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The Law of Comparative Advertising in the United States and Around the World: a Practical Guide for U.S

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The Law of Comparative Advertising in the United States and Around the World: a Practical Guide for U.S COMMENT JENNA D. BELLER* The Law of Comparative Advertising in the United States and Around the World: A Practical Guide for U.S. Lawyers and Their Clients Imagine sitting in front of the television and seeing the following commercial: M.C. Hammer, a famous rap singer, is performing on stage for thousands of enthusiastic fans in his usual macho rap style. During a brief break, someone in his crew hands him a can of Coca-Cola. Much to the chagrin of his fans, Hammer suddenly lapses into a soft rendition of "Feelings." Just as Hammer gets to the sappy chorus, a fan saves the day by opening and handing him a can of Pepsi, a sip from which returns Hammer to his upbeat, rhythmic style.' The next commercial that comes on shows a number of different pain relievers and several people who appear to be in various kinds of pain. The spokesman Note: The American Bar Association grants permission to reproduce this article, or a part thereof, in any not-for-profit publication or handout provided such material acknowledges original publication in this issue of The International Lawyer and includes the title of the article and the name of the author. *J.D. candidate, 1996, Southern Methodist University. Associate Comments Editor, Southern Methodist University School of Law Student Editorial Board, THE INTERNATIONAL LAWYER. 1. See Dave Barrager, Japan Tiptoes Toward Comparative Ads; Comparative Ads Violate Coun- try's Taboo Against Confrontation, ADWEEK E. ED., Feb. 22, 1993, at 10, available in LEXIS, News Library, ASAPH File; Elena Bowes & David Kilburn, Coke Hits Pepsi's Hammer, ADVERTISING AGE, July 15, 1991, at 33; Comparative Ads Run into Walls in Image-Careful Japan, Bus. ASIA, July 29, 1991, at 257; Comparative Advertising: Red in Tooth and Claw, THE ECONOMIST, May 18, 1991, at 79; Tom Ormonde, Pepsi TVAd Creates a Stir, THE AGE (Melbourne), May 11, 1991, at 14, available in LEXIS, World Library, TSTLNEX File; Pepsi Dares to Compare-Everywhere, BEVERAGE WORLD, Mar. 1994, at 18. 918 THE INTERNATIONAL LAWYER says, "[y]our body knows the difference between these pain relievers . and .. Anacin." Then the commercial asserts "Anacin can reduce inflammation that comes with most pain, Tylenol cannot.2 The preceding commercials are examples of comparative advertising, advertis- ing that compares one competitor with another.' The use of comparative advertis- ing and advertising in general by American companies has been increasing re- cently, not only in the United States, but also in many foreign countries. The growing importance of foreign advertising markets is due, among other things, to flourishing economies in Europe and Asia, the elimination of trade barriers in the European Community, 5 and evolving free market economies in Latin America. 6 Advertising expenditures in foreign markets are expected to continue increasing because of the need of companies to globalize their products in order to keep up with worldwide competition.' Many foreign governments have placed restrictions on their advertising mar- kets, which create barriers to entry for American companies. 8 Consequently, companies need to know the legal and cultural barriers in various foreign countries before implementing an advertising campaign overseas. This comment is a practical guide for U.S. lawyers and their clients who wish to engage in comparative advertising overseas. 9 Section I explains what 2. American Home Prods. Corp. v. Johnson & Johnson, 577 F.2d 160, 162-63 (2d Cir. 1978). 3. See Karen E. James& Paul J. Hensel, NegativeAdvertising: The MaliciousStrain of Compara- tive Advertising, J. ADVERTISING, June 1991, at 54. 4. U.S. INT'L TRADE COMM'N, INDUSTRY & TRADE SUMMARY... ADVERTISING, PUB. No. 2659 (sv-2), at 7, 9 (1992) [hereinafter USITC]. Advertising in general has increased because of the deregulation of many industries, the introduction of new products, and the growing penetration of foreign markets by U.S. companies. Id. at 7. To illustrate, U.S. advertising firms earned $21 billion in 1991, up from $16 billion in 1986. Id. 5. Id. at 57. Foreign advertising volume in 1988 was $121.4 billion; U.S. advertising volume was $118.1 billion. Id. at 56-57. 6. See Robert G. Vaughn, Consumer Protection Laws in South America, 17 HASTINGS INT'L & COMP. L. REV. 275, 276 (1994). This is due to a decrease in government-owned production facilities. Id. at 276. Of course, NAFTA will increase U.S. advertising in Mexico and other Latin American countries even more. See id. at 276-77. 7. USITC, supra note 4, at 57-58. Foreign advertising is also expected to continue because mature products can continue to grow only by entering new markets and because many countries have recently deregulated the television broadcasting industry. Id. 8. Id. at 66. These restrictions concern ownership and right of establishment, internal payment transfers, national procurement policies, language and content of advertising materials, and transbor- der broadcasting advertising. Id.; see also id. at 67-72. 