Mark Gavin looks at how businesses can use comparative advertising to their advantage.

Comparative advertising can often be seen as a controversial and risky practice for advertisers.

Do it right and it may result in a very successful marketing campaign. Do it wrong and the results can be very damaging to the reputation of a company and/or its brand.

Comparative advertising involves one trader making a certain claim about its product or service and comparing this to a claim or statement of fact about a competitor’s product or service. It often occurs in situations where a competitor is trying to knock off the “market leader” by proving that its product or service is superior. In recent times, consumers have come to demand more transparency on how products are made and are more discerning with their choice of brands. Comparative advertising is conducive to this by helping consumers make informed choices, as well as encouraging healthy competition in the marketplace.

Although relatively uncommon in New Zealand, recent trends show how businesses are effectively using comparative advertising to their advantage. A good example is the Whittaker’s v Cadbury advertisements in 2009 where Whittaker’s compared the various facts of both brands such as cocoa content, side by side. Similarly, the Hell Pizza comparisons with Pizza Hut in relation to size, salt and fat content of their pizzas also caused a stir in the marketplace.

An interesting development in comparative advertising occurred with the marketing campaign produced for Monteith’s Crushed Pear Cider, which ran over summer 2011/2012. This used tongue-in-cheek comparative advertising for the sake of comparing the existing Monteith’s Crushed Apple Cider product with its newly launched Crushed Pear Cider, where the two products took on personalities of their own by taking pot-shots at each other. Although not a traditional form of comparative advertising as both products were owned by the same company, it ensured equal leverage and worked to raise the profile of cider drinking.

However, one of the reasons marketers tend to avoid comparative advertising is the legal risks that could come to bite if not adhered to. Therefore, advertisers need to be well aware of these from the outset of any comparative advertising campaign.

One of the better known legal watch outs is the Fair Trading Act 1986 (FTA) which prohibits misleading and deceptive conduct in trade. Even if the statements being made in a comparative advertisement are factually correct, if they in any way mislead or confuse consumers as to their actual effect then the Commerce Commission may come knocking on your door.

For example, comparative advertising may be misleading where it creates a half-truth by omitting material necessary to make the comparison fair and balanced. This does not mean that you have to clutter the advertisements with over the top explanation. The test is an objective one and must be determined on an overall assessment, having regard to the effect of the advertising on reasonable members of the public in all the circumstances.

For example, in 2010 Specsavers ran an advertising campaign comparing the prices of progressive glasses at OPSM and Specsavers based on mystery shopping exercises. OPSM argued that the advertisements made various misleading and deceptive representations, however Specsavers pointed out that the claims were made solely on the price and not the quality or style of the glasses. The Court held that there was sufficient evidence that the claims were based on specific facts and the overall impression given by them was not misleading.

Caution is also needed in how one refers to the competitor and the product or service which it is comparing. Under the Trade Marks Act 2002 there is a specific defence to trade mark infringement if it is used for the purpose of comparative advertisement in accordance with honest practices. Therefore, referring to a brand name which has been trade marked will not usually be an issue. More problematic is when the brand name is conveyed in logo form on the product. Even though use of a trade mark may be permitted, the Copyright Act 1994 prohibits the reproduction of a logo as an artistic work. This means that the safest way to refer to a competing brand is in block letter form or plain font as this is unlikely to be a copyright work.

In addition, the Advertising Standards Codes also sets out a number of rules and guidelines in its Code for Comparative Advertising (Code). The Code highlights the consumer focussed purpose of comparative advertising; it should be factual and informative as opposed to an unfair attack on a competitor or to discredit a product. It also emphasises that where appropriate, competitive advertising claims should be supported by documentary evidence, independent tests and surveys, and conveyed in a way which makes them easily understandable to the audience.

For example, in 2010 a complaint was made to the Advertising Standards Authority in relation to use of the statement “We have the lowest overall grocery prices” in a Pak’nSave weekly mailer advertising specific in-store prices. The Panel noted that consumers were likely to interpret this as Pak’nSave having the “lowest overall grocery prices” compared to any other supermarket and as no evidence of substantiation could be presented, it was held to be a breach of the Code.

The Code also emphasises that the basis of comparison should be made clear either explicitly or by implication. This calls for a like comparison of “apples with apples” to ensure the consumer can make a fair judgment. For example, if the price of a product excludes GST then this should only be compared to the price of a like product which also displays the price as exclusive of GST.

While the competition must be fairly and properly identified, it cannot be done in a way which degrades the competitive product or service. For example, a Telecom advertisement which compared its service with 2degrees and followed with the phrase “now that doesn’t seem fair” was held to introduce a negative tone that degraded the competitive product and therefore in breach of the Code.

Overall, in the right situation where you have a factual claim which is much better than the competition, then a rational straightforward comparison can be potent. Keeping things simple avoids confusion and the risk of misleading the consumer. However, this doesn’t mean that comparative advertising cannot be creative. As long as it sticks to the facts and the above points are kept in mind, comparative advertising should be a marketing practice which is encouraged to restore transparency and foster healthy competition in the marketplace.