Clearing the fog over misleading ads

Sushant Khalkho | Updated on: Jun 15, 2022
Providing a uniform template for valid advertising

Providing a uniform template for valid advertising | Photo Credit: TarikVision

The new guidelines on misleading ads are welcome as they act as a deterrent against their production 

The received wisdom on advertising seems to suggest that it’s not what you say but how you say it. However, a summary perusal of the Centre’s recent Guidelines on Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements 2022 seeks to reverse this understanding.

The Centre appears keen to signal to advertisers, advertising agencies, and consumers alike that sometimes the problem can lie not only in how you say it, but also in what you say, and to whom you say it.

For the longest time, the practice of misleading ads continued unabated in India. Nevertheless, of late, India has been playing catch up with global trends towards strengthening the regulatory framework governing advertisements.

The extant guidelines place emphasis on three Cs: children, celebrities, and conditions precedent for valid advertisements. While much ink has already been spilt in popular media discussing the first prong, it is imperative to understand the nuances of the last two prongs in greater detail due to their enormous potential to be a decisive gamechanger.

Due diligence

First, the guidelines read with ASCI’s Code for Self-Regulation of Advertising Content in India specify certain ‘due diligence’ and ‘disclosure’ requirements, thereby holding endorsers accountable for what they endorse in advertisements.

According to the due diligence requirements, endorsers will now need to satisfy themselves that the advertiser is in a position to substantiate the description, claims and comparisons made in the promotion. The assumption herein is that endorsers are in a better position to overcome the information asymmetry faced by the average consumer who might not always have access to the latest scientific research and assessments of the product/service offered.

The aforementioned due diligence requirements for domestic endorsers also squarely apply to foreign professionals. The hope is that it will help avoid fiascos such as the controversial Pan Bahar ad in 2016. Therein an ex-James Bond actor alleged misrepresentation against the pan masala manufacturer after being made to endorse a tobacco-infused ‘breath freshener’.

Nevertheless, the Consumer Protection Act 2019 is not indifferent to the limitations of endorsers in gauging the genuineness of what they endorse. An exemption clause in Section 25(5) permits endorsers to avoid penalties if they can demonstrate to the Consumer Protection Authority that they exercised due diligence to verify the veracity of the claims made in the advertisement.

Moreover, in a bid to streamline the due diligence process ASCI launched an ‘endorser due diligence service’ which can be availed at any stage before the production of the advertisement. The service will examine the evidence in support of the technical and non-technical claims, representations, and statements made as part of the advertisement before advising endorsers on the way forward. Endorsers now would be well-advised to seek third-party expert assessment before committing to publicise the products or services.

Material interest

Second, the mandatory declaration of material interest of the endorser in the endorsed product/service is also a salubrious development. It will ensure that unsuspecting consumers are not misled by unscrupulous endorsers and will lend to informed decision-making by the consumer.

Such material disclosures are routine affairs. For example, for securities trading in India, SEBI requires listed entities to furnish all material events or information a reasonable investor would consider important in making investment decisions.

Thus, from the consumer law position of “seller beware” the government has made a decisive push towards “endorser beware”. Interestingly, this is not the first time that celebrity endorsers find themselves in the government’s spotlight. It is interesting to note that at the time of drafting the 2019 Act there were determined calls for including a jail term for endorsers endorsing fake claims.

Fortunately, reasonable voices prevailed and the legislature instead codified a middle path in terms of heavy fines (ranging from ₹10-50 lakh) and prohibition (for one to three years) on endorsers in the primary Act.

‘Valid’ ads

Third, while Section 2(28) of the 2019 Act exhaustively defines ‘misleading advertisements’, per contra, the primary Act did not provide much guidance on what is and what is not to be considered a ‘valid’ advertisement. Guideline 4 fills this legal vacuum by listing out seven criteria to consider while adjudging whether an advertisement is valid and not misleading.

Put more simply, an advertisement not meeting the criteria set out in the guidelines may be considered to be misleading. Hence, the inclusion of these criteria provides a uniform standard for understanding the scope and ambit of valid advertisement.

Another important defined term is ‘endorser’ which has an inclusive definition in the guidelines. What this means is that the current definition expansively covers and has the potential to rein in famous personalities of all stripes (including social media influencers and virtual influencers), particularly in the dynamic environment of digital and social advertising.

Likewise, the guidelines provide much-needed clarity, certainty, and predictability by defining and qualifying key definitional terms like surrogate advertisements, bait advertisements, etc.

In conclusion, overall, the guidelines are an important milestone in the legal and regulatory regime governing advertisements. Industry stakeholders who were till recently operating in a grey area now have a black-and-white framework of rights and duties for avoiding involvement in misleading ads even by mistake.

The abiding value of these guidelines lies in its intended deterrent effect against errant elements under the threat of effective legally enforceable financial penalty, prohibition and monetary compensation obligations.

This is a fundamental shift from the erstwhile voluntary compliance regimes under most self-regulatory codes like ASCI Code, CFBP’s Code of Fair Business Practices, FICCI’s Norms of Business Ethics, etc., which suffered from want of legally enforceable sanctions.

Thus, the real value of the guidelines lies in ex-ante preventing the production of misleading and patently false ads rather than reprimanding wrongdoers post-facto.

For a nation struggling to curb misleading advertisements, the guidelines hold immense promise if implemented in letter and spirit.

The writer is with the National Law School of India University, Bangalore. Views expressed are personal

Published on June 15, 2022
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