Regulation of Advertisements in India – Explained, pointwise

Introduction

The Central Consumer Protection Authority (CCPA) under the Department of Consumer Affairs has issued ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’. The Guidelines are a progressive step towards regulation of advertisements in India. They aim to curb misleading advertisements and protect the consumers. The guidelines seek to ensure that consumers are not fooled with unsubstantiated claims, exaggerated promises, misinformation and false claims. 

About the CCPA and the Guidelines

The CCPA has been established under Section 10 of the Consumer Protection Act, 2019. Its functions include: (a) Regulating matters relating to violation of the rights of the consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of consumers; (b) To promote, protect and enforce the rights of consumers as a class.

The new guidelines related to advertisements have been notified in exercise of the powers conferred by Section 18 of the Consumer Protection Act, 2019 to CCPA. The guidelines will be applicable to advertisements published on all platforms like print, television and online.

Misleading advertisement has already been defined under Section 2(28) of the Consumer Protection Act, 2019. It includes any advertisement with: (a) False description of a product or service; (b) False guarantees misleading the consumers;  (c) Express representation constituting unfair trade practice; (d) Deliberately not revealing the essential information about the product.

What are the emerging trends in advertising?

Digital Media Marketing: The lockdowns and restricted movement increased the use of social media. The demand for content has also increased commensurately. As a result, social media users are paying more attention to posts regarding brand endorsements.

Surrogate Advertising: The banned product (like alcohol or tobacco) rather than being projected directly to consumers is veiled behind another product (like Music CDs or pan masala), either by having the same brand name or similar practices. The aim is to ensure that whenever there is a mention of that brand, people start associating or recalling it with its main product.

Bait Advertising: It is a deceptive and insincere offer whereby the advertiser does not intend to sell the advertised product or service at the unusually low advertised price. The intention is to increase traffic, then switch the customer to a higher priced item when the customer is about to make the buying decision or visits the store. This is often accomplished by inducing customers to buy higher priced models by disparaging the less-expensive product.

Online Gaming Advertising: There has been a substantial rise in online gaming and real money winning games in India, perhaps owing to the ease of accessibility to smart phones and the internet. 

Ambush Marketing: It is also called ‘parasitic’, ‘guerrilla’ or ‘moment’ marketing. It occurs when a brand exploits the goodwill of an event with the intent to unfairly piggyback or gain market benefits from that event, despite having no financial or official sponsorship or involvement. Recently, multiple brands were seen engaged in ambush marketing in relation to the Tokyo Olympics 2020 (2021) event.

What are the salient provisions of the new guidelines?

Non-misleading and valid advertisement:  An advertisement can be considered non-misleading if it contains true and honest representation of goods. Genuine advertisements do not exaggerate the accuracy, scientific validity or practical usefulness or capability. In case of unintentional lapse, the advertisement may still be considered as valid if the advertiser has taken prompt action in letting the consumer know the deficiency. 

Surrogate advertisement: The guidelines completely disallow any attempts to advertise products that are prohibited by law.

Advertisements Targeting Children: The guidelines forbid advertisements from exaggerating the features of a product or service in such a manner as to lead children to have unrealistic expectations. It also forbids any health or nutritional claims or benefits without being adequately and scientifically substantiated by a recognized body.  

Further, advertisements targeting children shall not feature any personalities from the field of sports, music or cinema for products which require a health warning (for such advertisements) or cannot be purchased by children. The guidelines also require that advertisements including ‘chips, carbonated beverages and such other snacks and drinks’ shall not be cast on channels exclusively meant for children. 

Disclaimer in Advertisements: Disclaimers in advertisements, in a way, limit the responsibility of the company. The guidelines stipulate that disclaimer shall not attempt to hide material information with respect to any claim made in such advertisements. The omission or absence is likely to make the advertisement deceptive. A disclaimer shall be in the same language as the claim made in the advertisement and the font used in a disclaimer shall be the same as that used in the claim.

