ASHLAR LAW
ASHLAR LAW
Insolvency & restructuring

Know – Hows and guidelines on advertisements and endorsements

The Department of Consumer Affairs and Central Consumer Protection Authority (“CCPA”) under Ministry of Consumer Affairs, Food and Public Distribution, Government of India, held a Press Conference this Friday (20 January 2023) and released a guide ’Endorsement Know – hows! For Celebrities, Influencers, & Virtual Influencers on Social Media Platforms’ (“Guide”). The guide is an addition to the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 published earlier last year on 9 June 2022 (“Guidelines”) and the Consumer Protection Act, 2019 (“Act”).

The Guidelines had laid down conditions for what would constitute valid and non – misleading advertisements and endorsements. The Guidelines were applicable to and laid down duties of manufacturers, advertisers, advertising agencies, service providers and endorsers under its ambit. The Guidelines covered;

  • the terms and conditions for valid and non – misleading advertisements, bait advertising wherein goods and services are offered at lower prices to attract customers, free claims advertisements which claim products and services have free claims, and children – targeted advertisements,
  • it prohibited surrogate advertising,
  • it laid down guidelines for disclaimers to be provided to the customers, and
  • necessitated due diligence for any endorsement of advertisements.

The Guidelines, however, were way behind the applicable technologies and industry practices prevalent on the internet and the social media space. The Guide adapted the application of the Guidelines to the dynamic social media platforms, the highlighting aspects of the Guide were:

  • Virtual Influencers. It included under its ambit any individual or group that has access to an audience and can affect the purchasing decisions or opinions of such an audience because of such individual’s or group’s authority, knowledge, position or relationship with their audience. The Guide expanded the ambit of the Act and Guidelines to celebrities, social media influencers and virtual influencers (“Influencers”). One of the most interesting aspects of the Guide was its description of virtual influencers being, “Fictional computer generated ‘people’ or avatars who have realistic characteristics, features and personalities of humans, and behave in a similar manner as influencers”.
  • Material Connection. Section 14 of the Guidelines required disclosure of any material connection between the endorser and the trader / manufacturer / advertiser. The Guide provides an indicative list of what may constitute as a ‘material connection’, the list is very mindful of and captures the latest trends and practices in advertising / endorsements.
  • Disclosures. The Guide lays down very clear and direct impositions on prospective advertisers and endorsers for disclosures. The Guide takes into account not just images and videos but livestreams as well.
  • Due Diligence. The Influencers have been advised always to review and satisfy themselves that the advertiser is in a position to substantiate the claims made in the advertisement. The Guide also recommends that the product and service must have been actually used or experienced by the Influencer.
  • Penalty. The Guide makes a very prominent warning and reference to the Act, more particularly section 21 of the Act. Any manufacturer, service provider and / or Influencer may now be charged by the CCPA. An Influencer who causes a false or misleading advertisement may face a penalty of Rs. 10,00,000 (ten lakh rupees) and for subsequent violations a penalty of up to Rs. 50,00,000 (fifty lakh rupees). The Influencer may also be prohibited from endorsing for a period of up to 1 (one) year and for subsequent violations for a period of up to 3 (three) years.

The Guide would bring about much greater accountability to the geographically and demographically diverse set of new age influencers, who are otherwise not included under the definitions of manufacturers or service providers.

However, the Guide appears to be aimed at helping celebrities and influencers to understand and comply with the existing Regulations. A concern remains that the Guide lacks any enforceability and would be treated as mere FAQs or clarifications to the Guidelines and the Act. The CCPA may consider amending the Regulations sooner than later in order to give them the benefit of these new additions.