Ambush Marketing Damage, Tim and Wind Tre Trial
In a ruling considered unprecedented and unique in the matter, the Court of Milan – Enterprise Matter Section, on 23 April 2020 settled on a case of compensation damages by ambush marketing, awarding to the applicant a sum of 1,800,000 euros over interest, for having been damaged by the illegal and anti-competitive conduct of its competitor.
The facts relate to the large Italian telecommunications company TIM, which had suffered from a competing company a conduct of so-called advertising ambush marketing, consisting of the unauthorized exploitation of a character of a well-known film saga, as part of its own advertising campaign, of which TIM had acquired an exclusive merchandise for advertising purposes.
The Court of Milan found that the conduct framed an act of parasitic unfair competition under Italian civil law.
Confusion of the parasitic unfair competition
Ambush marketing is a phenomenon that was born in 1984, on the occasion of the Los Angeles Olympics.
The International Olympic Committee decided to grant exclusive sponsorships and licenses to some marketing agencies in order to finance the Games.
The excluded companies, in order to benefit equally from the attention that the media devoted to the Olympics, resorted to some communication strategies in which they talked about the Games without violating the rules of fair competition.
So, according to the definition given by Jerry Welsh, an advertising agent of the time, the ambush marketing consists of an attempt by a rival company to associate its products with an event that already has its official sponsors.
A definition rarely characterized by a positive meaning, in terms of creativity and fair competition.
Most often it involves a parasitic, unfair, activity, in which a company tries to take advantage of the media resonance of an event by associating its brand, slipstreaming the official sponsor who is already on the market and is solely bearing the costs of sponsorship.
It is demonstrated that economic interests of the competitor are adversely affected by this act of unfair competition; as well as it affectes those who have regularly entered into an exclusive advertising contract and have invested funds in the sponsorship campaign.
Indeed, organizers are exposed to suffering a damage afflicting their economic interests since they may find it difficult to obtain the necessary funding to patronize a campaign whose clearance and impact on the end-user is far from being effective due to the confusion.
Multi-protection against the pluri-offensive conduct
Generally, "predatory ambush" is depicted as the act of a competitor who associates without authorization its product with an event that already has distinctive signs and exclusive dealers.
It can happen by the means of imitation of the commercial promotions of the competitor or imitation of the products.
For example, in the field of sport events, it can be pursued by sealing a sponsorship with individual athletes or teams or by handing out free tickets.
A more specific form is "insurgent ambush" when unexpected initiatives are organized by the ambusher to interfere with the official launch of the event, for example by doing a sweeping advertising campaign. Finally, an additional form is the one called "saturation ambush", which is held when the unfair competitor exponentially increases his advertising campaign at the time of an event but without making reference to it.
Sometimes the ambusher ventures to the occupation of all the empty advertising slots remained unspent by the official sponsor, on all available channels such as TV, radio, newspapers, etc.
How this practice of unfair competition is targeted by the law?
At the moment, there are not many decisions settled by Italian Courts involving ambush marketing as the main core of the cause.
Furthermost, there is not a specific law ruling the matter and the Court can lead back unfair ambush marketing to other regulations such as Industrial Property legislation, AdSelf regulation, copyright regulation, Contract Law, etc.
Being not a concept underpinned by a specific law, such regulations offer only indirect protection and Italian legal system still misses a qualified law counteracting parasitic unfair conduct.
This may lead to consider a threat to fair competition also a a valuable creativity effort outcoming in the context of a greater effectiveness of the advertising campaign, should it result in a major public success of the supposed ambusher.
Moreover, it is unthinkable to fulfill any advertising space and would be unfair competition preventing other competitors from launching their own advertising campaign at the time of an event.
If the competitor performs ambush marketing through reproduction, imitation or translation of trademarks related to the event, and they have their essential function better known as distinctive character, both the official sponsor and the organizer can rely on the protection accorded to well-known marks eligible for registration, which will also cover the advertising investments made.
Moreover, if well known, signs of the fields of art, literature, science, politics or sports, the designations and abbreviations of events, can be used only by the qualified person, or with the consent of the same, without registration according to Article 8, paragraph 3, c.p.i.
Whether, on the other hand, the competitor develops anti-competitive practices through the brand without directly involving it, only the official sponsor, as a subject directly harmed by the practice, will be able to find protection by relying on the traditional discipline of unfair competition under Article 2598, No 3, Civil Code, as long as it can demonstrate evidence of a concrete risk of misleading the public to detriment of the official sponsor of the event.
Should the risk become an effective prejudice, the sponsor may also request protection under Italian law against deceptive business practices, especially with regards to Article 21, No 1, lett. c) and f) of the Consumer Code.
Tim and Disney co-marketing against WIND
At the end of 2017, is about to be launched the latest Star Wars film, the famous saga dedicated to the conquest of outer space.
The licensee of the brand is Disney that in Italy concludes a co-marketing contract with TIM which is about to launch its latest Christmas mobile offer, in order to enforce effectiveness of mutual promotions.
The advertising campaign is entrusted to the agency Armosia, which inserts the various characters of Star Wars in the commercials of TIM.
In the campaign you can see the characters inspired by the famous space saga promoting the offers of the telephone operator.
A short time later, an advertising campaign is launched to promote the Christmas offers of the phone carrier WIND, whose promoter is BB-8, the small and cute robot leading character of Star Wars cinematography.
