FRANKIES vs WOOLWORTHS: Ominous Storm in a Soda Cup
3/02/2012

The ASA ruling of 1 February 2012, on a complaint lodged by soft drink producer Frankie’s Olde Soft Drink Company against retailer Woolworths (Pty) Ltd, should be of concern to lawyers, business people and consumers in South Africa alike.  The ruling regrettably avoided established principles of law and of free market competition. 

The ruling followed a media campaign that has carried on since 15 December 2011.  The entire matter has been stereotyped as yet another battle between ‘David and Goliath’.  Yet there are times when the big boy can be the one bullied by the smaller boy.

The owner of Frankie’s has said in a radio interview that ‘…there are two courts that we need to fight this in, the one is the legal aspect and that’s clearly where the ASA is going to take care of it and then the other one is the court of public opinion.’

 The matter has been decided before the Advertising Standards Authority (ASA).  The ASA is a private body and not a court of law.  Yet its rulings bind industry as effectively as court orders do.  The media coverage of the past two months preceded the ASA’s ruling, and even the complaint itself.   The ASA Directorate was aware of the media attention and in the preliminary comments to the ruling starts by referring to ‘the media attention that this matter has garnered’.     

 The power of social media has also been commented on in this case.  This power has been very astutely harnessed by a competitor in a manner which has resulted in the removal of a perceived rival from the market and in consumers being deprived of choice.  The hype and desire to see the ‘big boy’ get his just desserts has caused people to lose sight of the fact that in a free market there cannot (barring registered intellectual property rights) be monopolies in ‘concepts’ such as vintage sodas, soda flavors and the descriptive terms used to sell them.  Whether you claim to be first on the market in South Africa or not, priority in time does not entitle you to the exclusion of competition.  Competition gives consumers choice, and differentiates price.

Frankie’s has by its own admission benefitted from the publicity.  It announced on Facebook that a number of its outlets were sold out of products over Christmas.  In an interview Frankie’s said, ‘Our sales undoubtedly took a boost from the dispute.  There were a lot of people in SA who hadn’t heard of Frankie’s and who are a lot more aware of our brand and our product today.  Certainly it had no negative impact on our sales.’

This case will no doubt be studied by future marketing students as a successful (even if inadvertent) marketing strategy.      

But first, take a look at the sodas in question: 

Are they confusingly similar in their get-up or trade marks?  No.  Did Woolworths copy any of the artwork or labels of Frankies?  No.  All that is apparent is a choice that the consumer has between two sodas.

The ASA closed for business on 15 December, and only re-opened in the new year.  On 15 December Frankie’s released a press statement entitled ‘Family business takes on Woolworths over imitation products’.  In the statement it was stated that ‘Frankies have proceeded with a complaint to the Advertising Standard Authority’.  Extensive negative publicity to Woolworths followed and continued into the new year.  Early in the new year Frankie’s continued to claim on its Facebook pages that ‘The ASA is dealing with our complaint’.  But the actual complaint was not lodged in December at all. 

Media reports claimed that the complaint was about many aspects ranging from the use of stripes on the labels, to the flavors of the sodas, to the shape of the bottles, to the ‘concept’ and more. 

The ASA complaint was only lodged on 9 January 2012 and it then transpired that the complaint was only about the use of the phrase ‘good old fashioned’.

Frankie’s uses the slogan ‘The Taste Of Yesteryear’ on its labels and in its advertising.

Frankie’s produced as evidence photographs of point of sale material in the form of table talkers, posters and fridge wobblers on which it had used the phrase “Good Old Fashioned Soft Drinks” (such as the one shown below).  It had chosen (as stated in its complaint letter to the ASA) not to run an advertising campaign in print media or on television, but to rely on word of mouth.

In the author’s view, the phrase ‘good old fashioned’ is not capable of distinguishing the vintage products of one person from those of another.  Frankie’s cannot show that it enjoyed (prior to this complaint) an exclusive reputation in this phrase to the exclusion of all others.  Our Courts have held consistently that descriptive phrases cannot be inherently distinctive of a particular trader.  Extensive evidence has to be adduced that such descriptive phrases have, through extensive use, become indicative of a single source.  No such evidence was, or could have been, submitted by Frankie’s. The phrase has no secondary, or brand meaning.

Furthermore, the phrase would be entirely unregisterable as a trade mark, and will not be able to sustain a case based on the common law delict of passing off.  There are others traders who use the phrase ‘good old fashioned’ (e.g. Melissa’s The Food Shop) and ‘old fashioned’ (e.g. Innesense’s cream sodas).  The NICE Company even uses the slogan ‘There’s Nothing Newer Than Old Fashioned Food’ on all of its ice cream tubs.  The trade marks register shows that Tiger Food has had to disclaim exclusive rights to the phrase ‘good old fashioned’ in its label registration for its Albany bread.  Woolworths itself has produced many vintage products ranging from clothing to foods.  The labels for its vintage range of confectionery include reference to their ‘old-fashioned’ nature.

