A vibrant and responsible advertisement industry is one of the measures of shape of economy of any country, and India is no different. On the contrary not only Indian advertisement industry is booming but some of the celebrities are worshiped like God in India and their word or endorsement is treated as gospel truth. Anything or any change in status quo in this regard creates flutters in the industry and shake the market, having ripple effects across industry sectors. In any case print media particularly is still reeling under the after effects of corona pandemic which fast tracked digitalisation of news media industry, compounding the challenges being faced by print media.
Recently the Central Consumer Protection Authority (Authority) notified the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (Guidelines) on June 9, 2022 under Section 18 of the Consumer Protection Act, 2019 (Consumer Protect Act). The Guidelines are applicable to all kinds of advertisement by all advertisers whose goods or services are the subject matter of advertisement, or an advertisement agency or a celebrity or an endorser whose services are availed. Thus, the Guidelines are applicable to entire spectrum of advertisement industry including celebrity and other endorsers.
However, let us first have a glance at the Consumer Protection Act and rules thereof, which is complete code to provide for consumer protection and in case of consumer complaints, time tested mechanism for redressal thereof working almost perfectly. In case any consumer has any complaint against any product or service such person can not only seek redressal thereof but also seek and get compensation therefor. Further, Chapter VII of the Consumer Protection Act provide for punishment for various offences and violations thereof including, imprisonment and fine both. Already a debate is going on for de-crimination of certain legislations including the Consumer Protection Act and now the Guidelines have been notified.
Indian regulatory or professional or industry bodies already have banned advertisement of many products including Liquor, Cigarettes and Pan Masala on account of social commitment and in professions like legal and medical. However, many manufacturers of such products have not only launched products with similar brand names and packing but are spending more money on advertising such products than total revenue generated from sale thereof, which practice is called surrogate advertising. There is no doubt that menace of surrogate advertising is real and staring at our face day-in and day-out, and the regulatory authorities are facing challenges in dealing with such advertisements for various reasons including deep pockets of advertisers, advertising agencies and celebrities doing surrogate advertisements, and slow pace of justice delivery system and bureaucratic decision making process. It appears that the intended purpose of the Guidelines is to deal with such situation and cast more obligation on the entire chain of advertisement industry, but how far and how much, that is the issue.
The Guidelines are very comprehensive and provide for Conditions for non-misleading and valid advertisement; Conditions for bait advertisement1; prohibition of surrogate advertising2; free claims advertisements; children targeted advertisements; advertisements prohibited by law; disclaimers in advertisements; and duties of manufacturer, service provider , advertiser and advertising agency; which in fact are the need of the society and is welcome step in that direction. In addition the Guidelines also provide for due diligence for endorsement of products or services in advertisements and mandates disclosure of material connection, which reads:
"13. Due diligence required for endorsement of advertisements. – (1) Any endorsement in an advertisement must reflect the genuine, reasonably current opinion of the individual, group or organisation making such representation and must be based on adequate information about, or experience with, the identified goods, product or service and must not otherwise be deceptive.
...
14. Disclosure of material connection. – Where there exists a connection between the endorser and the trader, manufacturer or advertiser of the endorsed product that might materially affect the value or credibility of the endorsement and the connection is not reasonably expected by the audience, such connection shall be fully disclosed in making the endorsement."
The real issues lie in due diligence required for endorsement of a product or service in an advertisement by a celebrity called endorser3 and disclosure of material connection.
Generally, the managers of celebrities are approached by advertisement agencies for endorsement of various products and services after getting specific mandate from the advertiser, negotiate arrangements and close the deal. The advertisements agencies also keep data base of celebrities available for endorsement and the principled stand taken by them of not endorsing certain products and services and not doing surrogate advertisements. Hence, based on background of the target endorser and budgets, celebrities for advertisements are finalised and then content team of advertisement agency comes out with different themes one of which is finalised, shoot is done and advertisements go live. In the entire process the celebrity only considers his principles, relationship either with the advertiser or the advertisement agency and recommendation of his or her manager. Generally the celebrity does not go for undertaking detailed legal due diligence either of the product or the advertiser.
