This article analyses the regulatory framework applicable to advertisements in India in light of the notification of the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022.
Until June 2022, advertising across all platforms was regulated by the Advertising Standards Council of India (ASCI), a self-regulatory watchdog, that compelled compliance with the Code for Self-Regulation of Advertisements (ASCI Code). The self-regulatory framework has since been supplemented by the introduction of the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (Guidelines) framed by the Central Consumer Protection Authority (CCPA) under the Consumer Protection Act, 2019 (Act). In addition to following industry best practices, advertisers and endorsers must now also comply with the Guidelines.
The Guidelines seek to achieve a 2-fold objective: (i) to prevent the publication of false and misleading advertisements; and (ii) to prevent endorsements of such false and misleading advertisements.
While the Guidelines mandate statutory compliance, as in the case of the ASCI Code, the intention behind the Guidelines appears to be to regulate advertisements to protect the consumers from falling victim to unfair trade practices. Further, the Guidelines operate in addition to, and not in derogation of, other regulations under other laws. Resultantly, the ASCI Code will continue to regulate television advertisements in addition to regulating advertisements in other forms of media.
The Guidelines apply to manufacturers, service providers, and traders whose goods, products, or services are subject to marketing and advertising agencies and endorsers whose services are used to promote such goods, products, or services.
Further, the Guidelines prescribe standards for different advertising strategies. For instance, in the case of bait advertisements, where goods, services, or other offerings are made available for less money to capture a larger consumer base, the advertisers must ensure that the goods, product, or service is made available to the consumer at the price stated in the advertisement (prior to its publication) and there is enough supply to meet the anticipated demand (at the time of publication of advertisement). The Guidelines also make special provisions, and lay down higher standards, for advertisements targeting or featuring children. If an advertisement fails to satisfy the criteria set out in the Guidelines, such advertisement will be considered 'misleading' and will attract penalties under the Act. Similarly, any advertorial attempt to persuade consumers to purchase goods or service whose promotion is restricted or forbidden by law is prohibited under the Guidelines. Circumvention of this proscription or passing the advertisement off as one for a different good, product, or service, will attract a fine under the Act.
The Guidelines also regulate the use of disclaimers in advertisements. Given that disclaimers are largely used to minimise corporate liability, the Guidelines require that advertisers refrain from rectifying any misleading claims in the advertisement through disclaimers.
To keep deceptive endorsement practices under check, the Guidelines provide for equitable apportionment of liability between advertisers and endorsers. Endorsers are now required to independently undertake due diligence and make necessary disclosures regarding their connection with the manufacturer/ trader to the extent that it may materially affect the value or credibility of the endorsement. Interestingly, the endorsers' responsibilities in the Guidelines are less comprehensive than those originally proposed by the draft Guidelines released for stakeholder comments in 2020.1
Any contravention of the Guidelines by an advertiser or endorser will attract strict action under the Act. Manufacturers, advertisers, and endorsers responsible for false or misleading advertisement may face fine of up to INR 10 lakhs, with subsequent violation carrying a penalty of up to INR 50 lakhs. Moreover, the CCPA may, if it deems appropriate, ban an endorser from endorsing any goods or services for 1 year.
A comprehensive framework supplemented by strict consequences for violation is likely to enhance transparency in the process of production of advertisements in India. The Guidelines seek to protect consumers' interests by enabling them to make decisions based on facts rather than on exaggerated or deceptive claims.
In light of the notification of the Guidelines, it is now even more crucial that advertisers and marketers ensure compliance with the applicable law and the normative positions (such as the ASCI Code). To avoid the imposition of fines or adverse impact on the brand image, advertisers and endorsers must rapidly implement effective risk mitigation techniques (from ideation to dissemination). This will not only create a reliable mechanism for regulation and compliance but will also significantly limit the liability that the advertisers and endorsers may be exposed to.
Edited by Ayesha Bharucha, Managing Associate.
Footnote
1. Draft Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements) Guidelines, 2020.
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.