The phrase ‘good old fashioned’ is one that people commonly use.  More importantly, it is a phrase that we all want to continue using, and that many traders may want to use now or in the future to describe their goods or services in trade.

But the ASA finds in its ruling that the phrase ‘Good Old Fashioned Soft Drinks’ is ‘a crafted advertising property’.  The consequence of this ruling is that a monopoly over common words, in everyday use, has been given to one trader. 

It also overlooks firmly held principles of our highest Courts, such as those set out below:

In Sea Harvest Corporation ( Pty) Ltd v Irvin & Johnson Ltd 1985 (2) 351 (C) the High Court held as follows:

 

“In particular, it has been settled that the mere fact that a trader is the first in the field to use a particular phrase or slogan gave him no monopoly (save possibly in the field of copyright), and also that a competitor would not be prevented from using ordinary descriptive words.

A long line of decisions in passing-off and trade mark cases has established that where descriptive words, as opposed to invented or fancy words, are used in a trade name or trade marks, the Courts will not easily find that such words have become distinctive of the business or products of the person using them, and will not give what amounts to a monopoly in such words to one trader at the expense of others.

The Supreme Court of Appeal recently in the case of Online Lottery Services (Pty) Ltd and Others v National Lotteries Board and Others 2010 (5) SA 349 (SCA) affirmed the view expressed above in Sea Harvest judgment, and it held that:

“The courts will not  H easily find that such words have become distinctive of the business or products of the person using them, and will not give what amounts to a monopoly in such words to one trader at the expense of others.”

 

And in a recent judgment of Swartkops Sea Salt (Pty) Ltd vs Cerebos Limited (Eastern Cape High Court, Cas No. 972/2011), the Court held that:

“It must be borne in mind, in this regard, that an intention to compete is legitimate.  An intention to compete must therefore not be confused with and intention to deceive and a court must be sufficiently astute to ensure that such confusion does not arise when making a finding.  This is so because a manufacturer has no monopoly in a get-up.”

In this way our Courts and common law uphold free trade, competition in our economy, and the freedom to plainly speak.  In the absence of confusion or unlawfulness (even in its broadest common law interpretation), descriptive words should be available freely to all traders.

And yet the ASA ruled that use by Woolworths of the phrase ‘Good Old Fashioned’ on its labels in plain smaller typeface is an imitation of Frankie’s ‘crafted advertising property’, “Good Old Fashioned Soft Drinks’.  It upheld the complaint based on clause 9 of its Code of Advertising Practice, which reads as follows:

“9. Imitation

9.1 An advertiser should not copy an existing advertisement, local or international, or any part thereof in a manner that is recognizable or clearly evokes the existing concept and which may result in the likely loss of potential advertising value.”

The clause goes on to provide that, in considering whether or not an infringement of this clause has taken place, the ASA must give consideration to, inter alia, the extent of exposure, period of usage and advertising spend, whether the concept is central to the theme, and whether it is distinctive or crafted as opposed to in common use.  The ASA should also take into account the competitive sphere.

Woolworths has not copied an existing advertisement or a part thereof.  And, as the eye can see from the pictures above, the Woolworths soda labels by virtue solely of the phrase in black plain type ‘good old fashioned’ do not evoke any advertisement of Frankie’s.  Furthermore, there is no likely loss of potential advertising value to Frankie’s.  If anything, the complaint has brought advertising value to Frankie’s as it has said itself.

The ASA has regrettably not taken into account its own prescribed considerations for finding that there was imitation under clause 9.

The ASA also appears to have veered off from its previous rulings where it has clearly expressed that ‘The imitation in Clause 9.1 involves copying the main features of a competitor’s packaging or advertisement.  The mischief which is sought to be punished by Clause 9 is the copying of original intellectual thought.’ (Kenna / House of Coffees).   In the ruling between Beacon / Mister Sweet (which involved the use of the name ‘speckled eggs’ for confectionery) the ASA correctly held that ‘It is trite that one cannot ‘own’ a broad or generic concept.’

Woolworths subsequently announced that it will withdraw its vintage soda products from the market entirely.  And, absent any registered trade mark right and despite clear common law principles to the contrary, Frankie’s may claim rights in the commonly used words ‘good old fashioned’.

After the soda storm has abated the potential damage must be assessed.  Will opportunistic businesses in future be encouraged to use the ASA and media to achieve aims which they cannot achieve in law and in Courts?   Will such practices result in harm to the consumer as legitimate competitors may be excluded from the market? 

Time will tell.  But if such approaches do become common place, it will ultimately be the consumers (who benefit from competition in the economy) who lose.

Suzaan Laing

Partner

Cape Town