Unfair Competition Lawsuit of Guangzhou Bluemoon Industrial Co., Ltd. vs. P&G (China) Co., Ltd. (2000)
Basic facts:
Guangzhou Bluemoon Industrial Co., Ltd. (hereinafter referred to as “Bluemoon”) is exclusively licensed by a certain chemical company in Guangzhou possessing the design patent for a 250ml packing bottle, which is used by Bluemoon for its Collar Cleaner detergent product. Bluemoon is the only company in China market to be licensed to use such packing bottle. However, an advertisement launched by P&G China Co., Ltd. (hereinafter referred to as “P&G”) in marketing its new generation multipurpose Tide® washing power product contains a phrase saying that “the new Tide® eliminates the need of collar cleaner”, in the advertisement, P&G used the packaging of its washing powder product to keep out a packing bottle which has the same appearance and shape as those of Bluemoon’s collar cleaner and in several parts of the advertisement, it presented a comparative demonstration or description using P&G product and the packing bottle of Bluemoon’s products.
During 1999-2000, P&G’s advertisement was broadcast by several TV stations. Bluemoon claimed that P&G had violated several laws including the Advertising Law, the Anti-Unfair Competition Law and the General Principles of Civil Procedure Law by drawing multiple comparisons between its collar cleaner and P&G’s, through various means and using the unique packing bottle of Bluemoon and displaying images and messages which apparently impaired the reputation of Bluemoon’s products and that P&G’s conducts have constituted an unfair competition practice against Bluemoon which severely infringed its lawful interest and damaged its goodwill and reputation. Consequently, Bluemoon brought a lawsuit with the Intermediate People’s Court of Guangzhou against P&G, moving for a court order that P&G’s conducts have constituted unfair competition and claiming damages of RMB 10 million and compensation for the costs of RMB 42,000 incurred for investigating P&G’s infringement, in addition to restoring its reputation by making public apology on mainstream media such as CCTV.
In its reply, P&G claimed that: 1. the advertisement reflects objective facts; 2. Chinese laws only prohibit defamatory advertising but do not prohibit all comparative advertising; 3. The collar cleaner product displayed in the advertisement is a generic term which does not specifically refers to Bluemoon’s product; 3. Bluemoon’s claim lacks legal basis.
Lawyers’ statement:
The packing bottle used by Bluemoon for its Collar Cleaner products is licensed by a certain chemical company which possesses the design patent, and the advertisement suggests that the packing bottle contains collar cleaner, which inspires consumers to compare P&G’s Tide® with Bluemoon’s Collar Cleaner product. Moreover, in its advertisement, P&G combined a message saying that “the new Tide® eliminates the need of collar cleaner” with a demonstration of a packing bottle similar to that of Bluemoon’s Collar Cleaner and displayed a picture where the packing bag (with an identification) of Tide® blocked the packing bottle of Bluemoon. The advertisement is, to a certain extent, prone to leading consumers into replacing Bluemoon’s Collar Cleaner with Tide® and therefore caused a negative impact on the market share of Bluemoon product and to a certain degree impaired its reputation, thus constituting an unfair competition.
The Intermediate People’s Court of Guangzhou basically affirmed our lawyers’ statement and ordered that P&G immediately stops its infringement, make public apology on a specified mainstream media and pay Bluemoon RMB 200,000 as damage awards .
Both Bluemoon and P&G appealed the decision to the Higher People’s Court of Guangdong Province. The court of appeal held that, P&G’s advertisement contains an overstatement which is misleading and has a defamatory effect on Bluemoon’s products and constitutes a violation of the Anti-Unfair Competition Law and the Advertising Law. Moreover, the advertisement displayed a packing bottle which has the same unique appearance as that of Bluemoon’s product, thus inspired relevant consumers to associate the advertisement directly with Bluemoon’s products and therefore constituting an unfair competition.
Judgment of Court:
The Higher People’s Court ruled that P&G makes apology in writing and pay Bluemoon RMB 6.57 million for economic loss.
Lawyers’ remarks:
This is a typical case involving a lawsuit brought by a domestic private company against a renowned multinational company, which caused a sensation across the country. In the first and second instances, both the intermediate court and higher court ruled in favor of Bluemoon represented by our firm.
