Reportable
Case No:  333/99
In the matter between:
NESTLé (SOUTH AFRICA) PTY LIMITED
Appellant
and
MARS INCORPORATED
Respondent
Coram:    Nienaber, Harms, Mthiyane, JJ A. Nugent and Chetty, A JJ A
Heard:
14 May 2001
Delivered:
31 May 2001
Review:  Advertising Standards Authority – obligation to consider complaints
referred to it in terms of Code of Advertising Practice
_________________________________________________________
J U D G M E N T

NUGENT, AJA:
[1] The Advertising Standards Authority of South Africa (ASA) is a voluntary
association  that is incorporated in terms of s 21 of the Companies Act 61 of 1973.
It was established by participants in the advertising industry with the objective of
creating a system of self-regulation within the industry.  For that purpose it devised
a Code of Advertising Practice and Procedural Guide to which its members are
obliged to adhere.  A departure from the Code by any of its members may result
in a complaint being made to the ASA which must be dealt with in accordance with
the prescribed procedure.  If there is merit in the complaint the ASA will rule
accordingly and it may impose various sanctions upon the member concerned, the
most important one being the withholding of advertising space or time.
[2] According to the Code the directorate of the ASA has the primary
responsibility for its application but it may refer a complaint to one or other of its
committees.  The Code provides specifically that all matters related to "industry

disputes" and in particular matters raised in terms of clauses 7, 8 and 9 of Section
II of the Code will be considered by the Advertising Properties Committee.
[3] The parties to this appeal are both manufacturers of confectionery and
sweets.   Each of them manufactures a sweet variety that may best be described
as a sugar-coated chocolate button.  The respondent (Mars), which is incorporated
in the United States, commenced manufacturing and selling its product in that
country in 1954 under the name M&M’s and it has since expanded its sales to
other countries.  The appellant (Nestlé) is a South African company which has sold
its product for many years in this country under the name Smarties.
[4] Soon after Mars commenced producing M&M’s it created a graphic
representation of its product with human features for use in its advertising material.
Its sweet was depicted with arms, legs and a face so as to represent it as a little
round man with the letter M depicted on his stomach.  There is no dispute that this

brand character in various forms has been extensively used by Mars in its
advertising and promotional material for many years.  The brand character has
also been developed into a  three dimensional model which serves as a dispenser
of the sweets.
[5] In 1993 Mars introduced its product into this country.   It is alleged that at
about that time Nestlé devised a plastic dispenser for Smarties which was also in
the form of a little round man (i.e. it had the appearance of a Smarties sweet with
arms, legs, a face, and other human attributes).  According to Nestlé it then
developed that concept further by translating the character into two-dimensional
form for use in its advertising and promotional material.
[6] In June 1995 Mars applied to register four different versions of its brand
character as trade marks in terms of the Trade Marks Act 194 of 1993.  In
December 1997 and again in January 1998 the applications were advertised in the
Patent Journal and they came to the attention of Nestlé.  Nestlé's Swiss principal

sought and obtained from the Registrar of Trade Marks an extension of time within
which to register opposition to the applications and further extensions were sought
and granted thereafter.  At the time that the present proceedings were commenced
its opposition to the application for registration of the trade marks had not yet been
filed.
[7] In May 1998 a firm of advertising agents representing Mars lodged a
complaint with the ASA and requested that it be referred to its Advertising
Properties Committee.  The complaint was against the use by Nestlé of its Smarties
characters in its advertising and packaging.  Although the complaint was more
broadly framed its gravamen was that Nestlé had copied the Mars brand character
in breach of clause 9.1 of the Code.   At the time the complaint was made that
clause read as follows:
“An advertiser should not copy an existing advertisement, local or
international, or any part thereof in a manner that is recognisable or clearly
evokes the existing concept and which may result in the likely loss of

potential advertising value. This will apply notwithstanding the fact that there
is no likelihood of confusion or deception or that the existing concept has
not been generally exposed.”
[8] It was the ASA’s response to the complaint that led to the proceedings which
are the subject of this appeal.  On 17 September 1998 the ASA wrote to the parties
in the following terms:
“The subject matter of the complaint is firstly a matter to be determined by
trademark law. The Courts, as the final instance, have a superceding
jurisdiction over the subject matter of the complaint, and can therefore
overrule the ASA’s decision.
In the opinion of the ASA Directorate the ASA is not the appropriate forum
to consider a matter where trademark law should firstly be determined.
Until the matter is finalised as a matter of law, the ASA cannot therefore
consider the subject matter of the complaint in terms of a self-regulatory
Code.”
[9] Shortly thereafter the view that had been adopted by the directorate of the
ASA was reiterated in a letter written by its attorneys in which the following was
recorded:

