Authored by Pratiksha Rawat, a 4th-year of Amity Law School
Delhi Affiliated to GGSIPU

Introduction:

The manufacturers of the product adopt extensive marketing
practises to create the demand for the product among the consumers.
In order to attract more and more customers, many manufacturers
undergo advertising in full swing. The Advertising Standards
Council of India defines the term advertisement as a paid-for
communication addressed to the public for the purpose of the
influencing their opinions. Many a time, some manufacturers engage
in unfair practises advertising their products at the cost of the
product of their competitors. False claims about the product of the
competitor, misleading advertisements, comparing one’s product
with the competitor’s product in order to belittle the
competitor’s product are a few examples of commercial
disparagement.

Meaning of Commercial Disparagement:

Commercial disparagement also called as business disparagement
is a civil wrong. The person charged of commercial disparagement
has a tortious liability. A person is said to have committed
commercial disparagement if he makes any negative statement against
the title of an individual to his property or his property in order
to prevent other persons from doing business with that person.

Difference between Commercial Disparagement and Comparative
Advertising:

There is a fine line of difference between commercial
disparagement and comparative advertising. Article 2 (c) of the
European Directive concerning Misleading and Comparative
Advertising defines comparative advertising as any advertisement
which identifies the competitor or his products either explicitly
or impliedly. Showcasing one’s product superior to the
competitors’ product falls within the ambit of comparative
advertising, and the same is allowed. However, where a manufacturer
makes any false statement with regard to the product of his
competitors in order to make his product superior is known as
commercial disparagement.

The laws of India allows the former one i.e. comparative
advertising but prohibits the latter, i.e. commercial
disparagement. Comparative advertising can turn into commercial
disparagement if the manufacturer uses any false claim in respect
of the competitor or his product or represents the products of the
competitor inferior in comparison to his product.

Essentials of Commercial Disparagement:

In order to file a successful claim of commercial disparagement
against the manufacturer, a competitor is required to state the
presence of the following essential ingredients-

• The manufacturer made a completely
  false statement in the advertisement against the competitor.
• The intention of the manufacturer
  behind making such a false statement was to cause financial loss or
  damage to the competitor.
• As a result of the concerned
  advertisement, the competitor suffered actual loss or damages.

Freedom of Speech:

The Supreme Court in the landmark judgment of Tata Press Limited
v. Mahanagar Telephone Nigam Ltd¹
held that the comparative advertisement is protected under Article
19(1) (a) of the Constitution as a form of free speech. The
restrictions can be placed on the comparative advertisement by the
government only in accordance with the provisions of Article 19(2)
of the Constitution.² Furthermore,
the protection of the corporate entity under Article 19(1)(a) of
the Constitution was also granted. From this judgment, it can be
concluded that the competitors have the freedom of speech to
promote their products and compare them with their rival
manufacturers.

The ordinary person test:

The ordinary test was employed by the courts in the case of
Dabur³ and Colgate⁴. In the present case, the courts
dealt with the impact of such advertisements on the ordinary person
with reasonable intelligence. An advertisement will be considered
as being disparaged if it creates a sense of bias and inferiority
with respect to the competitor’s product in the minds of an
ordinary person.

Legal consequences of Disparagement:

The consequences of the commercial disparagement are similar to
those ensued in the civil suit. The complainant competitor can file
a claim for an injunction of damages against the manufacturer or
advertiser of the concerned advertisement.

Exceptions to Disparagement:

1. True statement or claim is an
   absolute defence for commercial disparagement.
2. The statement concerned was a mere
   opinion and cannot amount to any action.
3. The conditional or absolute privilege
   is endowed with the defendant.

The laws and regulations to govern the commercial disparagement
is in a very nascent stage in India and is still in the process of
development. With the rapid and continuous growth in the business
world, there is a need for more specific laws and regulations.

Conclusion:

The laws and regulations to govern the commercial disparagement
is in a very nascent stage in India and is still in the process of
development. With the rapid and continuous growth in the business
world, there is a need for more specific laws and regulations.

Relevant Case laws:

Amul vs Kwality⁵

In a judgment given by the single judge of the Bombay High
Court, Amul was restrained from broadcasting two particular
Television Commercials (“TVCs”) or making any
advertisement of a similar nature to denigrate the products of
Kwality in any manner. In the concerned advertisements, Amul made a
comparison of its ice creams with the frozen desserts. The TVC
stated that the products (i.e. ice creams) manufactured by Amul
contain 100% milk, whereas frozen desserts manufactured by the
competitor are made with vanaspati. Although the TVC did not
mention Kwality or contain its trademark, the complainant (i.e.
Kwality) contended that the concerned advertisement denigrates
frozen desserts in general, the majority of which are manufactured
by it.

The complainant also raised the contentions that the frozen
desserts are manufactured using edible vegetable oils and not
vanaspati and that both frozen desserts and ice-creams contain 90%
milk. On the contentions of the complainant, Amul stated that there
are at least 30% manufacturers of the frozen desserts in the market
who use vanaspati. Therefore, the fact stated in the advertisement
was true, which is an absolute defence to disparagement. The court
observed that 70% of the manufacturers of the frozen desserts did
not use vanaspati, but the advertisement published by the Amul
attributes negative qualities to the frozen desserts in general. It
was held that the advertisement was based on incorrect facts and
was made with an intention to discourage consumers from using
frozen desserts, thereby causing disparagement.

Footnotes

1.(1995) 5 SCC 139

2. Tata Press Limited v.
Mahanagar Telephone Nigam Ltd (1995) 5 SCC 139.

3. Dabur India Ltd. v. Colortek
Meghalaya Pvt. Ltd 2010 SC Online Del 391.

4.Colgate Palmolive Company &
Anr. v. Hindustan Unilever Ltd 2014 (57) PTC 47
DEL(DB)..

5.Gujarat Co-Operative Milk
Marketing Federation Ltd. v. Hindustan Unilever Ltd and Ors Appeal
No. 340 of 2017 dated December 13, 2018.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.