At the start of the silly season the DTI published a consultation paper seeking views on proposals for the implementation of an EU Directive seeking to harmonise comparative advertising rules across Europe.
They said the proposals would mean “little change” to the present UK system for regulating “knocking copy”. We disagree.
Advertising slogans such as ‘The world’s favourite airline’ and ‘Refreshes the parts other beers cannot reach’ could sink without a trace should legislation proposed by the DTI last week become law.
How has this happened, what are the problems we foresee and is there anything to be done?
Stephen Groom and Nick Johnson examine the entrails.
The EC Directive dealing with Comparative Advertising was first proposed as far back as the early eighties, at the same time as the Misleading Advertising Directive, as part of a grandiose European consumer protection strategy.
The misleading advertising initiative did bear fruit relatively quickly in European terms, since by 1988 the UK had the Control of Misleading Advertisements Regulations.
The comparative advertising proposal, however, did not fare so well. In fact it was only in 1997 that agreement was finally reached and the lengthy and sometimes bitter debate shows in the wording of the final Directive.
Behind the inter-state debate, the intention of the Directive was certainly laudable: to harmonise the law on comparative advertising throughout the European Union. Because of the "Euro" drafting however and the slippery nature of the beast it is dealing with, there is no guarantee that the Directive will have the desired effect of the European level, the view of the commentators at least is that the DTI's expectation of "little change" in UK advertising practice is wishful thinking.
The compromises that show
Regarding the Directive, there has all too obviously been a compromise between "protectionist" states such as Germany, Italy, Belgium and France and "informationist" Member States like the UK, Ireland, Holland and Denmark.
The protectionists have won on one critical aspect, which will change radically the approach in the UK to this kind of advertising. This is the Germanic new rule that all comparative advertising will be illegal unless it satisfies all of no less than seven rules.
And that's not all. The solution to the fundamental and knotty problem of how to define "comparative advertising", a term hitherto unknown to English law, has been fudged, and fudged in such a way that advertisers have good reason to fear March 2000 and even more January 2001. We will reveal why later.
The new draft regulations
The draft regulations are racily named 'The Control of Misleading Advertising (Comparative Advertisements) (Amendment) Regulations 2000'. To comply with the Directive, they must be in force in the UK by 23 March 2000.
As the title suggests, the idea is to follow the Directive by incorporating them into the existing Control of Misleading Advertisements Regulations 1988.
The dangerous definition
The 1988 Regulations will be extended to cover comparative advertising, defined as any advertisement which, "in any way, either explicitly or by implication, identifies a competitor or goods or services offered by a competitor."
We will come back to this in our view dangerous definition in a moment, but if an ad is caught by it, it will be illegal unless it satisfies all seven of a list of what we will call "golden rules", though advertisers may come to refer to them in rather different terms!
The golden rules
The golden rules are that a comparative advertisement will only be permitted in the UK if:
it is not misleading;
it compares goods or services meeting the same needs or intended for the same purpose;
it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price;
it does not create confusion in the market place between the advertiser and a competitor or between the advertiser's trade marks, trade names, other distinguishing marks, goods or services and those of a competitor;
it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor;
it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;
it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.
How the system will work
The new comparative advertising rules will not mean that competitors have the right to sue each other for knocking copy that breaks the new rules.
Between March 2000 and January 2001, the only litigation that can arise will be by way of applications to the Court by the Director General of the Office of Fair Trading in respect of print advertising. The only legal sanction will be an injunction preventing further use of the ad plus an order to pay prosecution costs. The OFT can only start this procedure if it is satisfied that all 'existing means' for regulating the ad in question (e.g. in a printed or on-line advertising context, the ASA) have been used and have failed to prevent continued use of the offending advertising.
Broadcast advertising: a different regime
In the case of broadcast advertising, injunction applications will not be necessary, since the ITC and the Radio Authority are the "existing means" of regulation and if they are satisfied that an advertisement breaches the regulations they will simply order their licensees not to carry the advertising in question.
Who triggers the Regulations?
As for who will trigger the application of the Regulations, a competitor or consumer may complain to the ASA, ITC or Radio Authority depending on the medium in which the ad appears. Alternatively they may go direct to the OFT. If they do this, however, the OFT will refer it back to the relevant regulatory body and will only consider applying to the Court for an injunction if, despite adverse findings by the ASA for example, the advertiser continues using the offending ad.
This has been the regime for misleading advertising since 1988 and will continue as such until 2001, but then there could be fun and games!
The second whammy comes in January 2001
By January 2001 the EU Injunctions for the Protection of Consumers' Interests Directive must be implemented across Europe.
This will mean that for the first time in the UK, organisations representing consumers, such as the Consumers' Association and any number of other bodies which meet the laid-down criteria, will be able to apply to the Court direct to enforce a range of consumer protection measures which have come to us courtesy of a raft of EU Directives over the last 15 years.
What relevance does this have to comparative advertising? One of the Directives consumer associations will be able to police is, you guessed it, the Misleading (and now Comparative) Advertising Directive.
So the less than delightful prospect UK comparative advertisers face, come January 2001, is the double whammy of having to follow seven "golden rules" to save their ads from illegality, and avoiding the attentions of eagle eyed consumer organisations looking for an opportunity to use their brand new powers.
So what impact are the Regulations likely to have?
If our experience of the existing regulations governing misleading advertisements were anything to go by, the answer would be 'minimal'. In only a handful of cases each year has the OFT been constrained to apply for court injunctions and predictably these powers have been largely used only in respect of the traditional recidivist 'fringe' advertisers marketing, for instance, (appropriately enough) hair restorer, too-good-to-be-true slimming products and get-rich-quick schemes.
The trouble is, we do not believe the extension of the Regulations to comparative advertising will be a similar non event.
