1. INTRODUCTION

Social media influencing and marketing has picked up as one of the most rampant forms of promotion and advertising in the recent times. With the unprecedented growth in the users of digital media, marketeers have started to find investments in social media marketing highly lucrative.

In view of this surge of advertisements on the internet, the Department of Consumer Affairs ("DCA"), on January 20, 2023, released a guide 'Endorsements Know-hows! - for celebrities, influencers and virtual influencers on social media platforms' ("Guide"),1 which is intended to prevent misleading of masses on social media through endorsements in advertisements lead by celebrities, influencers and virtual influencers (collectively, "Influencers"). The Guide has been issued in furtherance of and in alignment with the Guidelines for prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, which was released by the DCA on June 9, 2022 ("Advertisement Guidelines")2 issued under the Consumer Protection Act, 2019 (the "CPA"), with the objective of protecting customers from getting misled and misguided by misleading and deceptive advertisements on the internet.

The Guide appears to have been issued as a clarification to the already applicable Advertisement Guidelines and is specifically focused on and contextualized for Influencers undertaking endorsements, marketing and advertisement on social media platforms, whereas the Advertisement Guidelines are more generic in nature and applicable to all advertisements regardless of form, format or medium. The issuance of this Guide seems to be necessitated owing to the potential impact of such Influencers on the purchasing decisions of their audience in relation to the products and services endorsed by them and will be enforced by the Central Consumer Protection Authority ("CCPA"), which is responsible for implementation and administration of the Advertisement Guidelines as well.3

2. BRIEF OVERVIEW AND DEVELOPMENT OF THE ADVERTISEMENT FRAMEWORK IN INDIA GOVERNING THE ONLINE SPACE

Historically, in the absence of any central legislation governing advertisements in India, advertisements were typically regulated by subject matter specific legislations governing specific media, specific sectors, and specific goods and services. Due to the lack of a dedicated legal framework, the self-regulatory body, Advertising Standards Council of India ("ASCI") promoted responsible and ethical advertisements through the 'Code for Self-regulation of Advertising Content in India' adopted and revised by it from time to time ("Code"). While the Code by itself did not have any statutory effect, it was adopted by the Cable Television Networks Rules, 1994 as one of the criteria for advertisements run on cable service, thereby according statutory effect to the Code solely in relation to advertisements carried through cable service.4

In 2021, ASCI published the 'Guidelines for Influencer Advertising in Digital Media' ("ASCI Guidelines"),5 for regulating advertisements in the online space, particularly social media, after identifying the potential reach and impacts of 'posts' on social media which were often packaged as generic creator content for consumption of viewers. While this was the first attempt to specifically introduce guidelines for advertisements on the internet, these guidelines lacked statutory backing and could not be legally enforced. Shortly thereafter, the CCPA released the Advertisement Guidelines to regulate advertisements, in all forms, format or medium and this extended to the digital space as well.6 The Advertisement Guidelines specifically dealt with endorsements in advertisements, which also encompasses endorsements by Influencers on the internet and was consistent with the intent of the Code and the ASCI Guidelines. The issuance of the Guide seems to be an attempt of the CCPA to reiterate the applicability of the Advertisement Guidelines and the CPA to the online space and also provide further context and clarity, where necessary, to ensure accountability of Influencers to safeguard the interests of the audience of such Influencers.

3. KEY PROVISIONS OF THE GUIDE

The Guide released by the DCA is specifically addressed and applicable to Influencers undertaking endorsements on social media, where there is a material connection between the endorser and the advertiser of the product or service, and discusses two primary requirements in relation to such endorsements by Influencers, namely:

  1. Disclosure requirements: requirement to make specific and transparent disclosures by Influencers in relation to the product/service/brand/experience endorsed by them; and
  2. Due diligence requirements: requirement to undertake specific due diligence by Influencers in relation to the product/service/brand/experience endorsed by them.

3.1. Who is the Guide addressed to?

The Guide is intended to cover all individuals and groups, celebrities or otherwise, who: (i) have access to an audience; and (ii) have the power to affect their viewers' / audience's purchasing decisions owing to their authority, knowledge, position, or relationship with their viewers / audience. This will include all celebrities and famous personalities, creators who endorse products and services as well as virtual influencers such as fictional computer-generated people or avatars who have realistic characteristics, features and personalities of humans, and behave in a similar manner as influencers, all of whom can have an influence and impact on the purchasing opinion of their viewers / audience. While the Guide is addressed to all Influencers, it is relevant to note that it will become applicable only in the event such Influencers are endorsing any products or services through their presence on social media and there exists a material connection between the Influencer endorsing the products or services and the advertiser of such products or services.