“We submit that the issue here of the infringement of Section 9(1) of the
code and the trademark infringement are one and the same as the issue
substantively is whether Nestle have copied your client’s figures.
Accordingly, it is our client’s submission that the ASA should not hear the
matter and the matter should be decided by the Registrar of Trademarks.
We submit further that the reason that you are approaching the ASA for a
ruling is as a form of interim relief when you should approach the High
Court for interim relief.
It is thus the decision of ASA that they will not hear this matter, but should
you wish to take our client on review, our client will abide the decision of the
court in that regard.”
[10] The stance that was adopted by the ASA as reflected in these letters
prompted Mars to apply to the Witwatersrand Local Division on notice of motion for
an order having the effect of compelling the ASA to reconsider and rule upon its
complaint.  The matter came before Schabort J who upheld the claim (the judgment
is reported as Mars Inc v Advertising Standards Authority of South Africa and
Another 2000 (4) SA 511 (W)) but granted Nestlé leave to appeal to this Court.

[11] Before turning to the merits of the appeal there is a preliminary matter.  It
was submitted on behalf of Nestlé in the Court below and in this Court that the
evidence does not establish that the application was authorised by Mars.  It is a
little surprising that the point was taken at all, let alone that it was pursued on
appeal, because it is abundantly clear that at the time the application was heard
Mars, even if it had not authorised them at the outset, had at least ratified the
commencement of the proceedings as it was entitled to do (Smith v Kwanonqubela
Town Council 1999 (4) SA 947 (SCA) 953B).  It was submitted on behalf of Nestlé
that the resolution relied upon by Mars (which does not expressly state when it was
adopted) cannot be construed as ratifying events that had already occurred.  If that
is so it only lends support to the inference that the resolution must have been
adopted before the proceedings were commenced.  But if it was not adopted
before the proceedings were commenced then it is capable of no meaning but that
Mars intended to ratify what had already been done.  Whichever way the resolution

is construed it is clear that the proceedings were authorised by Mars and there is
no merit in the point.
[12] It was not disputed that by subscribing to the terms of the Code the ASA and
its members became contractually bound inter se to adhere to the respective
obligations imposed upon them (cf Marlin v Durban Turf Club & Others 1942 AD
112 at 126-128).  That meant that the ASA was obliged to consider and to rule
upon complaints that were made to it in accordance with the procedure contained
in the Code.   It was also not disputed that in the event of the ASA failing to comply
with that obligation it would be competent for a court to order it to do so.
[13] The ASA did not oppose the application nor did it file any affidavits in
explanation of its decision.   We have nothing but its letter as amplified by the letter
from its attorney to determine the nature of the decision that it reached and the
grounds upon which it did so.

[14] It appears from those letters that the decision that is now in issue was made
by the directorate of the ASA rather than the Advertising Properties Committee (to
which the complaint had been directed) but I do not think it is material for present
purposes which of those two bodies was properly required to consider the
complaint.
[15] Nestlé's principal submission was that the circumstances that arose in the
present case were analogous to those that would give rise to a defence of lis alibi
pendens in a court of law.  It was submitted that the ASA was not obliged to
consider the complaint because the matter that formed the subject of the complaint
was awaiting adjudication  before what was referred to as another forum of
competent jurisdiction (i.e. the Registrar of Trade Marks).  In my view the analogy
is misplaced.

[16] The defence of lis alibi pendens shares features in common with the
defence of res judicata because they have a common underlying principle which
is that there should be finality in litigation.  Once a suit has been commenced
before a tribunal that is competent to adjudicate upon it the suit must generally be
brought to its conclusion before that tribunal and should not be replicated (lis alibi
pendens).  By the same token the suit will not be permitted to be revived once it
has been brought to its proper conclusion (res judicata).  The same suit, between
the same parties, should be brought only once and finally.
[17] There is room for the application of that principle only where the same
dispute, between the same parties, is sought to be placed before the same tribunal
(or two tribunals with equal competence to end the dispute authoritatively).  In the
absence of any of those elements there is no potential for a duplication of actions.
In my view none of those elements is present in this case.  Indeed, it is difficult to
see how they can exist where the matters in issue have been placed before two

quite different tribunals (as in this case), the one operating consensually and the
other by force of statute, each having its own peculiar functions, powers and
authority.  For in such a case each tribunal will, by definition, be inquiring into and
ruling upon different matters, and neither will be capable of ruling authoritatively on
the issue that falls within the competence of the other.
[18] In my view that is amply demonstrated in the present case.  The Registrar
of Trade Marks is called upon to decide whether the trade marks qualify for
registration in terms of sections 9 and 10 of the Act and if so upon what conditions.
The ASA, on the other hand, is called upon to decide whether Nestlé has copied
the advertising of Mars or any part thereof in the manner and with the
consequences referred to in clause 9.1 of the Code.  The questions before them
are quite different and no ruling made by the one will preclude a ruling by the
other.  Furthermore, the parties to the respective proceedings are not the same.
Although Mars is a party to both proceedings the complaint to the ASA was made
against Nestlé while the opposition to the trade marks is to be brought by its Swiss

