Comparative Advertising: yes or no? - Uhthoff

Comparative Advertising: yes or no?

By Xavier Hadad

Uhthoff, Gomez Vega & Uhthoff S.C.

Introduction

1.- Have you ever asked yourself if it’s legal for a company, when promoting its products to include in such advertisement, not only their special and unique characteristics, but also,  the  actual  price  of  such  goods  in  order  to  enhance  their  marketing  strategy products from that of their competitors? This new practice in Mexico is now regulated in our Country although in a limited manner. Nonetheless there is a remarkable trend by Mexican legislators to rule these type of activities.

In light of the above, this article intends to provide a slight glimpse on what is and is not permitted in Comparative Advertising matters in Mexico.

2.- A free economic system, which is nowadays commonly seen in almost all countries, including Mexico of course, is characterized or distinguished by the competition that exists among manufacturers and/or traders and their goods that also interact in the market.

Thus, competition should be understood, under an economic connotation, as a conflict arising among those traders intending to achieve the same result, offering similar products or services and targeting those to the same consumers, of course, starting from an equal legal basis that will lead them to a healthy and free competition environment.

Free competition should not be conceived as an unrestricted activity among traders, as it is well known that even in the most liberal economies, it has always been regulated in different scales, so that competition is not ruled upon the competitor’s free will as this would lead definitively to several kinds of abuse  from a few in prejudice of majorities and because of that, the State has always seek for correct regulation of this activity, in order to prevent an illegal or unclean practice among competitors.

Opposing fair competition, where manufacturers are located in an equal plane and where their success depends solely and exclusively on their efforts and skills applying their own resources to compete with their adversaries. Unfair competition arises when manufacturers are no longer placed in the same competitive and equal standard as they do not use their own resources nor their own forces and inventiveness but on the contrary, their success is based if not exclusively rather remarkably, in stealing other competitors’ resources, inventiveness or economic force.

Due to economic oponess, modern companies have been forced to seek new marketing skills and commercial advantages to obtain proper opportunities, to generate advertising tools that will allow them to distinguish their products from those of their competitors even when such goods are of the same kind. Unfortunately, even though companies are nowadays more frequently familiarized with “Comparative Advertising” this particular subject has been insufficiently regulated and thus, has caused severe problems among leader companies in a current strongly competed market.

In such regard, it is evident that we are facing a clear legal gap concerning “comparative advertising” forcing every involved party to seek for new instruments –commercial and legal- to try to obtain a better regulation of this latent new practice in Mexico.

Applicable Law

There are several legislations, both, domestic and foreign, which provide certain guidelines to unravel a correct definition of what should be understood by “Comparative Advertising”.

Relevant is the General Advertising Spanish Act which states in provisions 6 and 6 Bis that comparative advertising may be considered as unfair when it is not adjusted to the provisions of such law, understanding it as the explicit or implicit allusion to any competitor and the offered goods or services.

According to the provisions of the above regulation, comparative advertising is allowed: i) when the contended goods or services have the same purpose or are directed to satisfy the same needs; ii) when the evaluation is objectively performed and it is over one or more essential and verifiable characteristics; iii) when the products are protected by an appellation of origin, (this comparison shall be among products under the same appellation) and; iv) when the product to be compared has an special offer, it will be required to indicate the date when such offer initiated.

On the other hand, Mexican regulation, i.e. the Federal Consumer Protection Law states in provision 32 thereof that any information or advertisement related to goods, products or services that are disseminated by any means, must be truthful, verifiable and excluding texts, dialogues, sounds, images, marks, appellations of origin and other misleading or abusive descriptions which will provoke or may induce to error or confusion.

Furthermore, the referred provision states that misleading or abusive information or advertisement should be understood as “any which discloses characteristics or information related to any good, product or service, whether true or not, that due to its inaccurate, false, exaggerated, partial, artificial or tendentious presentation induces to error or confusion”.

