Beware the implied comparison injunction

The following article is a legal analysis of the effect on comparative advertising of the recent Ontario court decision in Church & Dwight v. Sifto Canada.Brenda Pritchard is a partner in Toronto's Gowling Strathy & Henderson and practises exclusively in the...

The following article is a legal analysis of the effect on comparative advertising of the recent Ontario court decision in Church & Dwight v. Sifto Canada.

Brenda Pritchard is a partner in Toronto’s Gowling Strathy & Henderson and practises exclusively in the area of advertising and marketing law.

Comparative advertising has long been considered by some advertisers (in the words of Dustin Hoffman’s Capt. Hook in the movie Hook) as ‘bad form.’

Advertisers are encouraged to extol their own virtues, rather than unfairly disparage the attributes of their competitors.

Nonetheless, in a competitive marketplace now aligned with our aggressive American counterparts, rather than our conservative English ones, comparative advertising has become commonplace, and, to a large extent, acceptable.

Generally, disputes between large competitors over comparative advertising are handled by a president-to-president discussion in which various grievances on different brands are used as negotiating tools.

In the event a settlement cannot be reached, the usual response is to file a trade dispute complaint with the Canadian Advertising Foundation to try to resolve the dispute without resort to the courts, in a relatively speedy and inexpensive manner.

The Sept. 23 decision of the Ontario Court of Justice in Church & Dwight v. Sifto Canada may well have inextricably changed the rules on not only ‘direct’ comparative advertising, but on implied comparative advertising, or ‘leading brand’ comparisons.

Sifto, long known for its salt products, developed a new baking soda product that it describes as ’100% pure and natural.’

The packaging complained of, goes on to describe the Sifto Baking Soda as follows:

‘Sifto Baking Soda – One of the richest sources of naturally occurring sodium bicarbonate is found deep in the Colorado mountains. The North American Salt Plant at Rio Blanco taps into this vast underground deposit, producing the purest possible baking soda, contained in this box. Sifto Baking Soda has no chemical additives, making it the only naturally occurring baking soda on the market.

100% effective

100% natural.’

Despite the fact that neither its pre-1992 trademark Cow Brand, nor its current Arm & Hammer trademark were referred to on the Sifto product, Dwight & Church, the Canadian distributors of Arm & Hammer, challenged the ad.

Dwight & Church took the position that, given its whopping 80% share of the baking soda market, the representation entitled it to relief in the form of an interlocutory injunction under s.7(a) of the Trade-Marks Act or s.36 of the Competition Act, or under the tort of injurious falsehood.

Section 7(a) of the Trade-Marks Act provides as follows:

‘No person shall make a false or misleading statement tending to discredit the business, wares or services of a competitor.’

Section 36 of the Competition Act entitles competitors to relief in the form of damages where false or misleading statements are made regarding their products.

Mr. Justice Harvis, relying on the June 15 decision in Unitel v. Bell Canada (where an interlocutory injunction was denied), found ‘the plaintiff’s product is identifiable by implication in that its product dominates the market, and, for that reason, the disparaging comments would fall upon them with virtually full force,’ and granted the interlocutory injunction on the basis of the tort of injurious falsehood.

In the Unitel case, Bell Canada referred to its competitors by way of innuendo by mentioning various features that its competitors claimed to have.

Unitel was unsuccessful in convincing Mr. Justice Winkler that Bell’s ads were obviously targetting Unitel, despite references to a long-distance competitor that appeared unique to Unitel.

The Sifto decision is precedent-setting in the following respects:

(1) It stands for the proposition that the tort of injurious falsehood can be invoked to combat false or misleading advertising even where no competitive trademark is used, so long as the plaintiff is the dominant leader in the market or is indirectly or by implication referenced in the ad.

(2) Injunctive relief was declared available in an action for injurious falsehood even without proof of actual economic loss.

(3) Loss of actual and potential customers, goodwill and diminution of a plaintiff’s reputation were found to constitute irreparable harm that cannot be compensated in damages.

(4) The difficulty of assessing the plaintiff’s damages attributable to the words complained of and the possibility that loss of its marketshare will be longlasting, dictate that the balance of convenience favors the plaintiff.

What concerns us about this case is its potential impact on comparative advertising as we now know it.

First, this tort will apply even to ‘leading brand’ comparisons that do not name competitors.

Second, although injunctive relief is considered an extraordinary remedy that is difficult to obtain because of its far-reaching effects, Mr. Justice Jarvis’ decision seems to imply the test will be met in any instance of potentially false or misleading comparative advertising, due to the difficulty in linking actual loss to advertising.

Unfortunately, it is difficult to envision a fact situation in which an aggrieved competitor could not argue that it would be difficult to link actual loss to the egregious ads, leaving the floodgates open for many more cases of injunctive relief.

A litigator’s dream, perhaps, but, surely, an advertising lawyer’s nightmare.