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Nakedbus’ advertising tactics to win market share from InterCity deemed ‘misleading’

Monday 17th February 2014

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Nakedbus, which challenged InterCity Group's near monopoly on national bus routes when it started in 2006, has been found guilty of trademark breach after aping its rival's name to lure customers through Google's advertising service.

Justice Raynor Asher of Auckland High Court has ruled Nakedbus deliberately infringed on rival bus company InterCity Group's trademarked name using the phrase as a keyword to lure customers from its rival.

The Feb. 12 ruling is the latest in an ongoing dispute between the "fierce competitors" over the use of the phrase 'inter city' by Nakedbus, Justice Asher said in his judgment. Nakedbus has used the phrase 'inter city' since its 2006 entry into the market, which it says is a description of the domestic travel services it offers.

However, the judge didn't find Nakedbus's use of 'inter city' through Google's AdWords service breached InterCity Group's trademark.

Google's AdWords service offers companies an edge over those relying on its 'organic,' algorithm-based search results by targeting key search words chosen by the advertiser which link to their website. Nakedbus advertised through Google using search terms including 'inter city'.

The tactics were reciprocated during a fierce battle for market share, as for several months in 2012 InterCity paid for 'Nakedbus' to result in links to its own advertisements in Google searches, according to a 2013 High Court judgment by Justice Rodney Hansen.

InterCity, which operates New Zealand's largest national bus service InterCity Coachlines, had enjoyed 95 percent market share since 1987, until Nakedbus' arrival as a budget coachline alternative eight years ago, It now has a 35 percent share, while InterCity has about 60 percent.

The 'no-frills' service offers fares as low as $1, which have since been matched by InterCity creating a "price war", said Justice Asher.

In his evidence founder and chief executive of Nakedbus, Hamish Nuttall said he established the company because he believed "that the 'intercity' brand was tired and vulnerable to a vigorous competitor operating online," according to the ruling.

InterCity first challenged its rival about the use of the phrase in 2006 when Nakedbus used the term throughout its website.

"InterCity welcomes competition - it's healthy and good for our customers - however we believe in a fair fight," Nick Hurdle, acting chief executive of InterCity Group said in a statement. "This was a cynical, calculated and deliberate attempt by a competitor to leverage our trade mark and mislead customers."

"Indeed it was described by the judge as an attempt to exploit the wide recognition of our trade mark 'InterCity'."

Nakedbus said it was weighing up the judgment and hasn't decided whether to appeal.

The proceeding has been adjourned for a further hearing on the account of profits claim.

 

BusinessDesk.co.nz

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