Pepsi vs. Coca-Cola: comparative advertising and its legal limits in the US and Chile

The US company Pepsi has revived the historic Pepsi Challenge advertising campaign it launched in the 1970s, in which it directly compared its product with that of its competitor Coca-Cola. In the new campaign, launched on social media and culminating in a Super Bowl ad on 8 February, Pepsi evokes an iconic Coca-Cola element to reinforce the comparison between the products, the polar bear.

Comparative advertising can be defined as advertising in which a product is explicitly compared to a competitor's product, using its name or distinctive elements, for the purpose of demonstrating an alleged superiority in measurable attributes.

From the point of view of trademark, advertising and competition law, this type of campaign raises some questions:

• Can a trademark use a competitor's name, signs or distinctive elements?
• Where is the line between a legitimate comparison and trademark infringement?
• When does a cross-reference become misleading or unfair advertising?

In the United States and other countries, such as the United Kingdom, comparative advertising is permitted if certain requirements are met. In particular, it is required that the advertising is not misleading or confusing between the advertiser's products or services and those of a competitor, that comparisons are based on objective, verifiable and relevant attributes, and that they do not suggest a non-existent association, sponsorship or endorsement by the competitor. Furthermore, such advertising must not unreasonably disparage the rival brand or take unfair advantage of the reputation of another's sign.

How would this case be analysed under Chilean law?

Chilean law does not expressly prohibit comparative advertising if it complies with the requirement of being truthful and demonstrable. Specifically, the Unfair Competition Law, in article 4 letter e), considers as an act of unfair competition "Any comparison of one's own or another's goods, services, activities or establishments with those of a third party, when it is based on any background that is not truthful and demonstrable, or, when in any other way it infringes the rules of this law".

Therefore, a comparative advertising campaign could be in breach of Chilean law if, for example:

• It generates consumer confusion.
• It discredits the competitor by means of false or unprovable claims.
• It uses third party brands by taking undue advantage of their reputation.

In short, one of the keys is for the average consumer to clearly understand that these are two different brands in competition, without confusing one with the other or assuming a non-existent association.

Final analysis

Comparative advertising remains a powerful tool, but also a legally sensitive one. For brands, the challenge is not only creative but also legal: to compare without confusing, to provoke without misleading and to compete without infringing.

In practice, such comparative advertising often involves the use of a competitor's trademarks within the campaign itself, which could normally give rise to an action for trademark infringement. However, legislation and case law in different jurisdictions recognise that comparative advertising can generate legitimate benefits for consumers, which is why the use of other people's trademarks in lawful comparative campaigns is allowed under certain conditions.

From an intellectual property point of view, there is no express exception allowing the use of logos, images or other protected elements of a competitor in a comparative campaign. Therefore, while the use of the word mark may be permissible, the use of logos or other protected visual assets often represents a greater legal risk, and in practice is something to be avoided.

Even when the use of a competitor's trade mark is permitted in the context of lawful comparative advertising, explicitly mentioning the competitor by name significantly increases the likelihood of a conflict. It is not uncommon for the brand concerned to try to argue that the campaign exceeds the limits of what is permitted, either by misleading, by taking undue advantage of its prestige or by distorting the comparison.