Comparative advertising is permitted by the Advertisement Act in Hungary. The regulation imposes specific obligations on companies in relation to comparative advertisements in order to avoid confusion of consumers and infringement of the rights and legitimate interest of competitors whose goods or services are used as the basis of comparison. Until its very recent amendment, the Advertisement Act also expressly stated that use of a third party trade mark, if it complied with the conditions on comparative advertisements and some further requirements (see details below), was not to be considered trade mark infringement. In this update we provide an insight into Hungarian provisions on comparative advertisements, their trade mark related implications and the reasons behind the recent amendment of the law.
Provisions on comparative advertising have been part of the Hungarian legal system for more than a decade. Due to the uncertain legal requirements and lack of case law, this type of advertisement has not become an everyday practice on the Hungarian advertising market. However, from time to time significant market players use this tool to attract the attention of consumers and we are increasingly asked for advice on this topic.
In the European Union comparative advertisements are regulated by Directive 2006/114/EC concerning Misleading and Comparative Advertising (the Directive). Hungarian provisions, inter alia Act No. XLVIII of 2008 on Essential Conditions of and Certain Limitations to Business Advertising Activity (the Advertisement Act), are harmonised with the European legislation. The Directive requires full harmonisation, which means that member states are not allowed to impose stricter provisions than are provided by the Directive. The Hungarian provisions fully comply with the Directive, even though the wording and sequence of the preconditions are not identical.
The Hungarian Advertisement Act contains the preconditions set forth by the Directive in two separate groups, each containing four criteria. The first set contains legal requirements according to which the advertiser has to respect the rights and legitimate interests of the competitor; while the second set contains preconditions in connection with comparison of features of actual goods or services.
According to the first set a comparative advertisement may not violate the reputation of a third party or its assets such as its trade names, goods or other brand elements. It should not result in confusion between the advertiser and a third party which is engaged in similar activities, or its assets such as its trade names, goods or other brand elements. Comparative advertising may not enable the advertiser to achieve an unfair advantage due to the exploitation of the reputation of a competitor or its assets. Furthermore it may not result in passing off as provided for in the Hungarian Competition Act.
The second set contains legal criteria relating to the features of the goods which may be used for comparison. Only goods intended for the same purpose or meeting the same needs may be compared, and the advertisement should be unbiased when it comes to comparison of one or more features. The features used in the advertisement have to be material, relevant, representative and verifiable. If the advertisement also compares prices of goods, this has to be an unbiased comparison as well. Goods with a designation of origin may be compared only with goods with the same designation of origin.
If a comparative advertisement does not comply with the criteria of the Advertisement Act, it does not automatically constitute trade mark infringement. Trade mark infringement can be asserted only if the conditions set forth by the Hungarian Trade Mark Act (Act No. XI of 1997) are met. These conditions are harmonised with the Trade Mark Directive (Directive 89/104/EEC) and also with the Community Trade Mark Regulation (Regulation 207/2009/EC). The protection of reputation and prohibition of confusion of consumers are the conditions which require special attention in this regard since these appear both in the Advertisement Act and in the Trade Mark Act.
Under certain circumstances the unbiased presentation of the purpose of a particular product may be a valid reason for comparison with another product. However, comparison may violate the reputation of the other product if it is absolutely unnecessary in the specific market. Furthermore, the use of attributions, which suggest that the actual product is of the same type, has the same features or is similar to a well-known product, may also be considered to be unlawful advertisements. If an unknown product is advertised as an equivalent to a well-known product of a brand with a reputation, it constitutes a violation of the provisions on comparative advertising. For instance, the Hungarian Competition Authority examined an advertisement in which an unknown perfume product was advertised as having the same odour as a well-known perfume brand. The Hungarian Competition Authority established that the advertiser had confused consumers with this type of advertisement. Although the Authority did not address trade mark related questions as it falls outside its competence, it is highly likely that trade mark infringement could have been also asserted in this case.
If an advertisement uses a trade mark with a well-known reputation for the purpose of comparison, the legal preconditions mentioned above have to be examined with extra care, but this does not mean that trade marks with a well-known reputation cannot be referred to in comparative advertisements. However, the chances of a finding of misuse are relatively high if comparison of the particular goods is not absolutely necessary.
As to the interpretation of likelihood of confusion, it is likely that Hungarian courts would apply the principles established by the Court of Justice of the European Union (CJEU) in O2 v Hutchison 3G (C-533/06). In this case the CJEU (formerly ECJ) provided that a trade mark proprietor cannot claim trade mark infringement in a comparative advertisement if use of its trade mark does not give rise to likelihood of confusion on the part of the public. This also applies if the advertisement does not comply with other legal requirements in the field of comparative advertising.