Introduction
The digital age today naturally inclines us towards what is served to us through social media and advertisements. While these ads are a great tool for businesses to expand, they can pose threats to consumer rights. Influencers and celebrities are looked up to by the publico as consumers before making any purchase. This layout warrants proper regulation of the relationships between a consumer and the endorsements/advertisements, which he/she relies on.
On January 20, 2023, the Ministry of Consumer Affairs (hereinafter “Ministry”) released a guide titled “Endorsements Know-Hows!” for celebrities, social media influencers, and virtual influencers (“Endorsers”) on social media platforms which was in furtherance to the notification on guidelines by Central Consumer Protection Authority (CCPA), a regulatory authority set up under Consumer Protection Act, 2019 (‘Act’). The two documents are holistically and in concurrence, culling out the mandatory requirements to be adhered to by Endorsers. The intention of the Ministry is multi-faceted, in the sense that the guidelines aim to touch upon various objectives in a go, like the following:
- To ensure that the influence/effect of Endorsers is not misleading the consumers who are in proximity of such influence.
- To regulate the information/influence that is being shown through various mediums to the consumers, such that consumers are not prey to unfair trade practices/misleading ads by the Endorsers.
- To include the best practices for transparent relationships between products/services/brands that are associating with Endorsers to advertise their products by making provisions of proper disclosures.
The talk around this step of the Ministry is in the affirmative as the stakeholders who will be governed by these guidelines like Influencers and agencies are applauding this initiative that strongly advocates the narrative of consumer protection and strengthening of the industry.
Applicability: Who should make the disclosures?
It is necessary for all the Endorsers to adhere to these guidelines who have access to an audience and the ability to influence their decisions to purchase/opine about a product, service, brand, or experience. These decisions are crucially a result of the Endorser’s authority, knowledge, position, or relationship with that audience/consumers.
As per Section 2(1)(f) of the Central Consumer Protection Authority (“CCPA”) Notification,
“endorser” includes an individual or a group or an institution making an endorsement of any goods, product, or service in an advertisement whose opinion, belief, finding, or experience is the message that such an advertisement appears to reflect.
Thus, Endorsers include,
- Influencers (creators who strongly impact the audience’s thoughts and purchasing decisions by promoting goods and services);
- Celebrities (famous people who have the ability to influence their audience’s decisions or opinions)
- Virtual influencers (computer-generated ‘humans’ or ‘avatars’ that are fictional but have realistic traits and personalities of people, and act similarly to influencers)
Section 3 of the CCPA notification entails the applicability of the guidelines, which covers all advertisements irrespective of the medium and all the manufacturers/service providers/traders/advertising agencies.
What are the contents of the disclosures and when should it be made?
In case of a connection between the Endorser and the trader/manufacturer/advertiser of the product/service/goods, which is capable of affecting the endorsement’s viability and when such connection not anticipated by the audience/consumers, such a connection needs to be properly disclosed while making the endorsements.
The connection, in reference, is inclusive of but not limited to the following as per the guidelines:
- Any kind of compensation;
- Free-of-cost products including gifts, discounts and unsolicited products without any conditions;
- Hotel stays/trips;
- Any relationship in the nature of family, personal or employment-related;
- Media barter;
- Coverage and awards; and
- Any sweepstakes/contests.
Due Diligence
Due diligence on the part of an Endorser is a substantial requirement for a legitimate endorsement to be undertaken. It is necessitated that the Endorsers shall actually use or experience the good/product/service that they are endorsing before recommending the same to their audience.
Also, playing it safe, Endorsers shall review and satisfy themselves that the advertiser/manufacturer is in a position where the claims made in the ads are verifiable. This is in addition to barring any Indian professional or foreign professional alike from making endorsements in any advertisements, for the time being, without any discrimination of any kind, in accordance with the Act.
How the disclosures are to be made?
Disclosures are mandated under Section 14 of the CCPA notification and the know-how guide throws light on how they are to be undertaken. They should be made in such a way that they are easily comprehensible and hard to miss, stated by the press release by the Ministry (Release ID: 1892527). They should be presented in the endorsement statement in such a way that they are clear and easily visible without mixing with hashtags or links.
In the case of endorsement through pictures, a disclosure should be prominently displayed on such picture so that it is visible to the audience without any effort. When disclosures are provided in a video, they should be made in both audio and video forms rather than sticking to the description of the video only. This means that such disclosures shall form part of the concerned video.
Where the endorsements are undertaken through the medium of live stream, disclosures should be provided continuously and prominently while the streaming is in process. This ensures that the audience is getting sufficient opportunities to see the disclosures and become aware of the same.
The guidelines keep it flexible for platforms with limited space like Twitter where terms like “XYZAmbassador” (where XYZ is a brand) are also appropriate and acceptable to make a disclosure. In general, terms like ‘ad’/advertisement’, ‘paid’/paid promotion’, and ‘sponsored’ are allowed for disclosures in general. To avoid any language barrier, the language of the disclosure should be necessarily the same as that of the endorsement. Additionally, the disclosures made for the concerned endorsements will be made separately apart from the platform disclosure tools.
Penalty for non-disclosure and misleading advertisements
The Act prescribes punishment for deceptive advertising applicable in the event of a false or misleading advertisement in accordance with Section 89 of the Act. The Central Consumer Protection Authority (CCPA) has the authority to impose fines of up to Rs 10 lakh on manufacturers, advertisers, and Endorsers with imprisonment extendable to two years. Penalties of up to Rs 50 lakh and imprisonment up to five years is the punishment for subsequent offences.
Section 21 of the Act, on the other hand, adorns the central authority with the power to issue directions and penalties against misleading and false advertisements. The Endorsers may be banned from making any endorsements for up to a year, and for consecutive violations, the ban may be increased to three years in addition to imposition of directions or penalties, accordingly.
Conclusion
The aim of this guide as well as the CPA notification guidelines, is to ensure that the consumer’s rights
are protected and they are not sucked into misleading/false/fake/bait/surrogate advertisements. It is also justifiably aspirational as a barrier protecting Endorsers from any legal mishaps that may result in penalties/bans/punishments. This foresighted action of the Ministry is evidently comprehensive in its applicability covering almost all the dimensions where consumer rights as well the protection of Endorsers may face any legal hurdles. The laudable guidelines are welcomed by the stakeholders and the general public alike. This much-needed emergence of guidelines will see the stakeholders through most of the unregulated areas and help in governing consumer-related violations and protections.
Corrida Legal is consistently rated as the best corporate and employment law firm & lawyers in Gurgaon, Delhi and Mumbai. Reach out to us on Linkedin or contact us at contact@corridalegal.com /+91-8826680614 in case you require any legal assistance. The author of this article is Pushkar Thakur, Managing Partner at Corrida Legal.
Pushkar is an ex AVP, Legal, Nomura and has led the legal teams at corporates namely Emaar India and Drake & Scull India. He represents clients before all major courts of India and has worked with Kochhar & Co., law firm. Pushkar is an expert in corporate law, contracts, litigation, employment law and data protection. Reach out to him at: pushkar.thakur@corridalegal.com. In case of urgent issues, you may call him at +91-8826680614.