On 12 November 2019, the Ukrainian Parliament adopted the Law of Ukraine "On Amending Certain Legislative Acts of Ukraine regarding Harmonization of Legislation in the Field of Comparative Advertising with Laws of the European Union" ("New Rules"). These New Rules entered into force on 11 December 2019 and introduce amendments not only to regulations on comparative advertising themselves, but also amend trademark law, the laws on protection against unfair competition, as well as consumer law.
Comparative advertising was not prohibited in Ukraine before the New Rules, but the regulation of comparative advertising was obviously insufficient to fit the times. For instance, the use of another party's trademark in comparative advertising was not considered a "fair use" exception under trademark law. Furthermore, for the purpose of advertising of medicinal products, medical devices, methods of prevention, diagnosis, treatment and rehabilitation, there has been a general prohibition to compare with another party's medicinal products, medical devices, methods of prevention, diagnosis, treatment and rehabilitation for purposes of enhancing the advertising effect (in practice, a ban on the dissemination of comparative advertising). In the overview below, we are pleased to note that both these restrictions have been abolished by the New Rules.
Not by comparative ad alone
Although the regulations on comparative advertising have been significantly improved, the New Rules have not ensured consistency of regulation in this field. Regulation of comparative advertising remains scattered over advertising laws, consumer protection laws, and the laws regarding protection against unfair competition. The new general requirements regarding advertising illustrate this issue. In particular, the Advertising Law was supplemented by an additional general prohibition of information in advertising that contains elements of unfair commercial practice and/or misleading consumers or unfair competition practice.
Respectively, advertisers should bear in mind not only new requirements regarding lawful comparative advertising, but also amended regulations on unfair commercial & competition practices.
Updated 'comparative advertising' definition and other definitions
Before the New Rules, Ukraine's Advertising Law defined a comparative advert as an ad that contains a comparison with other persons and/or goods of another person.
Now (as of 11 December 2019), the Advertising Law defines a comparative advert as an ad that contains a comparison with other persons and/or goods (activity) of another person, and explicitly or by implication identifies a competitor or goods or services offered by a competitor.
It seems that the Ukrainian legislature was more inclined to combine the previous definition of the comparative advertising with the notion of 'comparative advertising' given in Article 2 of the Directive 2006/114/EC concerning misleading and comparative advertising rather than just take the definition from the foregoing EU Directive.
There is no certainty now on whether the first or second part of the definition is sufficient to qualify a certain marketing activity as comparative advertising, or whether advertisers should bear in mind and take both parts of the new definition together when considering a comparative advertising campaign and assessing whether their campaign complies with comparative advertising requirements.
Unlike Directive 2006/114/EC concerning misleading and comparative advertising, no definition of 'misleading advertising' has been introduced by the New Rules, but the Advertising Law still contains the questionable notion of 'unfair advertising'. Instead, with the New Rules, Article 19 of the Consumers Protection Law was amended and now contains a list of commercial practices which qualify as those which mislead consumers.
Requirements for lawful comparative advertising
Restated Article 11 of the Advertising Law now provides for a number of key requirements that any comparative advertising should meet in order to be lawful:
a) it does not qualify as one of the unfair business-to-consumer commercial practices under consumer law;
b) it compares homogeneous (similar) goods which meet the same needs or are intended for the same purpose or compares activity in one and the same industry or one and the same type of activity;
c) it objectively compares one or more material, comparable and representative features of a homogeneous (similar) product or activity, including price, information about which may influence a consumer's decision when making a choice;
d) it does not discredit or contain false information about the quality of homogeneous (similar) goods of other manufacturers or sellers or discredit activity or standing of other persons or denigrate the trademarks, trade names, other identifiers of competitors or designation of origin;
e) for a product with designation of origin (plain or qualified designation of origin), it relates to a product with the same designation;
f) it does not create confusion between the advertiser and a competitor or between the advertiser's goods, trademarks, trade name and other identifiers and those of competitors;
g) it does not present goods as imitations of the competitor's goods protected by a trademark or trade name
The list of requirements is exhaustive.
The amended Advertising Law expressly provides that the advertiser bears liability for unlawful comparison in advertising as well as failure to comply with requirements relating to the content of the comparative ad.
Long-awaited "fair use" exception for comparative advertising
Ukrainian Trademark Law finally permits the use of third party trademarks in comparative advertising. However, the new "fair use" exception is conditional. In particular, the use of third party trademarks in comparative advertising should not constitute trademark infringement, provided that such use complies with advertising law, laws on protection against unfair competition, and does not qualify as one of the unfair commercial practices under consumer law.
The amended Advertising Law also now permits the use of images, references to the product, trademarks or other designations by which the product is marketed, and in relation to which the comparative ad is performed, as well as the use of the trade name of a competitor in relation to which activity or product the comparative ad is performed.
Enforcement of comparative advertising requirements
With the New Rules in force, there is now less certainty regarding which local authority will enforce the comparative advertising laws.
Before the New Rules, Article 11 of the Advertising Law stipulated that relations regarding comparative advertising shall be regulated by the laws regarding protection against unfair competition. On this basis, comparative advertising regulations were mainly enforced by the Ukrainian Competition Authority (the Antimonopoly Committee of Ukraine).
Article 7 of the Law of Ukraine "On Protection against Unfair Competition" (Comparative advertising) is still in effect (i.e. comparative advertising is still a type of unfair competition practice), but this article now stipulates that lawfulness of comparison in advertising as well as liability for non-compliance with requirements to the contents of comparative advertising are regulated by the Advertising Law. The amendment effectively means that the Consumers Protection Authority (the State Service of Ukraine on Food Safety and Consumer Protection) now has more power and thus can take a more active role in the enforcement of comparative advertising regulations.
We predict that both the Unfair Competition Authority and Consumers Protection Authority will enforce the comparative advertising regulations, but the Unfair Competition Authority will focus more on cases where fair competition is affected, while the Consumers Protection Authority will focus on cases where the rights of consumers are more affected. In order to bring certainty to the blurred line between the power of these two state authorities, the Unfair Competition Authority and Consumers Protection Authority will likely rely on the Memorandum of Cooperation they have entered into on 22 December 2016.
As a result, in case unlawful comparative advertising is classified as:
– violation of advertising law – a fine may amount to five times the value of the distributed/produced advertisement per each instance of violation. A violation committed repeatedly during the same year doubles the amount of the fine applicable for such violation.
– unfair competition practice – a fine may amount to up to 5% of the offender's turnover for the year preceding the year when the fine is imposed, for each such violation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.