India: A Bird In Hand Is Worth Several In The (Am) Bush!

Last Updated: 9 September 2003

By Mohit Kapoor & Ajay Shaw, DSK Legal

Originally published in the Corporate Counsel section of the Economic Times


Amidst the hype surrounding the 2003 ICC World Cup, there were some off-field events that caught the attention of the world, in particular the entanglement between the ICC, the organizers of the event, and the players. All participants were required to sign a contract, barring them from advertising products that competed with those of the official sponsors. In India, a country where cricket is a religion, the issue assumed special significance. With the largest number of cricket lovers in the world, India also comprises a significant consumer base for multinationals worldwide.

The ICC’s target for the event was to generate corporate sponsorship amounting to US $550 million from commercial rights agreements relating to the tournament and subsequent events up to 2007. The ICC justified its contractual restrictions by stating that manufacturers and dealers of products that compete with official sponsors would seek to capitalize on the publicity generated by the event by associating themselves with it. They were concerned that corporate houses would not sponsor the event due to "ambush marketing" by rival companies.

What is Ambush Marketing?

In the absence of any statutory definition, ‘Ambush marketing’, also referred to as ‘Parasitic Marketing', has been broadly defined by authors as "the unauthorised association of an organisation with the marketing of a particular event whereby they gain benefit of the marketing rights of that event without having to pay the license fee applicable in order to be associated with the event."

In such a case, a company attempts to weaken or dilute its competitors’ position as the "official" sponsor of a highly publicized international event through aggressive brand promotions and advertising campaigns during the event. This is intended to divert public attention and cause confusion about which company/brand holds official sponsorship rights to it.

Historically, companies have tried to outdo their competitors at international sporting events. The more controversial among these have been:

  1. Coke was the official sponsor of the 1996 Cricket World Cup hosted in the Indian subcontinent. Pepsi exploited the opportunity with its 'Nothing official about it' advertisement featuring celebrity cricketers.

(b) At the 1994 Lillehammer Winter Olympics, Norway, Visa paid approximately US $40 million as official sponsor. However, a survey, showed it was American Express that had 52 % brand recall thanks to its slogan: 'If you are travelling to Lillehammer you will need a passport, but you don't need a Visa'.

Nevertheless, there is a school of thought that perceives the act of ambush marketing as "Smart Marketing", which is "parasitic" only to those who lack the foresight to ensure that their sponsorships contracts include restrictive covenants. As competitors of the official sponsors, they are neither bound by contractual obligations nor do they have any legal obligation to ensure that the sponsorship of the event is successful.

Before the Sydney Olympics 2000, Australia enacted the Sydney Act, 2000 to prevent unassociated parties from implying any commercial connection to the event. Similarly, in 2001, South Africa brought ambush marketing within its Trade Practice Act, for the Cricket World Cup 2003. According to the new law, companies are guilty if, in connection with any sponsored event, they "make publish or display any false or misleading statement, communication or advertisement which represents, implies or suggests a contractual or other connection or association between that person and the event, or the person sponsoring the event, or cause such statement, communication or advertisement to be made, published or displayed." Through an active anti-infringement programme, authorities have ensured that spectators who wear clothing bearing non-sponsor brands risk either being penalized or being expelled from the venue.

It’s all in the fine print

Among the first common law decisions directly related to ambush marketing was the case of National Hockey League ("NHL") v Pepsi-Cola Canada Ltd, a 1992 decision of the British Columbia Supreme Court. NHL granted Coca Cola the right to be its official soft drink. The arrangement, however, did not give Coke the rights to advertise during television broadcasts of NHL games. These rights were purchased by Molson Breweries, who in turn granted the rights to Pepsi. Pepsi advertised a contest called ‘Diet Pepsi’s $ 4,000,000 Pro Hockey Playoff Pool’. In a classic ‘don’t forget to read the fine print’ style, a disclaimer denying any connection to the NHL appeared in advertisements against a dark background.

The court decided this case on the likelihood of the public being deceived, ruling that although Pepsi’s actions clearly constituted ambush marketing, there was nothing that could legally protect either Coke or the NHL from trying to protect Coke from its main competitor.

The Indian Ambush

Currently, no specific law deals with ambush marketing in India. As a result, the concept of "unfair trade practice" and the common law principle of "passing off" are used, albeit unsuccessfully, to prevent companies from indulging in ambush marketing.

The principle of passing off is a common law remedy used to protect the goodwill of a person (i.e. any entity including an individual, firm, company etc.) in his work product, his goods or services, which he produces/provides from unauthorized exploitation or use by a third party. Passing off is determined by misrepresentation intended to injure, the business or goodwill of another person and which causes damage to the business, or goodwill of the affected person. The principle of unfair trade practice, (which is currently undergoing certain statutory modifications) comes into play when a person promotes the sale, use or supply of goods or provision of any services by any unfair means or by deception.

Recently, the Delhi High Court refused to grant an injunction to ICC (Development) International, in respect of a sales promotion by electronics giant Philips, wherein Philips had promised free travel to South Africa and tickets to World Cup matches as prizes in a contest. The court held that the marketing promotion by Philips neither amounted to "passing off" nor to an "unfair trade practice". The court observed that the concept of "ambush marketing" was used by companies to promote their brands and in such cases the conduct could not be categorised as wrongful or against public interest and is not unlawful in India.

In the future, should India be selected to host a large international event, organizers will need to carve out exclusive contracts to control the endorsement activities of celebrity players. Given the vested commercial interests of organizers and sponsors, and the speed at which laws are enacted in India, it would be interesting to note if the government would enact suitable legislation and subsequently how it would enforce such laws to protect sponsors against ambush marketers.

The views expressed in this article are those of the authors and do not represent the views of the firm. This article does not purport to be professional advice, nor a complete or comprehensive study on the subject. It is recommended that professional advice be sought before taking any action pursuant to any matter contained in this article.

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