938 because one cannot seek to gain on the “good virtues” of the competitor’s goodwill and reputation in selling or promoting its goods.[2] However, in the interest of consumers information, comparative advertising is now allowed under S.10(6) UK Trade Marks Act 1994 which repealed S.4(1)(b) Trade Marks Act 1938. The recent English Court of Appeal case of O2 Holdings v Hutchinson 3G (2007) affirms this proposition of law. In the European Union, comparative advertising is also allowable as can be seen in Art 3a of the Comparative Advertising Directive 97/55/EC.
In Malaysia, the Trade Marks Act 1976 does not expressly disallow comparative advertising. There has yet to be a reported decision of the High Court or higher court on the issue of comparative advertising in Malaysia. However, since S.38(1)(b) Trade Marks Act 1976 is very much similar to the old UK trademark law which disallows comparative advertising, and the fact that UK courts precedent is highly persuasive but not binding to the interpretation of Malaysian law, it is submitted that it is highly likely that comparative advertising is not allowed in Malaysia.
However, it is noted that not all forms of advertisement will be prohibited from comparative advertising. According to the Malaysian Communications and Multimedia Content Code (“Content Code”), comparative advertising is allowable for advertisements communicated electronically i.e. this includes television, radio, online services and audiotext hosting services. The Content Code set out guidelines and procedures for good practice and standards of content disseminated for public consumption by service providers in the communications and multimedia industry. A Complaints Bureau has also been established to deal with complaints.
Part 3 of the Content Code states that:
(a) comparison advertising is allowable in the interest of vigorous competition and public information. It shall, however, respect the principles of fair competition and shall be so designed that there is no likelihood of the consumer being misled as a result of the comparison.
(b) The subject matter of a comparison shall not be chosen in such a way as to confer an artificial advantage upon the advertiser or so as to suggest that a better bargain is offered than is truly the case.
(c) Points of comparison shall be based on facts that can be substantiated and should not be unfairly selected.
(d) Advertisers should not attack or discredit other businesses or their products.
(e) Advertisers should not make unfair use of the goodwill attached to the trademark, name, brand, logo, slogan or the advertising campaign of any other organizations.
Comparative advertising can be in the form of direct or indirect. Direct comparative advertising occurs where the competitors are explicitly named whereas indirect comparative advertising occurs where the name of the competitors are not precisely identified. Famous examples are such as Pepsi over Coca-Cola, Burger King over McDonald’s and Hewlett-Packard over IBM. In Malaysia, since direct comparative advertising is not allowed for printed advertisement, indirect comparative advertising is commonly used as can be seen in the picture 1 where Tesco compares their price of goods with two hypermarkets; picture 2 and 3 where BMW and Audi “congratulate” each others; picture 4 where KFC alleges that their Alaskan Fish Combo has “30% more fish compared with KFC’s nearest competitor” and picture 5 where a telecommunication company added another two different coloured ducks into the advertisement implicating the other two telecommunication companies in which it is a known fact that these three companies are using these three different colours as their companies’ representative colours respectively.
On March 3, 1998, the Comparative Advertising Sub Committee of INTA[3] has unanimously passed a resolution encouraging all countries to permit comparative advertising so long as there are legal controls to prevent harm or damage to the mark of competitors, and to prevent explicit or implicit false or misleading representations or other forms of unfair competition.
The issue on comparative advertising is controversial. On one hand, it is said that the use of another’s trademark without permission of the trademark owner, even if used to identify the goods or services of the trademark owner, constitutes a trademark infringement. Furthermore, a claim by owners of lesser known trademarks that their goods or services are comparable with those well-known marks, constitute an unfair riding on the reputation and goodwill of the trademark owner even if the claims are truthful and not misleading.
On the other hand, however, it is believed that comparative advertising which is not false or misleading, consistent with principles of fair competition and not harmful to the trademark of competitors would encourage innovation and improvements to goods or services. Such a healthy competition would increase the options available to consumers and provide consumers with useful information that can encourage consumers to make more informed purchasing decisions. Moreover, comparative advertising would assist the consumers to evaluate the performance of the competing brands.
