Introduction
The Central Consumer Protection Authority (CCPA), a body constituted under the Consumer Protection Act, 2019 (Act), has notified the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (Guidelines) by a notification dated 09 June 2022. The Guidelines have been issued with an intention to curb misleading advertisements and to protect consumers from unsubstantiated claims, exaggerated promises, misinformation, and false claims made by advertising agencies and business enterprises.
The CCPA had released the draft guidelines on the same subject in 2020 (Draft Guidelines). In our earlier coverage on Indian laws regulating misleading advertisements in India particularly with respect to misleading advertisements on social media platforms, we had also discussed inter alia certain key features of the Draft Guidelines and advocated for the need of bringing the Draft Guidelines into force, so as to effectively manage the dynamic nature of social media platforms. Please click here to read our earlier coverage.
Applicability
The Guidelines are applicable to all advertisements regardless of form, format or medium and to all manufacturers, service providers or traders whose goods, products and/ or services are the subject matter of an advertisement. The Guidelines are also applicable to advertising agencies or endorsers whose services are availed for advertisement of such goods, products, or service.
Intention behind introduction of the Guidelines
The Advertising Standards Council of India (ASCI) in its annual report for 2021-22, recorded a surge of 25% (7631 complaints) in the number of complaints received against false and misleading advertisements, as compared to 6096 complaints received in 2020-21. Prior to notification of the Guidelines, false and misleading advertisements were regulated by the Act and the guidelines/ code issued by ASCI. Notably, the guidelines issued by ASCI (ASCI Guidelines) are self-regulatory in nature and cannot compel business enterprises to mandatorily comply with its provisions and/ or initiate any strict action for any non-compliance. Accordingly, the CCPA has notified the Guidelines to protect the interest of consumers by effectively regulating and monitoring the instances of misleading advertisements by business enterprises.
The New Paradigm
The Guidelines have attempted to provide clarity on the criteria that must be fulfilled for the advertisement to be considered valid and not misleading. Among other things, a valid advertisement: (i) must be truthful and honest; (ii) should not mislead consumers by exaggerating any aspect of the product; (iii) should not mislead about the nature or extent of the risk to consumers’ personal security; and (iv) must comply with all other applicable laws. The Guidelines have also put in place greater regulation on any form of bait advertisements, free claims advertisements, and advertisements targeted towards children. Additionally, with respect to surrogate advertising, the Guidelines have extended the ban on surrogate advertisements as currently provided under the Cable Television Networks (Regulation) Act, 1995 to all forms of advertising. The Guidelines also prescribe instances where disclaimers may be used in advertisements and the details required in such disclaimers.
Further, key compliance obligations have been prescribed for the business enterprises which advertise their product or services, as well as for advertising agencies involved in the process of designing, production, or other similar services in relation to the advertisements. These entities are required to ensure that the claims made in the advertisements are capable of being substantiated, and that the advertisements do not abuse the trust of, or mislead the consumers, in any manner. Further, the endorsers of advertisements have also been obligated to maintain due diligence standards with respect to the products being endorsed and disclose any material connection with the business enterprises advertising the products.
Drawbacks of the Guidelines
While the Guidelines provide sufficient additional clarity on key aspects in regulations for the industry, it would be remiss to not mention that the Guidelines may not be flawless. A few drawbacks of the Guidelines include:
1. Surrogate Advertisements – The Guidelines have extended complete ban on surrogate advertising from cable television to all forms of advertising. However, an exception has been created for advertisements of genuine ‘brand extensions’ i.e., advertisements of other products of the same brand that may not be advertised. For instance, many liquor brands have been using music CDs, short films, and big music festivals, etc., for promotions under the name of brand extensions.
Notably, the Draft Guidelines had proposed to incorporate a requirement that advertisements for ‘brand extensions’ should be commensurate with the scale of the advertising and the target markets. However, these reasonability requirements have not been retained in the Guidelines. Similarly, ASCI’s Code for self-regulation of advertising content in India (Self-regulatory Code) also stipulates certain conditions that may be followed by business enterprises for ‘brand extension’ advertisements such as: (i) the brand extension product/ service should be registered with appropriate government authorities (such as GST, FSSAI, etc.); (ii) the presence or the market share of the product/ service in the market; (iii) the sales turnover of the product/ service; and (iv) a certificate from independent chartered accountant, etc. The Self-regulatory Code stipulates that, if a brand extension cannot meet the qualification criteria, then such brand extension advertisement may not be considered genuine.
Therefore, it is recommended that business enterprises should consider complying with the conditions stipulated in the Self-regulatory Code for genuine ‘brand extensions’, even though such requirements are absent from the Guidelines. This is to ensure that business enterprises have adopted reasonable measures for conducting such advertisements.
2. Diligence standards for endorsers – The Guidelines have prescribed a responsibility on endorsers to conduct due diligence before making an endorsement, to ensure that the advertisement is not deceptive, and should reflect his genuine reasonable current opinion. Additionally, the endorser is also required to disclose a material connection exist between him and the advertisers. However, the Guidelines failed to prescribe the procedure for disclosure of such material connection. Notably, the Self-regulatory Code on the other hand stipulates the method of disclosing such material connection by listing a disclosure label on endorsers social media account. Therefore, it is recommended that the endorser may consider complying with the conditions stipulated in the Code along with the provisions stipulated in the Guidelines to avoid punitive action initiated by the CCPA.
3. Advertisements targeting or featuring children – The Guidelines prohibit a variety of forms of advertisements for the protection of children. However, a number of these restrictions are vague, and prescribe overarching limitations on any advertisement that may have an adverse impact on children. Considering the ambiguous nature of these restrictions, a majority of advertisements may fall afoul of the Guidelines, and business enterprises responsible for such advertisements may be subject to penalties under the Act. To ensure that disputes emanating from such advertisement are limited in number, it is recommended that the Guidelines are made more certain which would enable better compliance by genuine advertisers.
Our thoughts
The Guidelines intend to protect the consumer interests by introducing more transparency and coherence in the way advertisements are published so that consumers can make informed decisions. However, in the absence of clarity on some of the key aspects of the Guidelines such as ‘brand extension’ test for surrogate advertising, and diligence standards for endorsers, misleading advertisement on social media platforms may continue to take place unabated unless challenged by the authorities which may lead to prolonged litigations affecting the efficacy of the Guidelines.
Authors: Souvik Ganguly, Yogesh Chhajer and Aman Bagaria.
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