Food labelling vs Trademarks in Chile: a conflict not yet settled

Diego José Acuña Domínguez
Associate lawyer at Beuchat, Barros & Pfenniger, Abogados

When two constitutional rights are at odds, it is always a difficult conflict to solve, not only for the Government authorities but also for the Courts of Justice, which are often responsible for settling the dispute.

This is precisely the current situation in Chile, which has taken the decision to go further than the rest of the countries in terms of food labelling. Chile has, indeed, decided to implement a legislation that restricts both the nutritional composition of the same, as well as the way to advertise and offer them to the consumer of the relevant market, especially in those cases where aimed at minors.

The Government is basing its decision on the need to protect public health, due to the obesity pandemic that has been afflicting Chile for a decade now and which is causing 1 in 11 deaths in Chile. In fact, according to national studies, one person dies every hour from obesity and 5 out of 10 children are overweight.

The problem is under the spotlight because of the new Health regulation. The new regulation establishes that no manufacturer can disseminate “advertising” aimed at attracting the attention of children under 14 years old regarding products whose nutritional composition includes concentrations of nutrients that exceed the established limits, and which ultimately is an indicator of high levels of sodium, saturated fats or sugars.

In turn, companies manufacturing, distributing and marketing this type of products claim that their industrial property rights regarding the trademarks used on their packaging is being restricted, without previous expropriation or compensation by virtue of such limitation.

The conflict has escalated and has eventually reached the Civil Courts of Justice. The claims were filed by the affected companies against the administrative decisions of the Ministry of Health (under which fines have already been filed against these manufacturers of foodstuffs), requesting for these fines to be waived and to be authorized to use their figurative marks on the packaging of their products.

One of the arguments put forward by these private companies refers to the fact that they are complying with the current legislation on food labelling. They have done so by incorporating the so-called “HIGH IN” warning disclaimers on the packaging of their products in compliance with the “daily food guide”.

They also point out that they have terminated their involvement in the “advertising” activity aimed at children under 14 linked to the “HIGH IN” products, calories, saturated fat, sugars or sodium. Currently, these figurative elements are only used on the packaging of the products and in retail outlets, but not in mass media such as television, newspapers or similar media.

The main argument is that the registered figurative trademarks used on their products cannot be consider as “advertising” directly targeting children under 14, since Trademarks are used to identify or distinguish their products on the market from the ones of their competitors. In other words, the main use for trademarks is to provide distinctiveness, not for advertising purposes.

According to them, the concepts of “brand” and “advertising” are not synonyms; they have a different nature. The main function of a trademark is to “distinguish” products (emanating from the very definition in the Industrial Property Act), not to “advertise” them. The main purpose of advertising is to “promote the consumption of a given product”.

There, the use of the mark on the packaging is for distinguishing purposes, not advertising (mark cannot be placed on the food product itself). It is this distinctive function that allows the consumer in the relevant national market to associate or identify a certain product with the figurative mark that represents it (such as Nike’s check or Apple’s chewed apple), and the quality associated with the product and the producer.

They also pointed out that, according to previous statements from the administrative authority trademarks would not be affected by the new legislation when used for identification purposes. However, it appears that there has been a unilateral change of criterion.

This new interpretative criterion produces effects similar to an expropriation. It prevents the use of an industrial property right, who was previously granted registration by the trademark authority, and which, is now being denied the use, which is at the very essence of the exclusivity granted by IPR (as established in the Chilean Intellectual Property Act and in the TRIPS agreements). On this regard, companies point out that limitations based on public health reasons must be established by law, in compliance with the Constitutional principle of legal reserve regarding limitations on dominance (as is the case, for example, with tobacco, where the law expressly refers to trademarks), a requirement that is not met in this case.

Finally, they claim that the use of the marks complies with the authorization granted through registration by the Trademark Office, and only for distinguishing purposes of the protected goods in accordance with the International Classification. Therefore, there would be no legal ground for the prohibition.

On the other hand, the Chilean Government relies on the preventive nature of the legislation regarding the fight against obesity in Chile and the need to transform the current environment into a healthier one that protects the population.

One of the option to achieve this purpose is by providing clearer and more comprehensible information to the consumer through the “HIGH IN” warning discs. These labels indicate that the foods bearing them contain high levels of sodium, saturated fats or sugars, therefore exceeding the limits established by the Ministry of Health. Another option is to protect children under 14 from overexposure to food “advertising” exceeding health limits established by the Ministry of Health. In this sense, advertising should be understood as any form of promotion, communication, recommendation, propaganda, information or action aimed at promoting the consumption of a given product.

The Food Health Regulations prohibit all kinds of advertising directed to children under 14 “regardless of where it is carried out”. They consider that some elements lead to the conclusion that this age group is the main target of the advertising campaign: “characters and or childish figures, animations, cartoons, toys, children’s music, if it contemplates the presence of people or animals that attract the interest of children under 14”. Furthermore, the legislation also prohibits offering or delivering these products free.

Thus, and even though it is true that trademarks have a distinguishing purpose, it is nonetheless also true that they fulfil multiple functions. One of them is advertising, which allows to position the distinguished product or service and thereby facilitate its promotion, influencing the purchase decision of the final consumer (catchy trademarks are more likely to attract the interest of consumers).

The Government also claims that industrial property rights are not absolute, they do admit limitations. According to the Doha Declaration on TRIPS and Public Health itself, IP rights do not and should not prevent Member States from taking measures to protect public health.

In addition, the definition of “advertising” given by the Food Labelling Act and the Health Regulations is broad enough and does not distinguish whether or not a figure constitutes a trademark. Otherwise, registration as a trademark would be enough to escape the application of the rules set out by the regulation.

Finally, they assert that if these products were to adjust their ingredients and composition to the tables drawn up by the Ministry of Health, they would be free to use the figurative elements on their packaging, even for advertising purposes directly directed to children under 14.

This is an ongoing discussion and both sides have already exposed their arguments. For now, all that remains is to wait for the outcome of these cases and the opinion of the Chilean Courts of Justice. Regardless of the outcome of the claims, the real impact of this legislative change is to be seen on the long term (one or two decades), after which Chile must analyze whether or not they had the intended effect: is there a reduction in obesity rates? Has physical inactivity decrease?

Meanwhile, Chilean consumers are getting used to a new packaging, where classic figurative elements that used to accompany them have disappeared (such as Tony the Tiger on the Frosted Flakes or the colorful M&M’s). The packages are now “plain” and the predominant element is the word mark.