principal.  There is no prospect of a defence of res judicata in the proceedings
before the ASA once the Registrar had made his ruling (and vice versa) and by
the same token a plea of lis alibi pendens is thus bound to fail.
[19] It was argued on behalf of Nestlé that in the course of reaching his decision
the Registrar will be required to decide whether the trade marks are capable of
distinguishing Mars' goods from the goods of others (as required by s 9(1) of the
Act);  and whether Mars has a bona fide claim to proprietorship of the trade marks
(as required by s 10(3));  and whether the trade marks will be likely to cause
deception or confusion (as contemplated by s 10(12)).  All those issues, it was
submitted, will require the Registrar to decide whether Nestlé has acquired the right
in this country to what was referred to as the "advertising goodwill" in the
characters, which is a matter that the ASA will similarly be called upon to decide.
I cannot see that the so-called "advertising goodwill" or reputation in the characters
concerned is relevant to the inquiries that the Registrar will be called upon to make,
which relate to the nature of the respective marks and the manner and extent of

their use rather than to the reputation that they might or might not have acquired.
Furthermore, it is difficult to see what relevance the parties’ respective rights to the
"advertising goodwill" might have in relation to the complaint that is before the ASA.
The ASA is called upon to decide whether Nestlé has copied the advertising
material of Mars.  The fact that Nestlé might subsequently have acquired
"advertising goodwill" in the material seems hardly relevant to that inquiry.
[20] However, in my view, we are not called upon in this appeal to decide whether
or to what extent the respective inquiries to be conducted by the Registrar and the
ASA might correspond for in my view the attempt to find some correspondence
between the two proceedings is in any event misconceived and tends to divert
attention from what is the true issue in this appeal.
[21] The Registrar of Trade Marks and the ASA are both obliged to perform their
respective functions and neither is entitled to abdicate in favour of the other even

if some aspects of their respective inquiries might coincide.  There was some
debate as to whether the ASA divested itself wholly of the complaint that had been
placed before it or whether it merely deferred its consideration of the complaint
until the Registrar has reached his conclusion.   If it divested itself wholly of the
complaint, which was the construction that was placed on its conduct by Mars, then
clearly it was not entitled to do so, but I am willing to accept for purposes of this
judgment that it did no more than to defer consideration of the complaint until such
time as the Registrar has made his ruling (which was the construction that Nestle
placed upon its letter).
[22] The ASA might well be entitled in an appropriate case to defer consideration
of a complaint until the occurrence of an event that might be relevant to its inquiry
but the problem in the present case is not confined to the deferment of the
complaint.  In the absence of a contrary explanation, the inference is irresistible
that the ASA has not merely deferred the matter but has done so to permit the

Registrar to make a decision in its stead on one or other issue which the ASA
considers to be relevant to its inquiry (precisely what the issue might be, and its
relevance to the inquiry has been left unexplained).  To that extent at least it has
purported to divest itself, even if only partly, of matters that it is obliged by the Code
to consider and to rule upon itself.  I agree with the Court a quo that the ASA  was
not entitled to do that.  It was obliged to consider and to rule upon the complaint that
was before it and not to shift that responsibility to the Registrar either wholly or in
part.
[23] Finally, it was submitted that the proceedings in the Court a quo were
premature in that Mars ought to have exhausted the remedies provided in the Code
by placing the decision before the Appeal Committee in terms of clause 2.7 which
provides as follows:
“Any party who feels aggrieved by a ruling of the Advertising Standards
Committee or Advertising Properties Committee may appeal against such
ruling to the Appeal Committee.”

There is no suggestion that the decision that is now in issue was made by either
of those committees and in those circumstances it was not subject to appeal in
terms of that clause.   Moreover, I think that the reference to those committees
makes it clear that the decisions that are contemplated by that clause are decisions
relating to the merits of a complaint, rather than a decision not to hear a complaint
at all as in the present case.  Accordingly I do not think that Mars was obliged, nor
even entitled, to refer the matter to the Appeal Committee and in those
circumstances the proceedings were not premature.
The appeal is accordingly dismissed with costs which are to include the costs
occasioned by the employment of two counsel.
__________
R W Nugent
Acting Judge of Appeal
Nienaber,
JA)
Harms,
JA)
Mthiyane,
JA)
Chetty,
AJA)    concur