People admire celebrities and if those celebrities say that they like a product then the admirer will like that particular product, too. The concept of celebrity endorsement is simple and widely used as a part of promotional and marketing strategy throughout the world. In India celebrity endorsements are the backbone of the endorsement industry.
It is tough to analyse the impact of celebrity endorsements on the sales of a particular product but it is apparent that when a prominent public figure endorses a product the psychological effect will drive the audience to buy the product and will add to the profits of the trader as well as the celebrity. One of the global corporate finance companies found that "the total value of the top 15 celebrity brands in India is worth over US$691 million".
Although it is evident that celebrity endorsements are big-money transactions, with recent developments in the industry and with the proposal to replace the Consumer Protection Act, 1986, with the Consumer Protection Bill, 2015, celebrities will no longer enjoy a free lunch in the endorsement industry.
Following the nationwide ban on Maggi noodles in 2015 and the filing of criminal complaints against Bollywood stars for endorsing Maggi, the government has proposed several steps for strengthening consumers' rights under a new and extensive statute that would repeal the 1986 act.
The bill was introduced in the Lok Sabha in August 2015 has been considered by the parliamentary standing committee on food, consumer affairs and public distribution. The committee has suggested the inclusion of strict provisions for making celebrities accountable for their endorsements.
In the present legal framework, a celebrity can be held liable for inappropriate advertisements and promotional activities of products that adversely affect the interest of consumers, under statutory provisions of the Food Safety and Standards Act, 2006, and the Indian Penal Code, 1860, and as well as under the Consumer Protection Act, 1986. However under the proposed provisions of the bill celebrities who make false or misleading claims in their endorsements would be subject to heavy penalties.
The parliamentary standing committee is of the view that the misrepresentation of consumable products should be taken very seriously and the present provisions are not sufficient to deter producers and advertisers from using public figures in misleading endorsements.
Thus strict provisions are recommended for fixing the liability of celebrities in cases of misleading endorsements.
Under the initial proposal the penal provisions consisted of a maximum fine of ₹100,000 (US$1,500) and imprisonment up to two years for committing an offence under the bill for the first time. For a subsequent similar offence the penalties could be increased to a maximum fine of ₹500,000 and imprisonment up to five years. Though it was not clear from the initial proposal that the presence of a celebrity in the misleading advertisement would attract the provisions of fine and imprisonment, such an inference can be drawn.
According to recent media reports the government has proposed enhanced penalties for the manufacturer, publishers including magazines and newspapers, public relations firms, advertising agencies, etc., as well as celebrities participating in a misleading advertisement. Now the proposed penalty is a fine of up to ₹1 million for a first-time offender and ₹5 million for subsequent offences as well as imprisonment for the producer of unsafe and hazardous products.
Though the fine for celebrities has been increased in the bill, the imprisonment provisions were dropped. Instead a one-year ban from endorsement would be imposed on a celebrity participating in a misleading advertisement for the first time and a five-year ban for subsequent offences.
The proposed statute would foster a sense of responsibility among celebrities and make them more vigilant when accepting offers of brand endorsements. Though it is not possible for celebrities to understand the complex issues related to product standardization according to the statutory norms or to check the quality of the products personally, due diligence on behalf of the celebrity will be required after the enactment of the bill. The government has expedited the enactment process by including the bill in the list of "Bills for Consideration and Passing" in the last two sessions of the parliament.
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