First published in Bay of Plenty Business News September 2023 edition
Capturing the consumer dollar can be a challenge at the best of times.
At the worst of times, such as arguably those New Zealand is experiencing at the moment, it can be even harder.
It is not surprising then that to maximise their chances of capturing the dollar, businesses might undertake what in legal speak is called comparative advertising. That is, advertising in which either a business states that its products (usually) are compatible with another brand’s products, or a business compares its goods (or services) to the goods (or services) of one or more competitors, highlighting the benefits of that business’s goods over the competitors’. The benefits might be lower price, greater value, better performance or durability, for example.
Done right, comparative advertising can be very successful, achieving brand switch and long-term loyalty. Just ask Whittaker’s and potentially Pak’nSave (Kiwis will know what I mean here…).
Done wrong, and you can infringe registered trade mark rights (if you use a competitor’s trading name or logo in your ad) and/or breach New Zealand’s Fair Trading Act 1986 and Advertising Standards Code.
A well-publicised recent example of where a business ‘got it wrong’ in New Zealand involves the kiwi toy company, Zuru1, and the world famous brickmaker, Lego2. Zuru had used the LEGO word mark on packaging for its own ‘MAX Build More’ toy bricks to advertise they were compatible with Lego branded bricks. Lego had not consented to Zuru’s use and, to cut a long legal story short, sued Zuru for trade mark infringement, passing off and breach of the Fair Trading Act.
Although it failed on its passing off and Fair Trading Act claims, Lego did succeed on its trade mark infringement claim on the grounds Zuru did not use the LEGO trade mark in accordance with honest practices in commercial matters and its use took unfair advantage of the LEGO trade mark. Further, it was not reasonably necessary for Zuru to use the LEGO trade mark in such a prominent way on the front panels of its containers and packaging to indicate either a characteristic of its products or the intended purpose of its products.
Outside the world of toy bricks, I am aware of two other recent examples where competitors have undertaken questionable comparative advertising. Due to client confidentiality, I am unable to divulge further details. It suffices to say however that when scrutinised, the comparisons – which involved comparisons of product features – did not stack up: quite the opposite, the comparisons were fundamentally flawed and, should they have been tested in a court, would, I venture, been found so.
There are, I perceive, four key ‘rules’ when it comes to comparative advertising:
1. If making compatibility statements, like Zuru, ask yourself (and sense check with others) whether using your competitor’s name or logo is really A good rule of thumb might be, ‘If in doubt, leave it out’.
2. If comparing goods or services, compare apples with apples, not apples with pears and, worse still, lemons;
3. If you are questioned, make sure you can wholly justify the claims you make in your advertising; and
4. If you are in any doubt, seek appropriate legal advice.
Forewarned is forearmed.
1 New Zealand Limited and Zuru Toys New Zealand Limited, to be precise.
2Lego Juris A/S and Lego A/S, to be precise.
