Fortune favours National Brands in cookie conflict

South Africa

In National Brands Limited v Kwality Biscuits (Pty) Ltd, the Appeal Committee of the Advertising Standards Authority (ASA) has ordered the respondent to withdraw from sale a number of products whose packaging and labelling closely imitate the get-up of the complainant's equivalent products. The committee held that (i) it had jurisdiction to hear the complaint, even though the respondent is not a member of the ASA, and (ii) the self-regulatory nature of the ASA does not contravene Section 4 of the Competitions Act 1998.

National Brands Limited (NBL) manufactures and distributes a large range of both sweet and savoury biscuits (cookies) in South Africa. It lodged a complaint with the Advertising Standards Authority against Kwality Biscuits (Pty) Limited as a result of the latter having launched, over several years, a range of five products whose packaging and labelling closely imitated the get-up of NBL's equivalent products. NBL argued that this infringed Clauses 8 and 9 of the ASA's Code of Advertising Practice.

At first instance, an ASA tribunal ruled that two of Kwality's products, sold under the brand names 'Lemon Creams' and 'Marie', did infringe the code, while the biscuits sold as 'Choc-Krust' and 'Munch-A-Lot' did not. The tribunal failed to rule on the fifth product sold under the brand name 'Tea Lovers'.

NBL appealed the decision in respect of the 'Choc-Krust', 'Munch-A-Lot' and 'Tea Lovers' products, and Kwality cross-appealed in respect of the 'Lemon Creams' and 'Marie' products.

On appeal, Kwality (i) disputed that the ASA had jurisdiction to hear the complaint because Kwality is not a member of the ASA, and (ii) made a new submission to the effect that the self-regulatory nature of the ASA breaches Section 4 of the Competitions Act.

The Appeal Committee dismissed both arguments. It held that Kwality had, by its conduct, consented to the ASA's jurisdiction. The committee also pointed out that it is in the interests of fair competition that regulation of the advertising industry is overseen by a body that is not a competitor in the marketplace. It also highlighted the negative effect that misleading advertising has on lawful competition. The regulation of advertising, said the committee, is practised on a self-regulatory basis worldwide.

With respect to the alleged breaches of the ASA Code, the committee found that NBL had failed to establish that Kwality had intended to copy or take advantage of its goodwill in relation to the 'Choc-Krust' and 'Tea Lovers' brands. However, it found that the similarities between Kwality's products (sold under the names 'Munch-A-Lot', 'Lemon Cream' and 'Marie') and NBL's equivalent products were such that it was clear that Kwality had an intention to copy and take advantage of NBL's advertising goodwill. Kwality was directed to withdraw the packaging of those products within three months of the date of the order.

Kelly Thompson, Adams & Adams, Pretoria

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