The comparative advertising regime today
At present in the UK, comparative advertising is allowed but advertisers must be aware of certain basic rules. For example the advertisement should not:
– infringe competitors' registered trademarks
– libel competitors or amount to a "malicious falsehood" about them
– be a misleading price comparison and hence a criminal offence under the Consumer Protection Act
– mis-describe the advertised product or the competitor's and thus offend against the Trade Descriptions Act
– offend against the Codes governing print (ASA) or broadcast (ITC/Radio Authority) advertising.
When are the new Regulations in force?
Once these regulations are brought into force comparative advertisers who are nimble enough to avoid these risks will still not be home and dry. To escape injunction applications by the OFT (and come 2001, consumer bodies) they will also have to ensure that the advertisement complies with all seven of the golden rules introduced by the regulations. And that's not all. If the advertisement either promotes a special offer or a product with a protected designation of origin (e.g. Parma Ham) there are further rules which will have to be followed.
A departure from existing rules
Now one of the reasons why the impact of the Control of Misleading Advertisements Regulations was minimal was that the definition of "misleading" was little more than a re-articulation of existing rules. These new regulations, on the other hand, are in significant ways a material departure from the existing regulatory landscape.
Inconsistencies with existing Codes
The new Regulations depart from existing Codes.
For instance, the existing print advertising code does not require in terms that "only" goods or services "meeting the same needs" or "intended for the same purposes" may be compared.
Separately, neither the ITC code, nor for that matter, the ASA code require expressly that comparative advertisements must "objectively compare one or more material, relevant, bona-fide and representative features" of the products in question.
Similarly, there is no specific requirement contained in either the Codes, or in any existing legislation, that if an advertisement refers to a special offer the advertisement must in all cases, in a clear and unequivocal way, indicate the date on which the special offer ends or, if the offer has not yet begun at the time the advertisement is published, give the date of the start of the offer. The Regulations' requirement that if appropriate the offer should be expressed to be 'subject to availability' is also not necessarily an absolute rule under any existing rules.
"Existing means" impotent?
If the new 'golden rules' do end up going beyond existing codes and legal requirements (subject of course to what the new, revised British Code of Advertising due to be published in October 1999 has to say) all the 'existing means' available in the world are not going to be able to enforce rules that they don't have.
No longer a legal long stop
Potentially therefore this means that rather than being merely the legal 'back- stop' for enforcing existing regulations which it has been in relation to misleading advertising, the new comparative advertising rules may open up a whole new area of legal (as opposed to Code) risk for advertisers.
Until January 2001 this will undoubtedly stretch the already scarce resources of the OFT as the only regulatory authority in the land with the power to enforce these new regulations. Come 2001, however, advertisers may not rest so easy, since, for the reasons already explained, consumer organisations may well have a field day.
Rules open to interpretation
So if we do face the prospect of significant departures from existing knocking copy groundrules that have worked passably well for as long as most of us can remember, will we at least have the comfort of being reasonably certain when the new rules apply and what they mean?
We fear not. Key aspects of the Directive are open to widely different interpretations.
The 'Comparative Advertising' Definition. This is critical because only obedience to the seven golden rules will save an advertisement that comes within it. Now clearly all advertising is 'comparative' in that it seeks to persuade the consumer to buy the advertised product in preference to others. Those that are caught by these regulations, however, will be either directly or indirectly comparative, but exactly where does one draw the dividing line? Will strap lines such as 'the car in front is a Toyota', 'we try harder', 'the world's favourite airline', and 'refreshes the parts other beers cannot reach' vanish from our radar screens? There certainly seems to be no saving in the regulations for 'mere puff' or 'humorous comparisons."
Advertising that 'objectively compares one or more material relevant verifiable and representative features'. Given that the underlying purpose of these regulations is to facilitate comparative advertising moving freely across the European Union one has to have deep concerns as to whether regulators in Spain, Germany and Sweden are going to take exactly the same view as to precisely what this requirement means.
Comparative advertisements must not 'discredit or denigrate' the trademarks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor. The law is uncertain in its ambit. It does not state for instance, as does Section 10 (6) of the TradeMarks Act 1994 in a similar context, that the "discrediting" or "denigrating" may be permissible unless it is 'without due cause'. Does this mean that however accurate and capable of substantiation the knocking copy might be, it will still fall foul of the regulations? If the answer is "yes" this represents another significant departure from the well-established principle of English law (to be given a further buttress by the Human Rights Act when it comes fully into force next year) that absent any breech of confidentiality, truth should in most cases be a dependable shield against any attempt to gag the free dissemination of information, commercial or otherwise.
Possible avenues for lobbying
By now you may agree that there is much to express concern about in the industry/government/consumer consultation process now underway. The trouble is that most of this is set in stone. The pass was sold when the Directive was agreed in 1997.
Lobbyists may wish to try to re-open the issue of whether the wording of the Directive leaves the door open for member states to implement a more liberal regime. However, it must be said that the interpretation taken in the DTI's draft regulations, that a more liberal regime is not permitted, does seem the more natural interpretation of the Directive, however unattractive this may be.
The industry may also wish to ask the government to provide greater clarification as to what particular expressions in the Regulations mean. We have already questioned the precise meaning and effect of a number of key provisions in this paper.
They may also want to raise some of the other concerns raised above, particularly those in relation to the "Consumer Injunctions" legislation looming in less than 18 months.
If our readers would like any more information or to discuss how we can help any lobbying efforts they contemplate, they should contact Stephen Groom or Nick Johnson at Osborne Clarke at the co-ordinates below
Let us all hope that it is not too late for something to be done!
Stephen Groom (Partner) and Nick Johnson (Solicitor)
DD 020 7246 8078
Fax 020 7246 8079
DD 020 7246 8080
Fax 020 7246 8081