3.2. What is a material connection?

A 'material connection' exists between an advertiser and the Influencer when there is any benefit and / or incentive provided to the Influencer in relation to an endorsement. This can include monetary or other compensation, free products with or without any conditions attached (including those who receive unsolicited discounts / gifts), contest and sweepstakes entries, trips or hotel stays, media barters, coverage and awards, or any family, personal or employment relationship.

It is to be noted that while the Advertisement Guidelines recognise the concept of 'material connection' as well, as a connection between endorser and the trader, manufacturer or advertiser of the endorsed product that might materially affect the value or credibility of the endorsement, the Guide has attempted to elaborate on the concept of 'material connection' and has also incorporated an inclusive list of instances and examples provided above.

3.3. When is disclosure required?

Influencers are required to make requisite disclosures in relation to endorsements when there is a 'material connection' between an advertiser and the Influencer, and by virtue of such material connection, the value or credibility of the representation made by the Influencer in such endorsement may get affected. This requirement of disclosure of material connection is not new and has also been mandated as part of the Advertisement Guidelines specifically in the event the endorser has a material connection with the advertiser, trader or manufacturer of a product and such connection is not reasonably expected by the audience.7

It is to be noted that the disclosure requirements under the Advertisement Guidelines and the Guide are mandated in cases where endorsements are made by Influencers owing to their material connection with the advertiser, trader or manufacturer. Accordingly, any recommendations or feedbacks or other content featuring any brand / product / service, without any material connection with the advertiser, trader or manufacturer of such brand / product / service, will not warrant the said disclosures.

3.4. How should a disclosure be made?

The Guide prescribes certain standards in relation to disclosures which shall be complied with by Influencers and sets out in clear terms how these disclosures are to be carried out on social media.

  1. Disclosure requirements for different kinds of endorsements.
    1. Endorsement pictures. In relation to endorsement pictures, disclosures should be made within such pictures, i.e., superimposed on the picture in a prominent manner so that it is easily noticeable to the audience.
    2. Endorsement videos. In relation to endorsement videos, disclosures must be made within both the audio and the video, in addition to the text description of the endorsement.
    3. Live stream endorsements. In relation to live stream endorsements, disclosures must be displayed throughout the duration of such live stream, in a prominent manner.
  2. General standards for disclosures.
    1. Disclosures should be made in a manner that is clear, prominent, and conspicuous, and should not be combined with other hashtags or links.
    2. Disclosures must be made in plain, simple, and clear language. Moreover, the disclosure and endorsement must be in the same language.
    3. Influencers can use certain specified terms to disclose endorsements, such as 'advertisement' or 'ad', 'sponsored', 'paid promotion' or 'paid'.
    4. Separate disclosures will be required to be made apart from platform disclosure tools available to the Influencers.

Such general standards prescribed under the Guide are akin to standards for disclaimers required to be made by advertisers / endorsers under the Advertisement Guidelines, which inter alia, requires disclaimers in advertisements to be prominent and be made in the same language as the advertisement.8 That said, while the disclaimer requirements under the Guide are in line with the Advertisement Guidelines, the Guide has documented and clarified these requirements specifically in perspective of social media.

3.5. What are the due diligence measures required to be undertaken?

To clarify the due diligence requirements prescribed under the Advertisement Guidelines9 and applicability thereof to social media platforms, the Guide sets out the due diligence measures to be undertaken by Influencers in relation to the endorsements made by them, which includes recommendation to Influencers to review and satisfy themselves that the advertiser of any products or services, which such Influencer endorses, is able to substantiate the claims made in such advertisement. Additionally, as per the Guide, Influencers have also been advised to use or experience the product or service endorsed by them.

3.6. What is the cost of non-compliance?

While the Guide itself does not stipulate any penalties for non-compliance with the provisions of the Guide, given that it has been issued in alignment with the Advertisement Guidelines, which is issued under the CPA, penalty provisions prescribed in the CPA for non-compliance with such guidelines will extend to the Guide as well. As per the CPA, the CCPA may conduct an investigation pursuant to a complaint or information or directions in relation to a false or misleading advertisement prejudicial to public interest or consumers' interest.10 Pursuant to such investigation, when the CCPA concludes that an advertisement is false or misleading11 and is prejudicial to the interest of any consumer or is in contravention of consumer rights, it may issue directions to the endorser12 to either discontinue the advertisement, or modify the advertisement, in a manner determined by the CCPA.13 Additionally, if the CCPA is of the opinion that imposition of penalty is essential, a penalty of INR 10 Lakhs, which may extend to INR 50 Lakhs may be imposed on the endorser making such false or misleading advertisement.14