The very advantage of comparative advertising is that it is informative. A competing brand can highlight the superiority of their goods or services and thereby compare it with the competitor brand that is something that consumers are unable to do so before they purchase the goods. A check and balance is provided in which trademark owners have several legal remedies. If the advertisement is found out to be false or misleading, severe punishment will be imposed accordingly. They can also seek for injunctions to stop offending advertisements. A common law remedy under tort of injurious falsehood can also be initiated if the advertisement goes beyond mere puff whereby it serves to denigrate or disparage the trademark owner’s brand. This in effect would reduce the chances of false advertisement.
Although the Content Code is merely a self-regulation that based on voluntary compliance, as opposed to enforceable laws, however, by virtue of it being a voluntary Code, those subscribing to it have undertaken the commitment and responsibility to uphold its objectives and principles. Failure to comply with the Content Code will subject to sanction imposed by the Complaints Bureau and also the adverse publicity which most advertisers will wish to avoid.
Conclusion:
Comparative advertising is a young phenomenon in Malaysia, but it is excited to see advertisers started to make use of it. A lot of advertisers shun away from comparison advertising for the fear of trademark infringement lawsuit which to some extent it is true because comparative advertising is itself a trademark infringement in the first place. However, with the increase pressure for fair competition, we can anticipate that the trademark law may be amended in the near future to accommodate comparative advertising.
Comparative advertising is the most effective way for companies to tell the truth. Hence, businesses are encourage to be a little more aggressive and use comparative advertising to inform consumers of the best option available.
Comparative advertising occurs when one advertiser compares its goods or services directly or indirectly with others. Such comparison will usually refer to differences in price, quality or value. For instance, where an advertiser lists his goods or services alongside the competitor using the competitor’s trademark.
Comparative advertising is commonplace in the US,[1] but it is not widely used in most other countries, due to cultural norms or government regulation. In the UK, the English courts had decided that when an advertiser used the competitor’s registered trademark for comparative advertising, this was a form of trademark infringement under S.4(1)(b) Trade Marks Act 1938 because one cannot seek to gain on the “good virtues” of the competitor’s goodwill and reputation in selling or promoting its goods.[2] However, in the interest of consumers information, comparative advertising is now allowed under S.10(6) UK Trade Marks Act 1994 which repealed S.4(1)(b) Trade Marks Act 1938. The recent English Court of Appeal case of O2 Holdings v Hutchinson 3G (2007) affirms this proposition of law. In the European Union, comparative advertising is also allowable as can be seen in Art 3a of the Comparative Advertising Directive 97/55/EC.
In Malaysia, the Trade Marks Act 1976 does not expressly disallow comparative advertising. There has yet to be a reported decision of the High Court or higher court on the issue of comparative advertising in Malaysia. However, since S.38(1)(b) Trade Marks Act 1976 is very much similar to the old UK trademark law which disallows comparative advertising, and the fact that UK courts precedent is highly persuasive but not binding to the interpretation of Malaysian law, it is submitted that it is highly likely that comparative advertising is not allowed in Malaysia.
However, it is noted that not all forms of advertisement will be prohibited from comparative advertising. According to the Malaysian Communications and Multimedia Content Code (“Content Code”), comparative advertising is allowable for advertisements communicated electronically i.e. this includes television, radio, online services and audiotext hosting services. The Content Code set out guidelines and procedures for good practice and standards of content disseminated for public consumption by service providers in the communications and multimedia industry. A Complaints Bureau has also been established to deal with complaints.
Part 3 of the Content Code states that:
(a) comparison advertising is allowable in the interest of vigorous competition and public information. It shall, however, respect the principles of fair competition and shall be so designed that there is no likelihood of the consumer being misled as a result of the comparison.
(b) The subject matter of a comparison shall not be chosen in such a way as to confer an artificial advantage upon the advertiser or so as to suggest that a better bargain is offered than is truly the case.
(c) Points of comparison shall be based on facts that can be substantiated and should not be unfairly selected.
(d) Advertisers should not attack or discredit other businesses or their products.
(e) Advertisers should not make unfair use of the goodwill attached to the trademark, name, brand, logo, slogan or the advertising campaign of any other organizations.
