Comparative advertising in Ireland: the cost of supermarket wars

Here, via the Irish Times, is a note from guest contributor Nadia Zegze (Davenport Lyons) on a bit of a donnybrook that seems sure to end, not in bruises and broken bones, but rather in the solemn surroundings of an Irish courtroom. Writes Nadia:

"Once again, a storm appears to be brewing in the run-up to this festive period in the retail sector, as another battle is waged in the pre-Christmas supermarket price wars. German discount supermarket chain Aldi has begun court proceedings this week in Ireland against a major local competitor, Dunnes Stores, over a comparative advertising campaign involving alleged trade mark infringement and misleading commercial practices.

The clash between these two renowned and rancorous retailers has arisen following claims from Aldi that Dunnes had used Aldi’s trade marks within an advertisement campaign comparing prices on a range of grocery items. Aldi alleged that the ‘comparative advertisement’ was ‘unfair’ and ‘untrue’ as the comparison did not focus on like-for-like products, which is in direct conflict with the relevant European Directive.

Comparative Advertisements v Trade Marks

There has been considerable debate in Europe over the years about the interaction between comparative advertising law and trade mark law: this become even more relevant as competition hots up between competing brands in the cold season.

Comparative advertising is permitted under the European Directive 84/450, as amended and now codified as Directive 2006/114, which concerns the regulation of misleading and comparative advertising (the "Comparative Advertising Directive").

On the surface the very idea of comparative advertising would seem to come into direct conflict with the Trade Marks Directive 2008/95, as comparative advertising by its very nature uses third party trade marks without consent. However, Article 4 of the Comparative Advertising Directive provides that comparative advertising is permitted where

(a) it is not misleading to the consumer; (b) it compares goods or services meeting the same needs or intended for the same purpose; (c) it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price; (d) it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor; (e) for products with designation of origin, it relates in each case to products with the same designation; (f) 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; (g) it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name; and (h) it does not create confusion among traders, 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.

These principles are further enshrined in Article 6 of the Trade Marks Directive which refers loosely to ‘honest business practices’.

Past comparisons

This is not the first time that the laws of comparative advertising and trade marks have clashed. In O2 Holdings Ltd v Hutchison 3G Ltd [2006] EWCA 1656 Civ[see the IPKat here] the dichotomy between the laws of comparative advertising and trade marks was referred for a preliminary ruling to the Court of Justice of the European Union (CJEU) in Case C-533/06[noted by the IPKat here] where it was held that compliance with the Comparative Advertising Directive is also ‘honest business practice’. In this case, Hutchison 3G ran an advertising campaign for its mobile phone service which featured the term "O2" and used moving pictures of bubbles (which are synonymous with the O2 brand). The CJEU found that, although trade mark law is still relevant, there will be no trade mark infringement if the conditions mentioned above are fulfilled. In this instance Hutchison had complied with Article 4 and it was found that there was no infringement.

However, all hope is not lost for trade mark owners in cases such as these. In L'Oréal SA and others v Bellure NV and others [2010] EWCA Civ 535[noted here by the IPKat] a comparative advertisement was held to constitute unfair practice where one brand had taken unfair advantage of the reputation of another well-known brand by free-riding on the coat tails of their success. It accordingly seems that where the Comparative Advertising Directive has not been complied with, trade mark owners may be able bring a trade mark infringement action in the normal way, despite the apparent defence in Article 6 of the Trade Marks Directive.

We wait to see….

How will this case evolve in the Irish courts? This is not the first time Aldi has come into conflict with another supermarket chain over comparative advertising in Ireland. This time last year Aldi brought an action against Tesco for infringement of its trade marks in an in-store campaign that involved allegedly inaccurate and unfair comparisons between products sold by the two supermarket giants, securing damages of € 150,000.

While we await the outcome of this ongoing battle between the free market and the right to protect one's trade mark, the message so far seems to be that if any business is considering comparative advertising as part of a campaign, it must ensure that it complies with the requirements set out above (and thus act at all times within Article 4 of the Comparative Advertising Directive)".

Thanks, Nadia, says the IPKat, who is now wondering where to buy his katfood when next he puts his paws on the sacred soil of the Emerald Isle. Merpel, who is quite a supermarket-watcher at heart, is sure that both Dunnes -- no stranger to intellectual property litigation in recent times [its shamefully protracted battle over allegedly copied Karen Millen Fashions, which the chain first lost in 2007, has still to receive a ruling sought from the CJEU in Case C-345/13] -- and Tesco are both likely winners in these skirmishes with Aldi in the € 9 billion Irish supermarket sector. Whatever they pay in damages is bound to be less than what they gain by inducing consumers to shop with them before Christmas, she cynically suggests.