In South Africa, it is not uncommon for companies to take IP-related disputes to the Advertising Regulatory Board ("ARB"), a process that is far cheaper and quicker than High Court proceedings. In this article, we discuss recent ARB proceedings regarding skincare products in the case of L'Oréal South Africa (Pty) Ltd v Nutriwomen (Pty) Ltd.
The complaint
L'Oréal lodged an ARB complaint about Nutriwomen's DERMACARE product range – it claimed that the DERMACARE packaging 'substantially copies the packaging and get-ups' of L'Oréal's CERAVE products.
L'Oréal argued as follows:
- CERAVE has distinctive packaging and it has been advertised significantly worldwide and in South Africa;
- Nutriwomen, a direct competitor, is copying CERAVE with its DERMACARE range and is doing this through similar packaging, get-ups, colour schemes and product descriptions;
- Nutriwomen is exploiting CERAVE's advertising goodwill and it is seeking to create 'an association of affiliation in the mind of consumers...(this) is likely to cause damage to the goodwill associated with the complainant's product packaging and get-up';
- The two products 'directly compete' as they are sold 'in the same stores and on the same shelves, and are used by the same consumers for the same purposes';
- Nutriwomen, through its imitation of the CERAVE packaging is 'deliberately seeking to ride on the coattails of the substantial and favourable reputation which the Complainant has developed in its CERAVE packaging and get-up';
- Nutriwomen is contravening Clauses 8.1 and 9.1 of Section II of the ARB Code.
Nutriwomen's response
Nutriwomen saw things differently. It denied that there were rights in the CERAVE packaging. It made the point that it had not replicated the V-shaped block used by L'Oréal. It also argued the following:
- The CERAVE packaging has not been used for long enough for there to be any protectable advertising goodwill in South Africa;
- The CERAVE packaging architecture is not unique, and the colours used are common in the industry;
- L'Oréal is trying to stifle legitimate competition;
- DERMACARE has built up its own reputation;
- There are lots of other similar products, colours, descriptors and fonts out there.
- The two brand names are clearly visible;
- The goods involved are not impulse purchases;
- It is not unlawful to sell products which are considered to be "dupes" of another product.
The ARB ruling
In a ruling dated 16 May 2024, the ARB made the following findings:
Jurisdiction: Although Nutriwomen had not submitted to ARB's jurisdiction, the ARB can issue a ruling for the guidance of its members. This can have a significant impact on the ability of a non-member of the ARB to advertise and possibly sell its products through retailers who are members of the ARB.
Passing off: Although the test to be applied under Clauses 8 and 9 of Section II of the ARB Code is not quite the same as the test for passing off, court decisions dealing with passing off may be persuasive in ARB matters.
The exploitation of advertising goodwill: Clause 8 of the ARB Code deals with the exploitation of advertising goodwill and says that the likelihood of confusion, deception and the diminution of advertising goodwill are factors that can be considered.
The existence of an advertising goodwill: On the issue of whether there is an advertising goodwill, issues such as:
- L'Oréal's significant revenue;
- a market share of 10% (in the skincare category of Dermocosmetics, where both brands form apart of);
- the availability of its products in the Dis-Chem and Clicks chains; and
- significant advertising
are clearly very relevant.
Dealing further with advertising goodwill, the ARB said the following:
- It was satisfied that the 'unique combination of elements in the CERAVE product architecture has resulted in distinctive packaging goodwill'.
- L'Oréal has clearly 'gone through great effort in the short time since the launch of CERAVE locally to advertise the brand, including the product architecture of the different products in the range'.
- Social media posts submitted by L'Oréal in support of the complaint show that 'CERAVE and... the related product architecture is widely recognised by and prominent in the mind of consumers... (L'Oréal) has established the necessary advertising goodwill in its product architecture within the meaning of Clause 8 of Section II, despite having launched its products locally only in 2022.'
No coincidence: The ARB was very clear on this: ' There are too many similarities for this to have been coincidence... the CERAVE and DERMACARE range share overwhelmingly the same imagery... imagery that is not shared by third party products.'
A likelihood of confusion: The ARB held that there was clearly a likelihood of confusion 'by a hurried consumer and based on imperfect recollection' despite differences in the brand names of the products. This meant that there was a breach of Clause 8 of Section II of the Code.
Dupes: The ARB held that "dupes may be commonplace in the market, but this does not mean that competitors offering "dupes" have free reign to copy the product architecture of another brand. Copying brand architecture to deliberately create the impression in a consumer's mind that your product is a "dupe" of the original would amount to classic exploitation of that brand's advertising goodwill".
Imitation: The ARB said that Clause 9 prohibits the copying of an existing advert in a way that 'is recognisable or clearly evokes the existing concept and which may result in the likely loss of potential value'. The ARB held that 'the unique combination of elements affords the CERAVE packaging protection within the meaning of Clause 9'.
Finally
The ARB can in certain cases play a significant role in IP-related disputes.
*Note: The ruling of the ARB is being appealed, this article will be updated accordingly.
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.