Commercial Disparagement: A New Approach to ‘Puffing’?

A recent judgment of the Madras High Court (Colgate Palmolive v. Anchor, O.A. Nos. 493 and 494 of 2008 in C.S. No. 451 of 2008) appears to have modified the law relating to comparative advertising in cases of commercial disparagement, particularly in relation to ‘puffing’.

 

Puffing is, in general, a superlative claim made about one’s product; and is typically understood as so superlative that an average consumer would not believe the claim. For instance, a claim that “CCC coffee is the world’s best coffee” is likely to be construed as a puff. This is by its very nature a subjective claim, and a reasonable consumer is not really likely to take the statement at face value. Such superlatives must be contrasted, however, with claims of a product being ‘cheapest in the market’. ‘Cheapest’ is more of an objective standard that a subjective ‘best’. Consequently, the law treats the two types of claims differently. In case of a subjective statement, an average consumer is likely to see the claim as a ‘puff’; in case of an objective statement, an average consumer is much more likely to believe and act upon the claim. An average consumer is much more likely to be influenced by an advertisement referring to the “cheapest grade 1 coffee” than one referring to the “best tasting grade 1 coffee”. Consequently, if a producer advertises his product as a subjective puff; he must be given more leeway than a producer claiming to state an objective truth. Thus, if a competitor brings a claim, he is unlikely to succeed against a puff; but is likely to get an injunction against an untrue ‘objective’ claim. At least, this was true until the Madras decision.

 

Before discussing the Madras case, it will be useful to note the position of law in this regard according to the decision immediately prior in time. Under Reckitt Benckiser v. Hindustan Lever, 2008 (38) PTC 139 (Del), for a claim of commercial disparagement to succeed in cases of comparative advertising, the Court is to approach the issue from the perspective of the hypothetical “average person of imperfect recollection” picked from the target group of consumers. Now, “CCD sells the best coffee” is unlikely to make much of an impact on a group of coffee lovers; “CCD sells the cheapest coffee” may well cause them to think about switching over to CCD from Barista. Thus, drawing out from this rationale, the Delhi decision concluded that a tradesman is entitled to declare that his goods are the best in the world – even if such a declaration is untrue (as it almost inevitably will – at least, it will be impossible to prove as true). Mere puffing (by definition, exaggerated subjective opinion) was not an actionable wrong.

 

The Madras decision however seems to have done away with this rationale for distinguishing between subjective and objective claims by holding that all puffing is an actionable wrong. In doing so, the Madras High Court noticed a long line of cases (though not the latest Delhi decision which I have discussed above) which held that puffing on its own did not amount to disparagement. It then however proceeded to disagree with this line.

 

The Court was called upon to decide whether certain claims by Anchor (that its toothpaste was the “only” and “first” toothpaste to offer all-round dental protection) amounted to disparagement. Colgate, obviously, did not take this claim too kindly; and asked for an injunction. On these facts, it may well be possible to hold that the advertisement was not a puff, but was in fact a misleading objective claim. The decision would not be as significant had it rested solely on this aspect. Nonetheless, the Court went further to observe that all puffing was illegal.

 

The reasons which prompted the Court in reaching this conclusion were primarily related to consumer protection. It held that the question of the legality of puffing needed to be decided by balancing the right to freedom under Article 19 along with reasonable restrictions on that right in the form of consumer laws. The Court noted that the contrary decisions of other Courts were based on old English cases decided before consumer protection laws were put in place. Therefore, any proper determination of the legality of puffing must necessarily take into account consumer protection laws in India.

 

Next, the Court went on to hold that any puff must amount to an “unfair trade practice” under the Consumer Protection Act. It was held that allowing competitors to puff their products was not in the public interest, and could not be permitted. Undoubtedly, this is true only insofar as consumers are likely to believe the claims to be true. But are claims of obvious subjective exaggeration (for instance, “best coffee in the world”) really prejudicial to consumer interest?

 

The Court’s motivation is clear from the following statement, “But the recognition of this right (to puff) of the producers, would be to de-recognise the rights of the consumers guaranteed under the Consumer Protection Act, 1986.” The basis for the rejection of prior Indian cases was that they relied on British law prior to the developments in consumer protection. But, the Indian cases were nonetheless decided after consumer protection laws came into effect. This means that Indian law on the point kept the two causes of action separate – an action for protection of consumer interests was conceptually distinct under Indian law from the tort of commercial disparagement. The Court seems to have equated the two, thereby also equating the interests of consumers and the interests of competitors. Of course, none of the other decisions held that consumers would not have a remedy if there was in fact a violation of consumer rights; they only held that this was not a relevant factor in considering questions vis-à-vis competitiors. In other words, the approach of the Court does not take into account the fact that comparative advertising can have two effects. It can, of course, have an impact on consumer interest – and the Consumer Protection Act is relevant in adjudicating on disputes between consumers and the advertiser. But, comparative advertising can also have an effect in terms of commercial disparagement – it can disparage the trade name of a competitor. The previous decisions did not take into account the impact of consumer laws because they were concerned solely with this second effect. This second effect is the basis of the tort of disparagement. And the case before the Court was a case between two competitors for disparagement – not between a producer and a consumer.

 

It appears that this decision presents a clear conflict between the Delhi and Madras High Courts on the issue of the permissibility of puffing. This conflict can possibly be resolved by confining the observations made in the Madras decision to objective claims about product quality rather than clearly subjective puffs. As things stand, however, the Court’s rationale presents several further legal and policy questions. Is there a tort of commercial disparagement in India separate from consumer protection laws? Should standards in consumer protection legislation be applied to a dispute between to producers? Why should the matter not be decided from the vantage point of whether the plaintiff’s product would be disparaged in the mind of the average target audience? In any event, is it correct to conclude that subjective claims or puffs are illegal even under consumer legislation?