In terms of clause 13 of the Guidelines extracted above, an onerous obligation has been cast on the endorser, which an endorser may find it difficult to fulfill or is not feasible at all. In case the endorser has to do due diligence on every product or service he would need professional firms to do that and once getting a clean chit, endorsement may be done. This is not only a costly and time consuming exercise but also at time not feasible. Further, in spite of best professionals doing due diligence their reports are rarely fool proof and later certain aberrations or unforeseen issues surface. This routinely happens in due diligence done at the time or merger and acquisitions of companies leading to arbitration or protracted litigation. How much an advertiser or the celebrity is ready to foot legal cost for such due diligence before such advertisement is live, is a big if. Further, at least some part of the cost of due diligence for any advertisement will be passed on to the product or service making them costlier, which then become counter-productive to the interests of consumers, against the stated object of consumer protection and welfare of consumer of the Consumer Protection Act. Alternatively, the advertises may cut their advertisement budget or go for celebrities available at a lesser cost and or willing to take risks. At times many companies selling products or services ask their non-celebrity customers to speak about their experience and endorse them, who are in all likelihood may not be aware of the Guidelines or obligations cast on them and happily endorse such products or services to suffer later in case of any mis-step.
Another industry practice of advertisement industry is barter between the celebrity and media companies who carry advertisement – giving equity in the company of advertiser or particularly in housing or commercial building projects is of allotting units to conserve cash outgo - which though create conflict of interest, has also come under scrutiny under the Guidelines. Many celebrities ask for stake in a start-up or a mid-size company, which cannot afford fee for advertisement of a celebrity and in exchange for endorsement get stake in the advertising entity. Further, particularly in construction industry the practice of allotting units or a hybrid model of part fee and part allotment of units in the project instead of fee for endorsement and carrying advertainment by media companies is an established business practice. Now with the mandate of Clause 14 of the Guidelines the endorser has to disclose the fact of connection with the advertiser, which is violation of privacy rights of such person.
The celebrities are always under media glare and each and every action of them is newsworthy and they already have very little privacy. Further the celebrities are also cash rich and hence are potential target of mafia to demand protection money or give some other favours like attending to their ventures free of cost or at bare minimum cost. Disclosure of connection between the advertiser and the endorsing celebrity will further disclose financial interests of the celebrities to public in violation of their fundamental right to privacy, which needs to be protected.
Further, Clause 13 of the Guidelines do not provide any measurable parameters of due diligence requirement for endorsement and hence the entire exercise is subjective, not implementable and may ultra vires the Consumer Protection Act. In the absence of specific guidelines a generic due diligence done by professional services firms, which may lead to surfacing issues later to cause not only embarrassment, monetary penalty and debarring from future endorsements but also fine and possible imprisonment to the celebrities under the Consumer Protection Act.
It is imperative that the Authority issues detailed machinery provisions and parameters for due diligence for endorsement of advertisements but also amend the Guidelines to protect privacy of the celebrities. One option can be of amending Clause 14 of the Guidelines to disclose such connection in a confidential sealed cover to the Authority by the celebrity before release of advertisement to media for going live.
Before parting with the issue, the author believes that the Guidelines needs amendment by the Authority to make the same more practical and implementable with measurable parameters and not being subjective to bureaucratic interpretation. Further, the Guidelines are likely to be challenged before the High Courts and are expected ultimately to land before the Hon'ble Supreme Court for final adjudication. Till then it is field day for attorneys and professional services firms, as they got another source of revenue by bleeding advertisers and compounding the misery of consumers by increase in cost of the products and services. This of course will further impact already slow pace of recovery of economy and adding fuel to surging inflation. Till the issue settles both the advertisement industry and the celebrities are cross roads.
Footnotes
1. 'bait advertisement' means an advertisement in which goods, product or service is offered for sale at a low price to attract consumers
2. surrogate advertisement" means an advertisement for goods, product or service, whose advertising is otherwise prohibited or restricted by law, by circumventing such prohibition or restriction and portraying it to be an advertisement for other goods, product or service, the advertising of which is not prohibited or restricted by law.
3. endorser" includes an individual or a group or an institution making endorsement of any goods, product or service in an advertisement whose opinion, belief, finding or experience being the message which such advertisement appears to reflect
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