4. INDUSLAW VIEW

The wide and far-reaching applicability of the Advertisement Guidelines which sets out statutory requirements around misleading advertisements and endorsements extends to Influencers as well, and the Guide seems to be intended to provide certain clarifications on the applicability, scope and interpretation of the requirements under the Advertisement Guidelines, specifically for the purposes of endorsements in the online space. The Advertisement Guidelines along with the Guide are similar in spirit to the Code and the ASCI Guidelines. The Guide reiterates the principles of safeguarding interests of consumers and preventing unfair trade practices, as envisaged in the CPA and Advertisement Guidelines and provides tailor-made guidance particularly to focus on and govern advertisement in the online space. Further, given the purpose of addressing this Guide to Influencers on social media, the Guide has been designed to be more reader friendly, to ensure that it is more intelligible and comprehensible for the Influencers and is also easy to distribute and circulate.

The enactment of the Advertisement Guidelines had prompted revamping of endorsements by several Influencers and the internet had witnessed a change in the manner such endorsements were made and disclosed, especially with the growing and more apparent usage of the words 'paid' or 'sponsored' in relation to endorsement posts on social media platforms. However, given the nuances of the online space, the Guide now has contextualized these statutory requirements under the Advertisement Guidelines for social media and Influencers. In light of this, the Influencers will now have to upgrade their practices in order to ensure that the relevant disclosures, wherever required, are made in spirit of the Advertisement Guidelines as enunciated by the Guide. Further, requisite due diligence in relation to endorsements will also be required to be undertaken by the Influencers, not only in relation to authenticating veracity of the advertiser's claims but also, preferably, by way of personal, first-hand experience and feedback concerning the products and services endorsed. To this end, both, the Influencers as well as advertisers, must contractually safeguard themselves when entering into arrangements for endorsements, specifically in relation to claims to be made for the concerned products and services. Although the specific manner in which disclosures are to be made and the extent of due diligence required, might be considered to be onerous by some, the growing reliance of the audience on Influencers regarding the products and services they endorse, necessitates strict compliance with such requirements.

The applicability of the Guide also appears to be far-reaching. In view of the wide connotation given to the term 'Influencer' under the Guide which covers all 'creators' who advertise products and services with a strong influence on the purchasing decisions or opinions of their audience, any creator, whether an individual person, group or institution with an online presence and following may be brought within the purview of an 'Influencer', thereby having to comply with all the said requirements when undertaking endorsements.

It is relevant to note that the Guide has attempted to converge the requirements and prerequisites of endorsements in the offline and online world. While in the past celebrities have been seen to undertake endorsements largely on mediums such as television and newspapers, given the increased usage and viewership of content on social media, such celebrities have also established social media presence. Consequently, all such celebrities with presence on social media may be deemed as 'Influencers' in the online world and accordingly, be required to comply with the Advertisement Guidelines and the Guide while making endorsements and advertisements through social media as well, in addition to their existing obligations under the Advertisement Guidelines for endorsement through other modes.

Footnotes

1. Press Release by Press Bureau of India, available at https://www.pib.gov.in/PressReleasePage.aspx?PRID=1892527 ; 'Endorsement Know Hows' available at https://consumeraffairs.nic.in/sites/default/files/filefield_paths/Endorsement_Know-Hows.pdf.

2. Available at https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/CCPA%20Notification.pdf.

3. Press conference held by the Department of Consumer Affairs on January 20, 2023 - https://youtu.be/GOyqJQEqMkU.

4. Rule 7(9) of the Cable Television Network Rules, 1994 states that "No advertisement which violates the Code for self regulation in advertising, as adopted by the Advertising Standards Council of India (ASCI), Mumbai for public exhibition in India, from time to time shall be carried in the cable service."

5. Available at https://asci.social/assets/files/ASCI%20Guidelines%20-%20Influencer%20Advertising%20In%20Digital%20Media.pdf.

6. Provision 3 of the Advertisement Guidelines.

7. Provision 14 of the Advertisement Guidelines.

8. Provision 11(B) of Advertisement Guidelines.

9. Provision 13 of Advertisement Guidelines.

10. Section 19 of CPA.

11. Section 2(28) of the CPA defines 'misleading advertisement' in relation to any product or service, to means "an advertisement, which— (i) falsely describes such product or service; or (ii) gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or (iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or (iv) deliberately conceals important information."

12. Provision 2(1)(f) of the Advertisement Guidelines, defines endorser to mean "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."

13. Section 21 of CPA.

14. Section 21 of CPA.

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.