Marketing law: In the dock

From FIFA's legal wrangles with MasterCard to the latest on comparative ads, it has been a busy year in marketing law. Nick Johnson, partner and head of advertising and sponsorship at law firm Osborne Clarke, explains what the key decisions by courts and regulators mean for marketers.

SPONSORSHIP

MasterCard v FIFA

The case In a colourful case that did nothing to boost FIFA's reputation, MasterCard challenged the football governing body's entry into a sponsorship agreement with Visa. Under the terms of the 2002 sponsorship deal between FIFA and MasterCard, the latter claimed it had a right of first refusal on future sponsorship of the World Cup tournament and that FIFA had had no right to agree a deal with rival Visa. The initial ruling from the New York court sided with MasterCard, in a judgment highly critical of FIFA. Heads rolled within the organisation, but it went on to appeal the ruling, securing an order that it be reviewed. The case was subsequently settled on the basis that MasterCard would walk away from the sponsorship, paving the way for Visa to move in. MasterCard's regulatory filings suggest that it received $90m (£44m) from FIFA under the terms of the case's settlement. Visa is reported to be paying $170m (£82m) for the sponsorship - $10m less than it had originally bid.

Why it matters Any contract wording that leads to this much trouble cannot have been well drafted. The case illustrates well the perils of going ahead with unclear documents and insufficient legal advice.

GREEN CLAIMS

Advertising Standards Authority (ASA) and Toyota

The case The ASA upheld two complaints against Toyota in respect of emissions claims made for hybrid vehicles. In May, an ad claiming that the Lexus RX 400h hybrid SUV had 'low emissions' was held by the ASA to be likely to mislead. While the vehicle's emissions are low for an SUV, the ASA held that the term means low compared with all classes of vehicle.

In June, the car manufacturer ran into trouble again when it claimed that the Prius emits 'up to one tonne less CO2 per year than an equivalent family vehicle with a diesel engine'. The substantiation provided by Toyota included comparisons with 1.5-, 1.8- and 2.0-litre vehicles, but the ASA held that this was inadequate in relation to the 1.5-litre engine.

Why it matters Environmental claims must be carefully framed and fully substantiated to stay the right side of the ASA. This is an area where consumers and lobbying groups are quick to file complaints.

FILM TIE-INS

Advertising Standards Authority and Ford

The case Ford's issues with the ASA arose from its tie-in with the James Bond film Casino Royale. Ford sought to leverage this by using scenes and music from the film in its TV ad for its Focus Zetec Climate. Two viewers said the ad was misleading as it showed mainly the Mondeo model, which appeared in the film, but ended by showing the Focus Zetec Climate. The ASA upheld complaints that the ad misleadingly implied that the latter was also used in the movie.

Why it matters This is a cautionary tale for any advertiser wishing to leverage film or other tie-ins. Extension of the association beyond featured products is likely to be frowned upon if it misleadingly suggests that other products were featured in the film or content.

DATA SECURITY

Financial Services Authority (FSA) and Nationwide

The case In February, the FSA, wanting to 'send a clear, strong message to all firms about the importance of informa-tion security', fined Nationwide £980,000 following the theft of a laptop PC from an employee, which contained customer details. The failings that particularly concerned the FSA were primarily procedural. Nationwide was found either to have inadequate procedures relating to customer data or not to have implemented the procedures it did have in place.

Why it matters Although the FSA's remit extends only to the financial services sector, data security is an increasingly crucial compliance issue across the board. Any business that holds consumers' personal data should heed this 'clear, strong message' and take a hard look at its procedures and their enforcement. Direct marketing agencies handling financial services accounts should expect to have to comply with stringent client policies going forward.

COMPARATIVE ADVERTISING

O2 v Hutchison 3G

The case It was a busy year for comparative advertising decisions. In a long-running dispute over a comparative ad campaign run by mobile operator 3 in the summer of 2004, O2 appealed to the English courts to have key points in the case referred to the European Court of Justice (ECJ). The case revolved around 3's use of bubble imagery in the ads. O2's trademark infringement case had been unsuccessful in the first round of litigation in the High Court.

Why it matters The ECJ's decisions are still awaited, and may not come through for some months. However, the case is expected to decide once and for all when, and in what circumstances, it is permissible to use rivals' trademarks (and variants) in comparative advertising. The UK Court of Appeal's judgment suggests a radical approach, where use of a competitor's branding in the context of legitimate comparative advertising should not be seen as 'trademark use' at all. But will the ECJ follow this approach? And will the new Unfair Commercial Practices Directive (due to come into force in the UK next April as the Consumer Protection from Unfair Trading Regulations) rewrite the rules anyway?

COMPARATIVE ADVERTISING

L'Oreal v Bellure

The case

Dubai perfume company Bellure sold low-value fragrances that it claimed smelled similar to L'Oreal perfumes. It marketed the products on this basis, using packaging that 'winked at' the relevant L'Oreal designs, and published comparison charts that named particular L'Oreal perfumes. L'Oreal sued for infringement of its trademarks and 'passing off', claiming that Bellure's marketing materials took unfair advantage of the character and repute of L'Oreal's perfume brands. L'Oreal won the first round in the High Court, but in 2007 the case came to the Court of Appeal. It is now in limbo, pending a ruling from the ECJ, but a swing the other way looks likely. The Court of Appeal's view was that 'the public are not stupid'. It was unconvinced there was any likelihood that a low-value 'smell-alike' product would be confused with the original and took the view that, even if Bellure gained an advantage through comparing its products to L'Oreal's, it did not follow that it was an unfair advantage.

