Subjective comparative advertising, enemy or ally of the competition?

A Pepsi commercial, set in the 50s in the United States, shows a child walking down the street, who comes across two soda vending machines: one of Pepsi and another of Coca-Cola. After hesitating for a moment, he finally decides to have a Pepsi, then, in the next shot, we see a guitar shop behind the vending machine, that draws his attention, and then is revealed that the boy in question was an 11 years old Jimmy Hendrix. In another shot, we see that behind the Coca-Cola vending machine, there was accordion store, ending later with the phrase: “Whew … that was a close one”[1].

This type of advertising, something classic of Pepsi and undoubtedly one of its greatest attractions, has been the factor that has allowed it to become the main competitor of a giant like Coca-Cola. For Calfee, the advertising is understood as a tool that consumers use for their own purposes, something to be thankful for rather than fear[2]a concept that is quite suitable for the current information age, however, advertising regulations in our country have mantained an overly proteccionist tendency, an example of this, is the regulation of the comparative advertising. In this regard, the article 12 of Legislative Decree 1044, Law for the Repression of Unfair Competition, establishes that: the acts of comparison consist in presenting the advantages of the own offer compared to the competing offerspecifying that in order for those acts to be reputed as lawful, they must comply with what is indicated in article 11.2, which states, among other requirements, that they must be true information due to their objective, verifiable and reality-adjusted condi-tion, otherwise, they will constitute acts of unfair competition.

Regarding the above, although our current law only considers lawful the objective comparative advertising, this was not always the case, since there was a time when comparative advertising was not restrictive. The article 8 of Legislative Decree 691[3], simply established that: it is lawful to make specific comparisons of products, including related to prices, if the comparison does not denigrate competitors or confuse consumers, which means that, the objectivity, was not explicitly stated as a requirement for the legality of comparative advertising, it was enough only for the comparison to meet the requirements of truthfulness and loyalty, which obviously left open an infinity of possibilities for competitor, including being able to make comparative advertising based on subjective appreciations.

At the jurisprudential level, the criteria adopted by INDECOPI was very different. Through Resolution No. 0547-2003 / TDC-INDECOPI[4], dated December 10, 2003, Precedent of Mandatory Compliance on the principle of loyalty, in force to date, it established that “comparative advertising loses its informative character when the advertiser uses opinions or non-verifiable assertions, that is to say, of a subjective nature, since it is impossible for the consumer to verify whether the alleged benefits advertised actually exist. This lack of an informative nature, that is, of objectivity, causes the aforementioned competitor to suffer damage - materialized in the potential or actual detraction of customers - without the consumer benefiting from it. The net effect of this type of comparative advertising is negative and, therefore, unacceptable for the social model of repression of unfair competition to which the national legislation on advertising responds”. Likewise, it establishes that “the use of testimonials in a comparative context is lawful, as long as the advertiser objectively presents the testimony and for which they previously have sufficient documentary evidence to support not only the existence but also the content and meaning of the advertising claims made in the comercial”.

The aforementioned precedent was very controversial, since it contravened the provisions of Article 8 of Legislative Decree 691, still in force at that date. For Zegarra, the position adopted in the precedent is “an expression of the purest paternalism, even bordering on a totalitarian conception of the State that decides - in administrative headquarters, by itself and before itself - what information the consumer can use, which is almost like deciding what will be your consumption option. An outrage to freedom”[5]. Unfortunately, the current Legislative Decree 1044, adopted the same position, which means that, since the year 2008, subjective comparative advertising is illegal, which has resulted in comparative advertising itself practically disappearing, since the requirements demanded in the law for this type of advertising discourage the competitors and restricts the freedom of commercial expression.

At this point, it is worth asking ourselves, will competitors be able to persuade consumers to change from a product that has been on the market for years, based only on merely objective comparisons? Returning to the example of the Pepsi commercial, which definitely could not have been made in our country, since according to our law it would be considered as unfair competition, the advantage that is highlighted compared to Coca-Cola, is that Pepsi consumers will become rockstars. Is this an objective information? Of course not, then, is an act of confusion or denigration? neither, since it is evident that the commercial is using humor and fantasy resources. This last point deserves special attention, since requiring objectivity to a comparative advertising restricts the use of these subjective resources, which are the most persuasive for the consumer, and without them, it would have been very difficult for a Coca-Cola consumer, to even try a Pepsi.

In conclusion, the current regulation of comparative advertising is not beneficial neither for the market, or for consumers, since it imposes the idea that the consumer decision is based only on objective appreciations, which does not comply to the reality, since it is common that the consumers develop a preference for certain products based on subjective aspects, either because it brings back a childhood memory, is recommended by a famous artist, sponsors their favorite football team, etc. Thus, the only thing that this regulation generates, in addition to limiting the opportunities for other economic agents to position their products and stimulate the market, it limits our consumption options and therefore, the access to more competitive products.

Author: Kelly Sánchez Albitres – Intellectual Property Specialist
Law Firm: OMC Abogados & Consultores

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[1] Jimi Hendrix Pepsi Vs Coca Cola Commercial https://www.youtube.com/watch?v=NOOmu1Rz17Y
[2] CALFEE, John E. Fear of Persuasion: A New Perspective on Advertising and Regulation. p.34
[3] Legislative Decree 691, Rules of Advertising in Defense of the Consumer (derogated by the second derogative provision of Legislative Decree 1044).
[4] Issued in the case Coca-Cola Company vs. Embotelladora Don Jorge S.A.C. and Panorama Internacional S.A
[5] ZEGARRA Mulanovich, Gonzalo. "And my word is the law": INDECOPI, Comparative Advertising and Interpretation contra legem, p. 181