Finally, the Mexican Industrial Property Law states in provision 213, a catalogue of administrative infringements wherein section “X” contains a punishable conduct that may be construed to “comparative advertising”    i.e.; “It will be an administrative infringement:…  x.- To pretend or achieve the purpose of discrediting products, services, industrial or commercial activities or the premises of a third party. Comparison of products or services protected by a trademark directed to inform the consumers shall not be comprised in this provision, as long as said comparison is not tendentious, false or exaggerated in terms of the Federal Consumer Protection Law”.

Theory

Taking all of the aforesaid into consideration, Comparative Advertising may be defined as any commercial practice or marketing strategy which exerts psychological influence directed to obtain the preference by the consumers, by enhancing the preeminence of a product.

In other words, when traders or manufacturers launch their products, goods or services seeking to identify those and stand out their qualities and advantages, relying on their trademarks, all of this for the unique purpose of distinguishing their goods from others of the same kind, we are facing “comparative advertising”.

In such regard, we may say that there could be three possible types of this comparative advertising:

  • Single Comparative Advertising – It is a single and plain comparison between two goods, just to remark their special characteristics that make one product supposedly better than another, such as price, presentation, packaging, etc.,
  • Misleading Comparative Advertising – Intends to transmit misleading or wrong ideas to a consumer in respect of the good to be purchased.
  • Degrading Comparative Advertising – Distinctive signs are consciously or unconsciously underestimated through this type of Comparative Advertising.

In this order of ideas and according to the provisions referred before, Comparative Advertising is illegal when: 1) it is not supported on essential, similar and objectively demonstrable characteristics of the products or services to be compared, or; 2) when such goods or services are compared with non-similar, unknown or less advertised goods or services.

Furthermore, it should also be taken into consideration that any information or advertisement related to goods, products or services that are disseminated by any means, must be truthful, verifiable and excluding texts, dialogues, sounds, images, marks, appellations of origin and other misleading or abusive descriptions which will provoke or may induce to error or confusion, in order to considered as legal.

Review

Great expectations were generated when Mr. Antonio Morales de la Peña, Federal Consumer Prosecutor, published on October 19th, 2009, in the Federal Official Gazette the article “AGREEMENT WHEREBY COMPARATIVE ADVERTISING OR INFORMATION GUIDELINES ARE ESTABLISHED IN TERMS OF PRICES FOR GOODS, PRODUCTS OR SERVICES”, as it was expected to include the guidelines to be followed to enforce infringement actions against any violation to an IP right derived from comparative advertising; instead, said agreement only referred to price matters for the goods to be compared.

The Guidelines include criteria requiring the supplier to have documentary elements such as a purchase tickets or affidavit attesting the veracity of the price comparison. Likewise,  the  comparison  is  to  be  done  for  products  which  are  sold  on  floor,  by telephone or by any other means, thus providing veracity to said information and comparison regardless of the distribution means. Moreover, said guidelines provide that, when  comparing  prices,  a  clear  and  visible  date  shall  be  indicated  within  the Comparative  Advertising  or  information,  thus  providing  clear  criteria  and  juridical certainty pursuant to applicable law.

Conclusion

Industrial Property trial attorneys are immerse in a dilemma on whether to start directly an administrative infringement action before the Mexican Institute of Industrial Property by reporting these infringement conducts, or to turn to the Federal Consumer Attorney Office to get a declaration disclosing the type of product comparison we are facing, in order to determine the best legal way to act.

This is why, even when we appear to deal with a topic – Comparative Advertising – that may  be  regulated  by  several  legislations,  the  truth  is  that  there  are  no  accurate guidelines  which  advise  us  about  what  is  to  be  taken  into  consideration  when determining to what extent Comparative Advertising is legal and permissible or when does it become biased, false or exaggerated. In the United States, where Comparative Advertising is generally permitted, there have been many famous cases of abuse by leading companies such as PEPSI, MCDONALDS, NESTLE (Nescafe) STARBUCKS, etc.

As a conclusion, a significant number of trial attorneys on Intellectual Property matters consider that Comparative Advertising is a valid way or a very smart marketing strategy, which leads to make consumers aware of the advantages of a product against the disadvantages of those of the relevant competitors. However, it is important that all this comparison is made pursuant to law, taking into account the few provisions and guidelines of our legislation regarding this topic and even making use of any legal strategy.

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