Nativa (Pty) Limited v Austell Laboratories (Pty) Limited

Nativa (Pty) Ltd (appellant) is a pharmaceutical marketing and sales company that markets the OSTEOEZE brand of joint care products, specifically OSTEOEZE GOLD, which contains glucosamine and chondroitin. As at August 2017, Nativa held a 38% market share (R50.6 million) in the joint care supplement market. Austell Laboratories (Pty) Ltd (respondent), the largest privately owned pharmaceutical company in South Africa, held a 21% market share (R27.9 million) and marketed a competing product called PIASCLEDINE, which does not contain glucosamine or chondroitin. In February and March 2018, Austell broadcast a television advertisement for PIASCLEDINE (the initial advertisement) which prominently showed OSTEOEZE GOLD products and stated that glucosamine and chondroitin constituted a health risk to persons suffering from high blood pressure, diabetes, asthma, shellfish allergies and those taking blood thinning medication. It claimed PIASCLEDINE was the "only clinically proven osteoarthritis treatment... safe to use with other medicine." The initial advertisement used warnings such as "WARNING: Glucosamine & Chondroitin HEALTH RISK" and showed OSTEOEZE GOLD packaging and package insert. The respondent's sales representatives also used this advertisement in pharmacies. On 2 March 2018, Nativa demanded withdrawal of the advertisement. Austell eventually withdrew it on 12 March 2018 but then broadcast an altered advertisement that was identical except that the OSTEOEZE products were more heavily blurred and the package insert was replaced. However, the same warnings about health risks remained. Consumers contacted Nativa expressing concerns and returning products after seeing the advertisements. On 16 March 2018, Nativa launched an urgent application in the Gauteng Division of the High Court, Pretoria, for an interim interdict to restrain Austell from broadcasting the advertisements and from unlawful competition. The High Court (Van Der Westhuizen J) dismissed the application, holding that Nativa failed to show a prima facie right worthy of protection. The court found that the appellant's product was not clearly identifiable in the altered advertisement; expert opinion on the health risks was inconclusive; and no disparaging comments could be attributed to Austell regarding Nativa's product. Nativa appealed with leave of the High Court.

• Whether the appellant established a prima facie right to an interim interdict based on unlawful competition
• Whether the respondent's advertisements constituted unlawful competition through false disparagement of the appellant's products
• Whether the altered advertisement sufficiently differed from the initial advertisement to avoid being an unlawful disparagement
• Whether the health risk claims made about glucosamine and chondroitin in the advertisements were false and unsupported by medical evidence
• Whether the requirements for an interim interdict were satisfied: (a) a prima facie right, (b) well-grounded apprehension of irreparable harm, (c) balance of convenience, and (d) no other adequate remedy

The appeal was upheld with costs, including the costs of two counsel. The order of the High Court was set aside and replaced with an order: (1) Interdicting and restraining Austell from utilizing or causing to be broadcast the altered PIASCLEDINE advertisement or any part thereof, and/or any colourable imitation thereof, in any manner; (2) Interdicting and restraining Austell from competing unlawfully with Nativa by, directly or indirectly, making disparaging and false statements regarding Nativa's OSTEOEZE products and their ingredients, glucosamine and chondroitin; (3) Directing that the orders operate as interim interdicts, pending the outcome of an action to be instituted by Nativa against Austell within 21 days of the date of the order, for interdictory relief and damages based on unlawful competition; and (4) Directing Austell to pay Nativa's costs, including the costs of two counsel.

The binding legal principles established in this case are: 1. Direct infringement of a competitor's goodwill by publication of disparaging, untrue statements about their goods or services constitutes unlawful competition and is undoubtedly unlawful, being in conflict with the principle of fair competition. 2. To establish injurious falsehood (untrue disparagement), a plaintiff must prove: (a) the defendant made a false representation by word or conduct; (b) the defendant knew the representation to be false; (c) the plaintiff has lost or will lose customers; (d) the false representation is the cause of such loss; and (e) the defendant intended to cause the plaintiff that loss by the false representation. 3. For purposes of an interim interdict based on injurious falsehood, fault is not a requirement—it is sufficient if the representation is false. 4. An advertisement that has been minimally altered (such as by blurring a competitor's product) but which maintains the same false and disparaging message about that competitor's product constitutes unlawful competition where the altered version would be associated by reasonable viewers with the original advertisement. 5. Expert evidence in the form of a bald statement of opinion, without disclosure of the process of reasoning that led to the conclusion or the premises from which the reasoning proceeds, is insufficient for proper evaluation by the court. 6. The four requirements for granting an interim interdict are: (a) a prima facie right; (b) a well-grounded apprehension of irreparable harm if the interdict is not granted and ultimate relief is eventually granted; (c) the balance of convenience favours granting the interim interdict; and (d) the applicant has no other adequate remedy. 7. In the context of commercial competition, where false disparaging statements have been broadcast to the public and are likely to continue, causing reputational and financial damage to a competitor's established brand, an interim interdict is justified as the competitor has no other adequate remedy and the balance of convenience favors protection of the brand.