Comparative advertising can be in the form of direct or indirect. Direct comparative advertising occurs where the competitors are explicitly named whereas indirect comparative advertising occurs where the name of the competitors are not precisely identified. Famous examples are such as Pepsi over Coca-Cola, Burger King over McDonald’s and Hewlett-Packard over IBM. In Malaysia, since direct comparative advertising is not allowed for printed advertisement, indirect comparative advertising is commonly used as can be seen in the picture 1 where Tesco compares their price of goods with two hypermarkets; picture 2 and 3 where BMW and Audi “congratulate” each others; picture 4 where KFC alleges that their Alaskan Fish Combo has “30% more fish compared with KFC’s nearest competitor” and picture 5 where a telecommunication company added another two different coloured ducks into the advertisement implicating the other two telecommunication companies in which it is a known fact that these three companies are using these three different colours as their companies’ representative colours respectively.
On March 3, 1998, the Comparative Advertising Sub Committee of INTA[3] has unanimously passed a resolution encouraging all countries to permit comparative advertising so long as there are legal controls to prevent harm or damage to the mark of competitors, and to prevent explicit or implicit false or misleading representations or other forms of unfair competition.
The issue on comparative advertising is controversial. On one hand, it is said that the use of another’s trademark without permission of the trademark owner, even if used to identify the goods or services of the trademark owner, constitutes a trademark infringement. Furthermore, a claim by owners of lesser known trademarks that their goods or services are comparable with those well-known marks, constitute an unfair riding on the reputation and goodwill of the trademark owner even if the claims are truthful and not misleading.
On the other hand, however, it is believed that comparative advertising which is not false or misleading, consistent with principles of fair competition and not harmful to the trademark of competitors would encourage innovation and improvements to goods or services. Such a healthy competition would increase the options available to consumers and provide consumers with useful information that can encourage consumers to make more informed purchasing decisions. Moreover, comparative advertising would assist the consumers to evaluate the performance of the competing brands.
The very advantage of comparative advertising is that it is informative. A competing brand can highlight the superiority of their goods or services and thereby compare it with the competitor brand that is something that consumers are unable to do so before they purchase the goods. A check and balance is provided in which trademark owners have several legal remedies. If the advertisement is found out to be false or misleading, severe punishment will be imposed accordingly. They can also seek for injunctions to stop offending advertisements. A common law remedy under tort of injurious falsehood can also be initiated if the advertisement goes beyond mere puff whereby it serves to denigrate or disparage the trademark owner’s brand. This in effect would reduce the chances of false advertisement.
Although the Content Code is merely a self-regulation that based on voluntary compliance, as opposed to enforceable laws, however, by virtue of it being a voluntary Code, those subscribing to it have undertaken the commitment and responsibility to uphold its objectives and principles. Failure to comply with the Content Code will subject to sanction imposed by the Complaints Bureau and also the adverse publicity which most advertisers will wish to avoid.
Conclusion:
Comparative advertising is a young phenomenon in Malaysia, but it is excited to see advertisers started to make use of it. A lot of advertisers shun away from comparison advertising for the fear of trademark infringement lawsuit which to some extent it is true because comparative advertising is itself a trademark infringement in the first place. However, with the increase pressure for fair competition, we can anticipate that the trademark law may be amended in the near future to accommodate comparative advertising.
Comparative advertising is the most effective way for companies to tell the truth. Hence, businesses are encourage to be a little more aggressive and use comparative advertising to inform consumers of the best option available.
Therefore, businesses, feel free to compare!
reference:
[1] In the US, federal advertising legislation is found in two major laws : the Federal Trade Commission Act and the Trademark (Lanham) Act
[2] Bismag Ltd. v. Amblins (Chemists) Ltd. [1940] RPC 209
[3]http://www.inta.org/index.php?option=com_content&task=view&id=217&Itemid=153&getcontent=3
[1] In the US, federal advertising legislation is found in two major laws : the Federal Trade Commission Act and the Trademark (Lanham) Act
[2] Bismag Ltd. v. Amblins (Chemists) Ltd. [1940] RPC 209
[3]http://www.inta.org/index.php?option=com_content&task=view&id=217&Itemid=153&getcontent=3
© 2008 Edwin Lee
No comments:
Post a Comment