Why it matters Potentially, the case has a broader application than just 'smell-alike' products. It could also affect marketing campaigns where a challenger brand seeks to position itself as an alternative to an existing product. When the ECJ rules on this and the O2/3 case (see above), we should have a much clearer idea about what kind of use of third-party trademarks may be permissible in this context.

COMPARATIVE ADVERTISING

Lidl Belgium v Etablissementen Franz Colruyt

The case Supermarket Lidl objected to advertising by rival Colruyt, which claimed that a particular basket of goods was cheaper in its stores than its competitor's. The decision of the court was important for two reasons. First, it affirmed the view that fair price comparisons can be of benefit to consumers. Second, it held that advertisers should not have to set out in the ad the full details of every product when comparing a 'basket' of prices. It is sufficient simply to provide the consumer with an external source of reference where this information can be verified.

Why it matters As an ECJ decision, the judgment has a direct impact on the way UK brands must treat substantiation of advertising claims. Previously there was no general obligation for advertisers to publish details of the substantiation. However, following this decision, it will be necessary for advertisers making 'basket price' comparison claims to make substantiation available to consumers, for example online, and to ensure they know where to find that information.

TUPE

Hunt v Storm Communications and others

The case When wine company Brown Brothers put its PR account out to pitch in June 2006, Storm lost the business to rival agency Wild Card Communications. Ms Hunt had been employed by Storm, which said that, as she was dedicated to the Brown Brothers account, her employment contract had transferred to Wild Card under the Transfer of Under-takings (Protection of Employees) Regulations 2006 (TUPE). Wild Card refused to accept this, so Ms Hunt brought proceedings in the Employment Tribunal. The Tribunal held that Ms Hunt had spent 70% of her time on the Brown Brothers account and was effectively an 'organised grouping of employees' whose principal purpose was to service that account. On this basis, TUPE was held to apply, and Ms Hunt's employment was transferred to Wild Card. Her unfair dismissal claim against Wild Card was allowed to proceed.

Why it matters This is the case that proved lawyers weren't just scaremongering when they warned that TUPE can apply when a client moves its account from one agency to another. Not surprisingly, contract provisions dealing with TUPE risks have now become one of the hottest areas of negotiation between advertisers and agencies.

AGENCY STAFF

Greenwood v Whiteghyll Plastics

The case This Employment Tribunal decision will be of particular interest to advertisers and marketing agencies. Mr Greenwood was dismissed by his employer after a number of complaints about him by one of the company's major clients, Morrisons, who refused to have him working on its account. Whiteghyll tried, but failed, to find alternative employment for him and dismissed him. Mr Greenwood took his case to the Employment Tribunal claiming unfair dismissal. The tribunal initially found that Whiteghyll had valid reasons for dismissing Mr Greenwood, as there was little else it could do in the circumstances. Mr Greenwood appealed, and the Appeals Tribunal held that Whiteghyll should have considered the injustice that would be caused to Mr Greenwood and sought ways to alleviate it. As this point did not appear to have been considered at the initial hearing, the case was remitted to another Tribunal for further consideration.

Why it matters The decision will make it more difficult for agencies to dismiss staff on the basis of a breakdown between a person working on the account and the client. Employers will be expected to go the extra mile where employees have long service and/or good performance records.

UNWANTED MARKETING CALLS

Dave King and Everyday Financial Solutions

The case Although this case was reportedly settled out of court by Everyday, the financial-services wing of Littlewoods, it appears to mark a trend toward an increased level of consumer activism against unwanted direct marketing. Mr King received repeated marketing calls from Everyday, none of which was intended for him: his number was incorrectly held on the firm's database. Despite requests to Littlewoods to correct this, the calls kept coming and Mr King eventually paid BT to block the calls. He then sued for damages under section 13 of the Data Protection Act 1998. The case was apparently settled on the basis that Littlewoods paid Mr King £150 and removed his details from its database.

Why it matters Despite the relatively low level of damages in this case, the administrative time commitment will have been significant for Everyday. As more consumers become aware of their rights, marketers and agencies could face actions from multiple claimants and the liabilities involved could become more substantial.

ESSENTIALS - Developments to watch for

1. The Consumer Protection from Unfair Trading Regulations 2007. Expected to come into force next April, these will be the big story in UK advertising regulation in 2008. One aspect that appears to have slipped under the radar of most in the marketing industry is the fact that, from April, non-compliance with the Committee of Advertising Practice's code could give rise to criminal prosecution in certain circumstances.

2. Further enforcement action by LOCOG. Expect the London 2012 organising committee to take a tough stance on brands or marketers who use Olympic references on products or in promotions without specific authorisation. Little Chef was this year barred from using two-time Olympic gold medal-winner Daley Thompson to promote its Olympic Breakfast.

3. ECJ decision on comparative advertising. Following references to the European Court of Justice in a number of UK cases this year, a decision could be forthcoming from the court in 2008 on key issues around the use of trademarks in comparative ads.

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