Origin, quality of products: consumers at risk of falling prey to deceptive marketing: CCP

The Competition Commission of Pakistan (CCP) has observed that consumers in Pakistan are clearly susceptible and at a serious risk of falling prey to deceptive confusion pertaining to the origin and quality of the products, due to the striking similarity in the original product's trade dress and the copycat producer company's trade dress. According to an order recently issued by a two-member bench of the Commission comprising CCP Chairperson Vadiyya Khalil and CCP Member Dr Shahzad Ansar, the Commission is fortified in its view that the company is responsible for and has in fact resorted to parasitic copying. Marketers traditionally focus on designing advertising campaigns and other promotional strategies to promote a brand name. However, with evolving consumer preferences and laws' presentation, trade dress has become very essential for making products and services distinctive and for building brand recall. The cultural diversity of the Pakistan market makes a compelling case for the importance of product identification by packaging and visual impression. This has resulted in third parties creating look alike of popular products with similar packaging in order to grab consumers' attention and generate demand for their own products in the market. In the considered view of the Commission, the consumers are clearly susceptible and at a serious risk of falling prey to deceptive confusion pertaining to the origin and quality of the products, due to the striking similarity in the complainant's (company number 1) trade dress and the respondent's (company number 2) trade dress.
In simple layman terms, 'parasitic copying' or 'copycat packaging' is the practice of designing the packaging of a product in a way that gives it the general look and feel of a competing, well-known brand (typically the market leader). The copycat producer avoids investing in brand development and free rides at its competitor's expense who has already built a degree of visibility and goodwill with the consumer. The consumer may be misled by copycat packaging in terms of three aspects: the consumer might take the copycat product for the original, the consumer could be misled as to the quality or the consumer could be misled as to the origin of the product, the CCP order said.
"In order to impose any penalty in the instant matter and remedy, the situation we deem it appropriate to highlight the importance of a 'trade dress', which in Pakistan is not taken into account and packaging and products are often created by borrowing successful features from competitors in order to grab consumers' attention and generate demand for their own products in the market. The CCP is conscious of the fact that with the dramatic development of digital communications and network technologies, and as global distribution channels enable businesses to market themselves to a worldwide audience, protecting and enforcing marks, trade dress, product designs and brand identities is of crucial importance. As these intangible assets embody valuable goodwill and serve as a distinct source identifier for the products and services of the business, in this environment, such assets continue to take on greater significance in developing and maintaining brand integrity, reputation and recognition for the business. This enables people with skill and enterprise to produce and market goods and services in fair conditions, thereby facilitating international trade. Hence, the practice of parasitic copying of the trade dress, which appreciably impairs the consumer's ability to make an informed decision due to confusing similarities between the original and copied one, is to be discouraged," the CCP said.
The CCP noted that during the enquiry as well as during the proceedings before the Commission the respondent was given substantial time to amend/ revise its trade dress, however, no credible effort was made by the respondent to change its trade dress and make it distinct from that of the complainant. "Hence, keeping in view the above, we are constrained to impose a penalty of Rs 5,000,000 on the respondent, which shall be deposited with the registrar of the Commission within sixty (60) days from the date of this order."
The CCP order shall dispose of the proceedings initiated pursuant to show cause notice (SCN), issued to M/s Shainal Al-Syed Foods Limited (respondent) for prima facie violations under Section 10 of the Competition Act, 2010 (Act). The SCN was issued pursuant to a complaint filed with the CCP by Ms National Foods Limited (complainant) whereby it was alleged that the respondent had engaged in deceptive marketing practices.
The main issue under consideration in this matter is whether the respondent has engaged in deceptive marketing practices through the fraudulent use of the complainant's product labeling and packaging for its own products, in violation of subsection (1) of Section 10, read with clause (d) of subsection (2) of Section 10 of the Act and if so whether such practice has also led to violations of subsection (1) of Section 10 in terms of clauses (a) & (b) of subsection (2) of Section 10 of the Act.
As established by the Commission, the respondents' trade dress and overall impression of the product labeling and packaging is deceptively similar to that of the complainant's trade dress. An ordinary consumer who purchases the respondent's product off the shelf is highly likely to be deceived by the product packaging, logo and the getup of the product. The misleading information on the respondent's products is in the form of a deceptive impression disseminated by the respondent's trade dress, which is likely to mislead the consumer as to the origin and quality of the same being linked to that of the complainant. The respondent has failed to discharge the burden of providing any level of substantiation for the authenticity of its trade dress to the effect that it would not cause a misleading impression that respondent's products originate from the complainant and hence match the quality of the complainant' products. This deceptive similarity in the respondent's trade dress and the complainant's trade dress has the potential to directly or indirectly affect the transactional decision of the consumers to buy the respondent's product on the misleading pretence as to origin/ place of production and quality of the product and hence is materially deceptive.
In view of the foregoing, the Commission is of the view that the aforementioned conduct of the respondent has resulted in a violation of Section 10(1) read with Section 10(2) (b) of the Act, as the respondent is disseminating misleading information to consumers lacking a reasonable basis, in the form of the confusing similarities of respondent's trade dress to that of the complainant's trade dress, thereby misleading the consumers as to the origin and place of production of the product.
The CCP order said that the company is hereby reprimanded to ensure responsible behavior in future with respect to the marketing of their business and are directed to cease and desist from the use of its trade dress (previous and revised submitted to the Commission) which is subject matter of this order and similar to the complainant's trade dress and trade mark, with immediate effect and not to use it in future. The respondent is directed to ensure that the products are repackaged in a manner that is distinct in its overall layout, design, shape, size, language and color scheme so as to be easily distinguishable from the complainant's trade dress. The respondent is also directed to file within sixty (60) days from the date of this order, the compliance report with the registrar of the Commission to ensure future compliance and not to contravene any provision of the Act, in particular Section 10 of the Act with respect to the subject matter.
In case the violation of this order continues, it is then warranted that the respondent shall be made further liable under sub-section (3) of Section 38 of the Act to pay an additional penalty amounting to Rs 100,000 per day from the date of such violation.