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05 Jul 2021
BY Gaelyn Scott

Advertising regulation in SA: it’s not exactly bliss

The South African High Court judgment in the case of Bliss Brands v Advertising Regulatory Board (“ARB”) has real relevance for IP owners. The judgment deals with the issue of whether the ARB, the body that replaced the now defunct Advertising Standards Authority (“ASA”), has jurisdiction over companies that are not members of the body.

 

A thorny issue

For years, brand owners have used the advertising regulation procedures in order to resolve trade mark and copyright-related disputes. A particularly effective weapon available to brand owners is the so-called “Ad Alert”, a provision that allows the advertising regulation body to issue an instruction to its media company members not to accept an advert that the body has ruled against.

The legality of such instructions was eventually challenged in the Herbex case. The Supreme Court of Appeal ruled that the ASA had no jurisdiction over any non-member and could not require a non-member to participate in its processes, or issue any instructions, orders or rulings against it. This judgment contributed to the eventual demise of the ASA.

 

The case of Bliss

The ARB ruled against the packaging of a soap product offered by Bliss, following a complaint from Colgate. Colgate claimed that Bliss was exploiting its advertising goodwill and imitating its packaging, issues that are dealt with in clauses 8 and 9 of the ARB Code. This despite the fact that Bliss is not a member of the ARB. The ARB issued an Ad Alert instructing its members to refuse the advert. Bliss filed an appeal to the High Court, where the case was heard by Judge Fisher.

Image source

 

The Ad Alert

The judge said that clause 3.3 of the ARB’s memorandum of incorporation (“MOI”) creates Ad Alert power. What this means is that, even though the ARB has no jurisdiction over non-members, it can issue an order requiring its own members not to accept an advert that the ARB has ruled against.

The judge said that the Ad Alert “has the effect that the rights of non-members are implicated in the ARB’s processes.” This makes it a very effective remedy. It also makes it a coercive remedy, resulting in two challenges. First, that the Ad Alert has no source in law. Second, that the Ad Alert falls foul of Section 134 of the Constitution.

 

Is the Ad Alert sourced in law?

No. As the judge said, membership of the ARB comprises “the whole of the print, digital and broadcast media in South Africa’, with members ‘obliged to follow the ARB’s prescripts.” The judge went on to say that “the operation of the ad-alert has all the features of an indirect boycott.”

Yet, said the judge, “the ARB has no truck with the law… its purpose is to enforce ‘standards’ which are determined and set by the membership.” She went on to say that a ‘private body that exercises public powers is not permitted to be … a law unto itself.”

Referring to the Herbex case, the judge said that this is “authority for the proposition that the issuing of an ad-alert against non-members is unlawful as a general rule.”

 

Does the Ad Alert contravene the Constitution?

Section 134 of the Constitution provides that “everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.”

Yet, said the judge, the ARB adjudicates on complaints under clause 8 of the Code (taking advantage of an advertising goodwill) and clause 9 (imitation), issues that fall within the realm of IP law. The judge went on to say that under the ARB procedure, the non-member cannot defend itself in a court on the merits, the court’s jurisdiction is ousted, and “decisions on legal causes of action akin to passing off, copyright and trade mark infringement are made, in large part, by non-lawyers.”

The judge used some strong words. She spoke of “the usurpation of the court’s functions by the ARB” as well as “the tyranny of the ARB’s processes.”

The judge also spoke of lack of independence: “This funding model creates room for the perception of a lack of independence where the complainant is a funder and member and the respondent is a non-member.”

 

What about the lawful limiting of rights, the application of section 36?

Section 36(1) of the Constitution allows for the limiting of rights in certain circumstances. The ARB argued that it is best placed to regulate the commercial rights of those seeking to sell and market products. Unsurprisingly, the judge disagreed – there are remedies under IP law and various pieces of legislation relating to, inter alia, foodstuffs, medicines and tobacco products. There’s also the Consumer Protection Act, 2008.

 

Conclusion

The judge declared the “public powers which are assumed by the ARB in relation to the regulation of the advertising of non-members” to be “unconstitutional” and “not sourced in law.”

The net effect:

  • The ARB’s MOI and Code are unconstitutional.
  • Clause 3.3 of the MOI, which grants the ARB jurisdiction over non-members, is unconstitutional, void and unenforceable.
  • The ARB has no jurisdiction over a non-member of the ARB.
  • The ARB may not issue rulings against or in relation to a non-member or that member’s advertising.

This is a significant judgment, and we understand that there will be an appeal.

 

Gaelyn Scott

IP | Trade Mark Attorney | Executive | Head of Department

gscott@ENSafrica.com

+27 83 632 1445