While not essential to the decision, the Court made several notable observations: 1. The Court described Austell's claim that its statements in the advertisement were "substantially similar to what is written in the OSTEOEZE package insert" as "absurd," and its assertion that the statements were merely to alert vulnerable, elderly patients to possible dangers as "risible." These strong characterizations, while not forming part of the legal reasoning, signal judicial disapproval of such defenses. 2. The Court noted that Austell's withdrawal of the initial advertisement "without admission of wrongdoing" "rings hollow," suggesting that the respondent's actions demonstrated it appreciated it had engaged in unlawful competition. This observation about the significance of withdrawal goes beyond what was strictly necessary for the decision. 3. The Court observed that Austell "threatened the relevant media houses that they would be implicated in these proceedings if they did not immediately withdraw the initial advertisement." While this conduct was noted, it did not form part of the Court's reasoning on unlawful competition or the requirements for an interim interdict. 4. In discussing the altered advertisement, the Court stated: "Applying a common sense approach to the matter, it is extremely unlikely that reasonable viewers would have noticed the difference between the two advertisements." This practical observation about viewer perception, while supporting the decision, reflects a broader judicial willingness to apply common sense in assessing commercial advertising rather than relying solely on technical distinctions. 5. The Court observed that the respondent's expert "said nothing about the respondent's claim that PIASCLEDINE was 'the only clinically proven osteoarthritis treatment.'" While this observation was made, the Court did not need to decide the veracity of this claim for purposes of the appeal. 6. On the question of punitive costs, the Court noted that "there was some explanation provided for the delay in halting the further broadcast of the initial advertisement that cannot altogether be discounted" and that "the respondent's belief in the lawfulness of the altered advertisement was misplaced." These observations about the respondent's conduct, while relevant to costs, were obiter to the main legal issues. 7. The Court referenced the historical principle from Combrinck v de Kock (1887) that "the proscription against unlawfully taking an improper advantage in business is not new," emphasizing the long-standing nature of this protection in South African law. This historical observation provided context but was not essential to the legal analysis.

This case is significant in South African commercial and delictual law for several reasons: 1. Unlawful Competition by False Disparagement: It provides a modern application of the longstanding principle from Combrinck v de Kock (1887) that while fair competition is permitted, using falsehoods to gain an unfair advantage constitutes unlawful competition. It confirms that direct infringement of a competitor's goodwill by publication of disparaging, untrue statements about their goods is undoubtedly unlawful. 2. Standard for Injurious Falsehood: The case clarifies the requirements for a claim based on injurious falsehood (untrue disparagement) and confirms that fault is not required for an interdict based on injurious falsehood—it is sufficient if the representation is false. 3. Comparative Advertising Boundaries: The judgment establishes clear limits on comparative advertising in South Africa. While companies may compare their products to competitors, they may not make false claims about health risks associated with competitors' products. The case demonstrates that merely blurring a competitor's product in an advertisement does not cure the unlawfulness if the false disparaging message remains the same. 4. Expert Evidence Requirements: The case reinforces the principle from Coopers that an expert's bald statement of opinion is insufficient; proper evaluation can only be undertaken if the process of reasoning leading to the conclusion, including the premises, are disclosed by the expert. 5. Protection of Brand Reputation: The decision affirms robust protection of commercial goodwill and brand reputation against false attacks by competitors, recognizing that reputational harm in competitive markets can be irreparable and justifies urgent interim relief. 6. Consumer Protection Implications: While not framed primarily as a consumer protection case, the judgment protects consumers from being misled by false health warnings about safe products, which could deter them from beneficial treatments. 7. Pharmaceutical and Healthcare Products Marketing: The case has particular significance for the pharmaceutical and healthcare products sector, setting standards for responsible marketing and establishing that unsubstantiated health risk claims about competitors' products will not be tolerated. The case provides important guidance on the boundaries of lawful competition in South Africa and the courts' willingness to grant interim relief to protect businesses against unlawful competitive practices involving false disparagement.