Comparative advertising involves the direct comparison of a sponsored brand to a competitive brand in an advertisement. It is inherently controversial and has raised concerns from the media, the government and the advertising industry itself. Not surprisingly, the legal implications of comparative advertising have often formed the basis of controversy.
Prior to the 1970s, most advertising avoided the use of comparisons for several reasons. First, as a result of previous court decisions in Canada, there was uncertainty surrounding the legal implications of using a competitor’s trademark in an advertisement. Second, there was published research on comparative advertising suggesting that referencing a competitor’s trademark within an advertisement could actually benefit the competitor. Finally, there was a sense of fair play within the industry — at least until the 1970s, when the Federal Trade Commission in the U.S. endorsed truthful comparative advertising in their Statement of Policy Regarding Comparative Advertising.
However, the landscape of comparative advertising in Canada is far more uncertain. Marketing and advertising in Canada is generally governed by the Competition Act, but comparative advertising also raises unique legal issues under the Trademarks Act (“TMA”). As such, in addition to numerous common-law and regulatory avenues, there are several statutorily imposed civil remedies available to trademark owners who are the subject of a comparative advertising campaign in Canada depending on the circumstances.
For instance, section 22 of the TMA provides that “[n]o person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.” As a matter of first impression, this section appears to be a catch-all prohibition against the use of a competitor’s registered trademark in a comparative advertising campaign. However, case law in Canada has effectively limited this section’s applicability in cases involving comparative advertisements. As a result, advertisements are often only found objectionable by a competitor if the competitor’s trademark is used on the product being advertised, on the packaging for the product, or if it appears in advertising available at the point of sale. Unfortunately, the mere use of the competitor’s trademark in advertising is often not sufficient for an advertisement to be challenged under section 22 unless the mark is used in a comparative advertisement for services. Further, the Supreme Court of Canada has expressed the opinion that section 22 claims should be confined to cases “in which the protectable interest is clear and the threat of interference is substantial [emphasis added].” As a result, the application of section 22 is rather limited in scope.
For companies targeted by false or misleading comparative advertising in Canada, either expressly or implictly, a more productive challenge can often be put forward via section 7(a) of the TMA and/or section 52 of the Competition Act. A recent decision involving two major wireless communication providers in Canada reiterated that trademark protection is available even if a trademark is not directly used. If a trademark is capable of being identified by implication and the impression created by the advertisement is false or misleading, a cause of action may be available under section 7(a) of the TMA or sections 36 and 52 of the Competition Act. Specifically, section 36 of the Competition Act affords a private party a civil right of action if they have suffered loss or damages as a result of another person’s contravention of section 52 of the Competition Act for false or misleading advertising, which is a criminal offence. As such, it must be proven beyond a reasonable doubt that (a) the representation was false or misleading when consideration is given to the general impression conveyed as well as the literal meaning, (b) the representation was false in a material respect, meaning that the representation could influence a consumer to buy or use the product or service advertised, (c) the representation was made knowingly or recklessly, and (d) the representation was made to the public.
While section 36 of the Competition Act provides for the recovery of damages, neither section 36 nor section 52 explicitly provides for injunctive relief, which could prove detrimental depending on the content of the false or misleading comparative advertisement. Recently, however, the courts have been more willing to grant interim injunctions in cases involving claims brought under these sections if the claimant can satisfy the court that (a) the claim raises a serious issue to be tried, (b) not ordering the injunction would result in irreparable harm to the claimant, and (c) the balance of convenience favours the claimant.
In contrast, under section 7(a) of the TMA, the claimant only needs to demonstrate that the advertisement contains (a) a false or misleading statement, (b) a statement tending to discredit the business, wares or services of a competitor, and (c) resulting damage. There is no requirement that the claimant prove the misrepresentation was false or misleading in a material respect or that the representation was made “knowingly or recklessly” as is required under section 52 of the Competition Act. Further, both damages and injunctive relief are available to the claimant under the provisions of the TMA.
Although section 7(a) of the TMA appears to be much easier to satisfy than section 52 of the Competition Act, a long-standing controversy surrounding the constitutional validity of this section has resulted in most claims for false or misleading advertising being brought, either simultaneously or independently, under section 52 of the Competition Act. Similarly, this has allowed the courts to avoid expressly addressing section 7(a) and instead decide cases on the basis of section 52 of the Competition Act.
Protecting a trademark against comparative advertising can involve complex legal analysis. Not only are there many standards for determining what is considered lawful or unlawful, but there are numerous remedies available — from injunctions to regulatory proceedings — for trademark owners whose marks have been used in comparative advertising. As such, businesses finding themselves the target of comparative advertising should seek the advice of experienced Canadian counsel.
Jayda A. Sutton, Toronto