The case is by nature an unfair competition lawsuit, during which, the parties conducted intensive court debate over issues such as whether or not the advertisement constitutes an unfair competition and how to determine the amount of damages. Both made a thorough elaborations and arguments in the courts of first and second instance on the relationship between a comparative advertisement and unfair competition, but took different approaches and criteria as to how to determine the amount of damages. This case has significant guiding value when handling similar cases.
Firstly, P&G’s comparative advertising constituted unfair competition. Comparative advertising is not prohibited by Chinese laws, provided that the following basic requirements are met:
1. The comparison should be based on objective facts and should not convey false information; 2. The information provided in the advertisement must be complete without one-sided or misleading ; 3. The comparison must be precise and correct without causing confusion among consumers; 4. The advertisement must show respect for other companies without damaging their goodwill or business reputation. An advertisement containing an overstatement on advertisers’ own products, which cause enough misleading effect on relevant public, constitutes an unfair competition; a comparative advertisement, whether or not containing a true statement about its own products or services, will constitute a direct infringement on the lawful interest of the company whose products are included in comparison and will constitute an unfair competition, as long as the advertisement belittles that company’s products or services.
In this case, Bluemoon submitted a test report issued by the Guangzhou Quality Testing Administration (GQT) suggesting that the use of Tide® alone doesn’t necessarily have the satisfactory cleaning effect, but when combined with Bluemoon’s Collar Cleaner, Tide® will have better cleaning effect. Accordingly, P&G’s advertisement overstated the cleaning function and effect of Tide®, distorted facts and misled consumers. Moreover, its advertisement contained a lot of images and messages which belittle Bluemoon’s Collar Cleaner, insinuating that Tide® is a new product while Collar Cleaner is an obsolete product by showing the latter in black and white picture and the former in color picture; the advertisement impaired the image of Bluemoon’s product in at least five aspects, for example, it suggested that Collar Cleaner needs repeated rubbing in order to have a satisfactory effect, while Tide® produces great cleaning effect without much rubbing, thus had consumers believe that Bluemoon’s is an obsolete product.
Secondly, P&G’s advertisement is apparently illegal. Considering the face that P&G and Bluemoon are competitors, and P&G’s advertisement defamed Bluemoon’s Collar Cleaner, it has constituted a violation of the law mentioned above and an act of unfair competition.
Thirdly, as mentioned in the judgment of court, the reason suggested by P&G in defending its case that the collar cleaner used for comparison didn’t specifically refer to Bluemoon’s Collar Cleaner, is not a valid defense. The packing bottle used by Bluemoon is a patented product, and Bluemoon possesses the exclusive right to use it. Even if P&G’s statement that the collar cleaner used for comparison is a generic term, P&G's advertisement still constitutes unfair competition against all companies who making collar cleaner products including Bluemoon.
Finally, in calculating damages, considering that the actual losses sustained by Bluemoon due to P&G’s unfair competition could not be exactly measured and proven, and Bluemoon’s application that the court orders an investigation into and audit of the profit generated by P&G during the period of infringement was not supported, the lawyers proposed that damages should be determined according to the amount of advertising expenses required for restitution, that is to say, P&G’s advertisement has infringed the lawful interest of Bluemoon, weakened the position and damaged the reputation of Bluemoon’s products, accordingly, in order to eliminate consumer misunderstanding and restore damaged reputation, it is necessary for Bluemoon to advertise its products at least with the same frequency as that of P&G’s advertisement within the same geographic region to counteract the negative effect caused by P&G’s advertisement. As a result, the costs incurred by P&G for launching the infringement advertisement should be used as an important basis for determining the amount of damages. P&G’s advertisement has been broadcast on 71 TV stations countrywide from Sep. 1999 to Apr. 2000 mostly during prime time in the evening, involving an advertising cost of at least RMB 8.22 million. At the end, the court fixed the damages at RMB 6.57 million and ordered P&G to make written apology to Bluemoon. The damages awarded come closer to Bluemoon’s actual loss than the RMB 200,000 awarded in the first instance and therefore can better achieve the purpose of damages as a remedy for loss and deter unfair competition practice.
