Nestlé (South Africa) Pty Limited v Mars Incorporated

Mars Incorporated manufactures M&M's chocolate buttons and has used a brand character depicting the sweet with human features (arms, legs, face) since 1954. Nestlé (South Africa) manufactures similar products called Smarties. In 1993, Mars introduced M&M's to South Africa. Around that time, Nestlé developed a plastic dispenser for Smarties in the form of a little round man with human attributes, later translating this into two-dimensional advertising material. In June 1995, Mars applied to register four versions of its brand character as trade marks. In May 1998, Mars lodged a complaint with the Advertising Standards Authority (ASA) alleging that Nestlé had copied its brand character in breach of clause 9.1 of the Code of Advertising Practice. The ASA refused to hear the complaint, stating that the matter should first be determined by trade mark law and that courts had superseding jurisdiction. The ASA indicated it would not consider the complaint until the trade mark matter was finalized.

• Whether the ASA was obliged to consider and rule upon complaints referred to it under the Code of Advertising Practice
• Whether the defence of lis alibi pendens applied to prevent the ASA from hearing the complaint while trade mark registration proceedings were pending before the Registrar of Trade Marks
• Whether the ASA was entitled to divest itself of or defer consideration of a complaint pending determination of related proceedings before another tribunal
• Whether Mars was required to exhaust internal appeal remedies under the Code before approaching the court

The appeal was dismissed with costs, including costs for two counsel. The effect was to uphold the order of Schabort J compelling the ASA to reconsider and rule upon Mars' complaint against Nestlé.

A self-regulatory body that has contractually undertaken to consider and rule upon complaints in accordance with its code is obliged to perform that function and cannot divest itself of that responsibility, either wholly or partially, by deferring to another tribunal (even a statutory one) to decide issues that fall within its mandate. The doctrine of lis alibi pendens does not apply where two different tribunals (one consensual/contractual and one statutory) are considering different issues, between different parties, under different legal frameworks, even if some factual overlap exists. Each tribunal must perform its own distinct function and neither can substitute the other's decision-making role.

The court made observations regarding the questionable relevance of 'advertising goodwill' to either the Registrar's inquiry under sections 9 and 10 of the Trade Marks Act (which relate to the nature and use of marks rather than reputation) or to the ASA's inquiry under clause 9.1 of the Code (which concerns whether copying occurred, not subsequent goodwill acquired). The court also suggested that while a self-regulatory body might be entitled in appropriate cases to defer consideration of a complaint until the occurrence of a relevant event, this was not such a case. The court noted it was 'surprising' that Nestlé pursued the authorization point on appeal given the clear evidence of ratification.

This case establishes important principles regarding self-regulatory bodies in South Africa. It confirms that voluntary industry self-regulatory bodies create contractual obligations between members that are enforceable in courts. The judgment clarifies that self-regulatory bodies cannot abdicate their responsibilities by deferring to statutory tribunals merely because related proceedings are pending elsewhere, particularly where the tribunals operate under different legal frameworks, address different issues, and have different parties. The case demonstrates the courts' willingness to compel self-regulatory bodies to fulfill their mandated functions and reinforces that the doctrine of lis alibi pendens does not apply where different tribunals with distinct jurisdictions and functions are involved. It also provides guidance on when internal appeal remedies must be exhausted before approaching courts.