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Comparative advertising; don't get caught up in civil and criminal liability

27 June 2008

In an increasingly competitive world, businesses are turning to more aggressive advertising strategies.

One example of these is ‘comparative advertising’ or CA. The term describes any advertising in which a business compares its own goods or services with those of another – usually on price, features or perceived quality. Generally English law does not prohibit comparative advertising, but if it is not carried out appropriately, it can give rise to civil and criminal liability warns Paul Gordon.

Remedies and risks

If false statements are made about a competitor’s goods, he may have various civil remedies such as defamation, trade libel and malicious falsehood. If he is successful in such a claim he may be awarded damages and costs.

Another option is for the competitor to refer the matter to the Director General of Fair Trading who may take action under the Control of Misleading Advertising Regulations 1988. The Regulations, which derive from a European Directive, give the Director General powers that include court injunctions to restrain misleading advertising that is likely to injure a competitor’s business.

An advertiser also needs to be careful not to falsely describe products or make false statements in relation to services since this may give rise to criminal liability under the Trade Descriptions Acts.

Using comparative advertising safely

If you want to use a comparative advertising approach without risking liability in the civil and criminal courts, here are some tips:

  • avoid statements which may be seen as personal attacks on the integrity or honesty of your competitor
  • check the facts used in your advertising: you may want to say why your products are better than those of your competitor but such claims should be based on established facts
  • you will probably not be found liable for an exaggerated claim not intended to be a statement of fact (sometimes referred to by the courts as ‘trading puff’) but this is a more risky strategy
  • do not mislead (advertising is misleading if it is deceptive and consequently likely to affect people’s economic behaviour or injure a competitor)
  • you can objectively compare goods or services meeting the same needs or intended for the same purpose
  • you may objectively compare one or more material, relevant, verifiable and representative features of those goods and services with those of a competitor
  • do not create confusion in the market place between advertiser and competitor or between their respective trade marks, trade names or other distinguishing marks, goods or services)
  • do not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor
  • do not take unfair advantage of the reputation of a trade mark, trade name, or other distinguishing marks of a competitor
  • do not present goods or services as imitations or replicas of goods and services bearing a protected trade mark or trade name.

Trade marks

Owners of registered trade marks have some protection in law against infringement by the use of identical or similar marks. However, developments in the case of O2 (UK) Limited v Hutchinson 3G Limited appear to have eroded this protection in relation to trade marks used with comparative advertising.

The case involved Hutchinson’s use of bubble imagery similar to that of the O2 trade mark. The Court of Appeal has referred various questions on comparative advertising to the higher European Court of Justice. While these have yet to be determined, the Advocate General has already provided guidance that trade mark law has no role to play in comparative advertising, rather it should be a matter for the Regulations mentioned above.

In practical terms, that may mean the competitor has no separate cause of action for trade mark infringement in comparative advertising cases. That aspect of his case would therefore have to be left to the Director General to pursue.

In short, it is not unlawful to engage in comparative advertising but it must be done carefully. If such advertising includes the use of a competitor’s trade mark, the competitor may no longer be able to rely on an infringement under trade mark legislation, and for that aspect of his case may have to encourage the Director General to take action.

**At the time of publication, we are awaiting the ECJ’s decision on the the case referred to above**

Partner Paul Gordon has specialised in dispute resolution since qualifying and has handled a broad range of commercial matters, including intellectual property, director and shareholder disputes, and engineering and construction cases. He has acted for many notable clients including American Express, PizzaExpress, and a number of major financial loan companies such as GE Capital and Morgan Stanley, as well as many businesses with local interests.

Contact paul.gordon@willans.co.uk

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