On January 20, 2023, the Department of Consumer Affairs of India released new rules for influencers called, "Endorsement Know Hows" targeting celebrities, influencers and virtual influencers. The regulations are a part of the continuing efforts to curb misleading advertisements and to protect the interests of consumers amid the expanding social influencer market which is projected to grow 20% annually in India to reach approx. $300 million by 2025.1
The Rules prescribe that all individuals or groups who have access to an audience and the power to affect their audiences' purchasing decisions or opinions about a product, service, brand or experience due to their authority, knowledge, position or relation with their audience are required to disclose a material connection with the brand, product, or service they are endorsing. In addition to celebrities and influencers, the Rules also include virtual influencers in this category, wherein, virtual influencers have been defined as fictional computer-generated 'people' or avatars who have realistic characteristics, features and personalities of humans, and behave in a similar manner as influencers. Lu do Magalu, Lil Miquela, and Barbie are a few examples of such virtual influencers.
A material connection could include but is not limited to benefits and incentives such as monetary compensation, free products with or without conditions attached including unsolicited discounts and gifts, contests and sweepstakes entries, trips or hotel stays, media barters, coverage and awards, or any family, personal or employment relationship.\
The disclosure must be placed in the endorsement message such that it is prominent and hard to miss, simple and clear, and in the same language as the endorsement. Where the endorsement is a picture, the disclosure should be superimposed over the image such that it is clear enough for the viewers to notice. In the case of a video, the endorsement has to be placed in both the video and the accompanying text. Where the endorsement is made in a live stream, the disclosure should be displayed continuously and prominently during the entire stream. Terms such as 'advertisement', 'ad', 'sponsored', 'paid promotion' or 'paid' are allowed. In addition to the endorsement platform's disclosure tool, separate disclosure has to be made.
The Endorsement Know-Hows released by the Department of Consumer Affairs are similar to the previously released Guidelines for Influencer Advertising in Digital Media issued by the Advertising Standards Council of India (ASCI). The Guidelines provide further details about disclosures and specify that for videos that last 15 seconds or lesser, the disclosure label should stay for a minimum of 3 seconds, for videos longer than 15 seconds, the disclosure label should stay for 1/3rd of the length of the video, and for videos longer than 2 minutes, disclosure label has to stay for the entire duration of the section in which the promoted brand or its features, benefits, etc., are mention. In the case of audio media, the disclosure must be clearly announced at the beginning and at the end of the audio, and before and after every break that is taken in between. However, there are a few differences in the Endorsement Know-How Rules and the ASCI Guidelines, therefore, the provisions of the Endorsement Know-How Rules shall be taken as official.
A failure to disclose any material connection amounts to unfair trade practice under the Consumer Protection Act, 2019, which can attract discontinuation of the digital post, and a penalty which may extend to approximately $12,000 for the first violation and approximately $60,000 for subsequent violations of the provisions of the Consumer Protection Act.
In view of the above, influencers, celebrities as well as brands engaging such personnel are recommended to be vary of the regulations and advertise accordingly.
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.