9. When a client brings J.J. Boddewyn and Katherin Marton a U.S. or foreign comparative adver- tisement for legal approval, they offer the following advice. (1) "[T]he comparison should be on a factual basis only" because facts can be tested and proved, while thoughts and feelings cannot. (2) The product to be compared with should actually be a competitor in order to decrease the risk of confusion. (3) "Compare competitive products that are similar in price and that the consuming public considers to be of the same general quality." (4) Only compare significant attributes of the products. (5) "[D]o not imply overall superiority unless" the claim can be supported by facts. J.J. BODDEWYN & KATHERIN MARTON, COMPARISON ADVERTISING: A WORLDWIDE STUDY 34-35 (1978). VOL. 29, NO. 4 COMPARATIVE ADVERTISING 919 comparative advertising is and why it is an effective tool in marketing new or existing products and services. Section II outlines the current U.S. comparative advertising law and the various causes of action and remedies available to compa- nies injured by the comparative advertising practices of their competitors. Section III analyzes the current comparative advertising proposal in the European Com- munity and explains individual European countries' laws and attitudes regarding comparative advertising. Section IV explores the current views toward compara- tive advertising in Asia, and Section V follows up with a forward look toward comparative advertising law in certain Latin American countries, including Mexico. I. Comparative Advertising in General Comparative advertising is defined as advertising that "identifies the competi- tion for the purpose of claiming superiority or enhancing perceptions of the sponsor's brand," as opposed to advertising that promotes one's product solely on its own merits.'o The comparison may be of a specific attribute of the product, such as price or taste, or it may be a general, all-encompassing comparison."' The comparison may be subtle, or it may show or name a specific competitor, usually the market leader.12 Even though comparative advertising is perceived by some people as "being more offensive as well as less believable, honest, or credible than is non- comparative advertising," 3 it is used and even encouraged in the United States. 10. James & Hensel, supra note 3, at 54 (citation omitted). Comparative advertising is also defined as "a technique by which a product is compared to a competitive product with the intent of proving its superiority." Paul E. Pompeo, To Tell the Truth: ComparativeAdvertising andLanham Act Section 43(a), 36 CATH. U. L. REV. 565, 565 (1987). 11. See Dhruv Grewal & Larry D. Compeau, Comparative Price Advertising: Informative or Deceptive?, J. PUB. POL'Y & MARKETING, Apr. 1992, at 52. 12. Darrel D. Muehling et al., The Impact of Comparative Advertising on Levels of Message Involvement, J. ADVERTISING, Sept. 22, 1990, at 41. An example of a subtle comparative advertise- ment is Burger King's proclamation of the virtues of "flame broiling" hamburgers versus "frying" them. Burger King's ad implies that some other fast food restaurants fry their hamburgers without making a specific reference to their competitor (known to be McDonald's, the market leader). James & Hensel, supra note 3, at 55. An example of a direct comparative advertisement is Pepsi's M.C. Hammer ad, again attacking the market leader, Coke. See Ormonde, supra note 1, at 14. Experts contend that market leaders that use comparative advertising gain nothing, and, in fact, probably lose, because they give their rivals free exposure, and because comparing one's product to the market leader is often considered an admission of inferiority. Comparative Advertising: Red in Tooth and Claw, supra note 1, at 80. Comparative advertising is much more effective when the advertiser has a small percentage of the market. See BODDEWYN & MARTON, supra note 9, at 222. For example, when Mazda introduced its new Hatchback in 1977, Mazda compared the car with four of its competitors in a comparative advertisement in the United Kingdom. Id. At the time, the hatchback only had 1 % of the market. Id. When Mazda put itself against the better-known models with respect to price comparison, its sales increased. Id. 13. James & Hensel, supra note 3, at 60 (citations omitted). When using advertising that appears negative to its viewers, there is danger that the negative view will be attributed to the advertiser WINTER 1995 920 THE INTERNATIONAL LAWYER Approximately one-third of all advertising in the United States is comparative in one way or another, 14 in part because comparative advertising has become an easy way to take away market share from competitors. 15 Research shows that it is effective. A 1994 study showed that 21 percent of comparative advertisements were persuasively superior, while only 18 percent of noncomparative advertise- ments were persuasively superior.' 6 Studies have also shown that a comparative advertisement produces 7 greater attention and message recall than a noncompara- tive advertisement.
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