WIND leads by itself its own advertising campaign, which instead of just advertising the pairing of the gadget to the subscription of the new offers, makes it the real actor of its commercials capturing attention of the public.
Granting interim protection before the merit
By way of order of 2017 the Court of Milan, Enterprises Matter Section, directed WIND to suspend advertising campaign focused on the Star Wars character in competition with TIM.
By order of 23 April 2020, the Court ordered WIND to pay compensatory damages in favour of TIM by accepting the claims on the merits.
TIM's reasons for complaint
TIM has asked for the withdrawal of WIND's advertising campaign as a precautionary measure. On the grounds of merit, TIM has sought WIND's conviction for damages for placing a character from the same saga used by TIM as an official sponsor within its advertising campaign, instead of merely giving it in conjunction with the subscription of a new mobile offer. It has argued an anti-competitive law seeking damages as a relief of financial investments made by the advertising agency in charge of the campaign.
WIND has resisted complaining its acting as fair and legal, on the basis of the exhaustion of the intellectual property rights related to the Star Wars character whose rights to be manufactured have been purchased by an external manufacturer.
Breach of the Civil Code professional correctness clause
During the decision of precautionary measures, the Court of Milan frames the case of ambush marketing within Italian law, not concerning traditional sponsorship or merchandising exclusive contracts but referring to a co-marketing agreement.
On the basis of this peculiarity, the Judge applied the general clause of protection against unfair competition, in the form provided for by Article 2598, No 3, Civil Code regarding the infringement of the principles of professional correctness.
It is believed that the use of the Star Wars character in the predominant position within the WIND advertising campaign at the very moment when the film was coming out in theaters, could mislead the end user with the belief that there was an economic connection between WIND and Disney.
Consistently, WIND had been ordered to suspend the advertising campaign on a precautionary basis because the practice was contrary to the principles of professional correctness.
In the trial phase, the Judge had to establish the subjective requirement of the competitive relationship between Armosia – that is, the advertising agency that oversaw TIM's campaign – and WIND.
Competition between different economic stages
The competitive relationship between Armosia, on behalf of TIM, and WIND was considered existing and a matter of fact, even though these two companies act on different economic stages, on the grounds that advertising activities affect the same category of consumers.
The damage resulting from anti-competitive conduct is in fact a misdirection of the same final users that the two parties have in common.
The final customer, in this case, is the one interested in mobile phones and it does not matter that Armosia is an advertising agency and not a telephone carrier, because its interest to succesfully perform TIM advertising campaign comes from the fact that if the campaign is successful for TIM, and therefore takes hold on the final clientele, then it will also improve the commercial image of Armosia which will count on better chance of selling its advertising services in the future.
Moreover, the ordinance reads, WIND conducted the advertising campaign on its own, while TIM entrusted it to Armosia, which must therefore be considered a person integrated into the organization of TIM.
This means that there is not only commonality of final customers, but also affinity of the activity carried out at the various levels of the production chain.
Effective risk of misleading customers
To assess the configurability of anti-competitive protection, in addition to the effectiveness of the relationship of those involved at different levels of the production chain, the Court has first verified whether the interest to gain a considerable success among certain shared consumers by the means of an advertising campaign would translate into an effective unfair competition practice of deliberately misleading consumers.
In the legal review of the case, the Court of Milan in the pre-trial case had also dealt with the matter from the point of view of trademark discipline.
They had thus rejected the exception of WIND on the basis that the principle of exhaustion of a brand allows its use for the promotion and resale of products, but does not allow to use it in combination with different products or services nor to use it in such a way as to suggest an economic connection with the owner of the brand.
Ambush marketing via Google's Ads
The unfair competition practice of ambush marketing is customary even in the world of Web Marketing and is not only affecting sport events.
For example, if you search for a brand in Google's search engine tab, the ADS algorithm will make the products of direct competitors appear among the first sponsored results near the brand you looked for, even accompanied by confirmation that it is an alternative.
This depends on Ad Words' agreement by payment that allows an advertiser to place its ad in a position as high as that of its competitor who has payed the same. And keywords the competitor choose can contain the name of the competitor’s brand.
So far, Google considers it a lawful competition practice and does not reject the ad.
Except if the ad contains a registered trademark. In this case Google does not approve the advertisement and the registration does not allow the brand to be used by any competitor in a competitive manner.
Unless matching keywords are acronyms or abbreviation of the registered trademark, since the algorythm is unable to associate the brand with an abbreviation or acronym.
This is considered a typical Google Ads scheme. According to some advertiser, it is an industry wide practice not illegal as far as it is a tactic to promote one's own brand.
According to other trademark holders, it represents a trademark law infringement (altough not set by Google but by the competitive advertiser). A violation that, should it result illicit in the Courts determinations, it would force a large number of online marketers to review their AdWords accounts.
Similar ruling by the Court of Rome
In 2003, the Court of Rome, while not directly addressing the issue of ambush marketing, recognized the existence of a competitive relationship between a football club that entered into exclusive agreement with an agency for broadcasting football news and TIM that spread the same news via MMS without authorization.
Similarly with the Milan ruling, a common end user was investigated and assessed an anticompetitive conduct in distracting costumers, that would end in damaging commercial and economic interests of the organisers due to the decreasing of opportunity to enter into licensing agreements in the future.