Earlier this year, the High Court of Delhi (“DHC”) in Kent RO Systems Ltd. v. Advertising Standards Council ofIndia & Ors., held that puffery falls outside the scope of disparaging advertisements. This means that advertisers shall not be penalized for making exaggerated or vague claims in their advertisements as a legitimate marketing strategy. This decision has reignited the...
Earlier this year, the High Court of Delhi (“DHC”) in Kent RO Systems Ltd. v. Advertising Standards Council ofIndia & Ors., held that puffery falls outside the scope of disparaging advertisements. This means that advertisers shall not be penalized for making exaggerated or vague claims in their advertisements as a legitimate marketing strategy. This decision has reignited the debate on whether the present legal position on puffery adequately protects the main stakeholders – the competitors and the consumers?
Over the years, Courts have unequivocally restricted denigration and disparagement while indulging in comparative advertisement. Unlikethe US, companies in India are not permitted to negatively and unfairly portray the competitors or their products to attract consumers. However, with regard to puffery, while the DHC has accepted it as a legitimate practice, the High Court at Madras (“MHC”) has taken a contrary view and proscribed it in all forms.
In this blog, the authors underscore the conflicts between recent High Court rulings. in the legal opinions across different High Courts in the recent rulings. Secondly, the blog highlights the gap in the current legal regime which has led to the present inconsistency. Finally, it provides certain viable recommendations to resolve the tussle.
Conflicting Legal Opinions
Since 2007, Kent has continuously used the tagline, “Kent deta hai sabse shudh paani” (Kent provides the purest water). In December 2023, the Advertising Standard Council of India (“ASCI”), a non-profit self-regulatory body, restrained Kent from further using the tagline. Subsequently, Kent approached the DHC against the ASCI's order where the Court granted an interim stay on the order. The Court's rationale was that as Kent had indulged in puffery, no claim could be attracted. Most importantly, the Court said that as puffery is neither intended to make a representation as to facts nor is considered as such by the target audience, thus, it cannot be stated to be misrepresenting facts.
In India, this position of law has its roots in a ruling by the House of Lords. In Timothy White v. Gustav Mellin, the Court held that businessman cannot be restricted to use extravagant phases to advertise their goods even it impliedly or indirectly effects the competitors. The cause of action arises exclusively when explicit disparaging representation is made against the competitors.
However, on the point of puffery, the MHC held contrary the House of Lords. In Colgate-Palmolive (India) Ltd.V. Anchor Health & Beauty Care Private Ltd, the Court said that since the Timothy White, the corpus of consumer protection laws have grown substantially in both India and UK. Due to such structural changes, misleading or false claims under the garb of puffery would go against the larger consumer interest.
Interestingly, even the DHC has supported such a similar claim in a different case. Just a month before the Kent case, in Dabur IndiaLtd. v. Advertising Standards Council of India, it had ruled that it is not possible for anybody to make an unsubstantiated claim that his goods are the best in the world. Consequently, Dabur was restrained from advertising that its toothpaste was the “world's No. 1 ayurvedic paste”. However, it is puzzling why Pratibha Singh J. (presiding over both benches) disallowed Dabur's claim of 'No. 1' but permitting Kent's claim of providing the 'purest water'.
Problems of Puffery Prosecution
The main reason of this ambiguity is the deficiency on two levels; statutory and regulatory. Currently, against misleading advertisements, the consumers can bring an action under the Consumers Protection Act, 2019 (“CPA”). The Section 2(47) includes Unfair Trade Practices which has a wide ambit to cover any misleading claim. So, legally, the consumers do have a legal remedy. But as a matter of fact, no consumer has ever pursued a puffery case, as these disputes are typically initiated by competitors or advertisers themselves in response to ASCI's restraint orders.
For the competitors, some remedy is available in the Section29(8) of the Trademarks Act, 1999 which prohibits any advertisement which infringes trademark by taking unfair advantage of and is contrary to honest practices in industrial or commercial matters. However, the trademark provisions could be only applied when such trademark has been inappropriately represented in the advertisement. Puffery, by its very nature, does not involve any direct representation because that will fall within the ambit of disparaging advertisements.
Due to this statutory deficiency, the aggrieved parties usually invoke the common law for tort of misrepresentation or disparagement. However, even the common law does not regulate puffery unambiguously for two reasons. Firstly, common law countries varysubstantially in their dealing with puffery. While the US doesn't interfere in puffery at all, the UK permits it to a certain extent only. Secondly, as discussed by the MHC, the introduction and prominence of the consumer laws has gone against the earlier prevailing focus on the laissez faire interest.
As far as regulatory deficiencies are concerned, India doesn't have any sanctioned regulatory authority which could oversee the advertising sector wholly and regularly. On the other hand, ASCI, though a self-regulatory body, has indulged in active regulation and even has a detailed codeof self-regulation of advertising content in India. But its application on the non-members has been an contentious issue. The Courts have been divided on this issue, due to which ASCI has remained toothless in addressing misleading and denigrating advertisements.
Possible Statutory Arrangements
Before 2002, Section 36A of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, provided for Unfair Trade Practices, a similar provision like the CPA but for the competitors. However, when the MRTP Act was repealed, no similar provisions were added in the Competition Act, 2002 due to which the competitors could not either rely on the Trademarks Act or the common law remedies.
Thus, a straight forward and effective way to deal with the issue can be adding a similar provision like Section 36A of the MRTP Act in the Competition Act. Such an amendment can clearly define the limits of what's disparaging and what's not. Specifically, as far as puffery is concerned, the Competition Act could prohibit claims that unreasonably elevate one product over another based on ambiguous or baseless assertions. Ultimately, the underlying objective, as the Preamble of the Competition Act states, is to 'prevent practices having adverse effect on competition' and 'to protect the interests of consumers'.
Secondly, another viable option can be the formulation of a separate code to extensively deal with the issue of puffery. For instance, in 2018, the Food Safety and Standards Authority of India (FSSAI) came up with the FoodSafety and Standards (Advertising and Claims) Regulations, 2018.
It provided certain broad general principles which must be kept in mind in advertising relating to food products. Regulation 4 states that claims in the advertisements must be truthful, unambiguous, meaningful, not misleading. But as the ambit of the Regulation is limited to food products, a standardized and centralized code for all industries can settle this for once and for all.
As on 2023, the advertisement sector in India was valued at Rs.93,166Crore and it is expected to grow substantially in the next couple of years. Therefore, the regulation of such an industry becomes sine qua non in emerging markets. Through this blog, the authors have emphasized that whenever such regulation is being formalized, puffery should not be seen as a defense to disparaging advertisements; and its contours should be defined clearly for the larger interest of the competitors and the consumers.
Views are personal.