Protecting corporate reputation through legal action sometimes 'the only way', says expert

Expert in corporate reputation management Imogen Allen-Back of Pinsent Masons, the law firm behind Out-Law.com, said that allowing untrue allegations to go unchallenged can lead the general public to think there is "a degree of truth" in the statements.

Allen-Back was commenting after German company BSH Hausgeräte, which is behind the Bosch and Siemens brands, announced that it was "initiating legal steps in Great Britain against the British vacuum cleaner manufacturer Dyson".

In a statement, BSH accused Dyson of making "a number of false allegations in the press asserting that BSH manipulated energy efficiency tests using control electronics in vacuum cleaners". BSH said it "strenuously rejects" the claims and said they were "unfounded and untrue".

In a statement issued in response to BSH's announcement, Sir James Dyson said: “We will not be diverted from what is a crucial consumer issue. What Bosch and Siemens have done we believe circumvents the purpose of the EU energy regulations and misleads consumers.”

Last week Sir James Dyson, Dyson founder, said that Bosch had "installed control electronics into some of its machines to wrongfully increase energy consumption when in use – to cheat the EU energy label", according to media reports. He said the company's behaviour was "akin to that seen in the Volkswagen scandal".

"Sometimes a company decides that the only way it can properly protect its corporate reputation is by taking legal action to set the record straight," Allen-Back of Pinsent Masons said. "If left unchallenged, it is likely that the general public will think that there is a degree of truth to these allegations."

"The nature of these allegations – involving cheating or deception in relation to energy efficiency, something which is high up on the corporate social responsibility (CSR) agenda, goes to the very core of the company’s ethos and values," she said. "Such allegations can be very damaging to a company’s brand reputation, and potentially undermine years of positive initiatives on the CSR front. A successful legal action will provide the company with a basis for asserting that the allegations are entirely false, allowing the company to vindicate its reputation, on the back of which it can mount a PR campaign to repair some of the damage done to its brand."

In the UK, laws on defamation and malicious falsehood are among those that companies can use to protect their corporate reputation when it is under threat from untrue statements.

Allen-Back said that in order to bring a claim in defamation, BSH would need to demonstrate that the publication of the allegations has caused, or are likely to cause, it serious financial loss, in accordance with the requirements of the UK's Defamation Act 2013. She said, though, that it is not straightforward to show this.

Allen-Back said a recent case before the High Court, the first judgment to look at what a corporate claimant needs to prove to show that it has suffered "serious harm" that  "caused or is likely to cause … serious financial loss" under the Act, provided some clues as to the approach courts would take in assessing such claims.

In the case, the judge took a holistic approach when reviewing a firm of solicitors' allegations of financial damage suffered as a result of being referenced and commented about on a website which was "a simple variant" of an earlier site called 'Solicitors from Hell'.

Mr Justice Warby said that while a mere belief that financial loss had been caused was unlikely to satisfy the legal test, the other features of the pleaded case, including some inferences, were collectively enough to meet the requirement.

Allen-Back said that claims of malicious falsehood might succeed where a company has made an untrue statement about its competitor’s business, knowing it to be false or reckless as to whether or not it was false, where the statement is calculated to cause financial loss. 

Editor’s note 28/10/15: this story has been updated to include Sir James Dyson’s statement in response to the announcement of legal action by BSH.