Duty on Manufacturer: The guidelines also impose duties on the manufacturers, service providers and advertising agencies. They shouldn’t claim and make comparisons in an advertisement which relate to matters of objectively ascertainable facts. Moreover, the advertisement must be framed to gain the trust of the consumers and not to “abuse the trust of consumers or exploit their lack of experience or knowledge”.

Due Diligence by Endorsers: The guidelines state that the endorsements should reflect the genuine, reasonably current opinion of the endorser regarding their representation. Such endorsement must be based on adequate information or experience with the goods or services and must not be deceptive. Foreign professionals are barred from making endorsements in all circumstances where Indian professionals are barred.

Penalties: CCPA can impose penalty of up to INR 10 lakh on manufacturers, advertisers and endorsers for any misleading advertisements. For subsequent contraventions, CCPA may impose a penalty of up to INR 50 lakhs. The Authority can prohibit the endorser of a misleading advertisement from making any endorsement for up to 1 year and for subsequent contravention, prohibition can extend up to 3 years.

What are other rules/ laws/organizations associated with regulation of advertisements in India?

The Advertising Standards Council of India (ASCI): It was established as a self regulatory mechanism of ensuring ethical advertising practices. ASCI is a voluntary Self-regulation council. The members comprise Advertiser’s, Media, Advertising Agencies and other Professional/Ancillary services connected with advertising practice. ASCI entertain and dispose of complaints based on its Code of Advertising Practice (“ASCI Code”).

What is the significance of the New Guidelines on Regulation of Advertisements?

First, the guidelines provide better clarity to the existing rules and provisions. It defines ‘bait advertisement’, ‘surrogate advertisement’ and clearly provides what constitutes as ‘free claim advertisements’. Further, the enforcement issues in existing advertisement laws have been addressed by the guidelines in as much as it imposes severe penalties.

Second, it will help in upholding and protecting the rights of consumers like right to be informed, right to choose and right to be safeguarded against unsafe products and services. These rights are often violated by sellers through misleading advertisements.

Third, several preemptive provisions have been laid down on advertisements targeting children. This has been done keeping in view the sensitivity and vulnerability of children and the severe impact advertisements make on the younger minds.

Fourth, the guidelines perform an essential function in bringing the Indian regulatory framework at par with international norms and standards. Further, the government is expected to come out with guidelines in consultation with industry representatives to curb fake reviews on e-commerce platforms.

Fifth, it gives a framework for the industry stakeholders to prevent misleading ads even by mistake. 

What are the concerns associated with the Guidelines?

First, surrogate advertisements have been banned. However, there is ambiguity regarding brand extensions. A brand extension is when a company uses one of its established brand names on a new product or new product category. The Guidelines recognize advertisements of Brand extensions (provided they comply with other guidelines), there is no objective criteria prescribed to determine the validity/genuineness of such advertisements. This might have an impact on advertisement and thus sales of many branded products.

Second, in case of any ambiguity or dispute in interpretation, the decision of CCPA shall be final. This might lead to increased litigation and put further pressure on the Judiciary.

Third, the opinion is divided over the provisions related to celebrity endorsements vis-a-vis due diligence. Some experts believe, celebrities lack technical knowledge to undertake due diligence. Other critics argue that the penalty (INR 10 Lakh) is too small for big celebrities who charge crores of rupees for endorsements.

Fourth, a lot of claims made by advertisements are unverifiable (e.g., products may claim they make the child stronger, or taller). It is difficult to define what is misleading. The ambiguity might increase consumer complaints.

What lies ahead?

First, some provisions of the guidelines are bound to face litigation in courts. For instance, guidelines prohibit advertisements of chips, carbonated beverages and such other snacks on exclusive children channels. It remains to be seen whether it can survive a challenge under Article 14 and Article 19(1)(g) of the Indian Constitution. Many experts believe that it impinges upon the right of the channels such as Cartoon Network to earn revenue from such advertisements.

Second, the advertisers, too, must take a cue from the guidelines and impose self-regulation to comply with the same. 

Third, while the guidelines must be hailed as a step in the right direction, there is a definite need to ensure their implementation in the spirit they have been drafted with. This will require strengthening of consumer courts at District, State and National level coupled with massive awareness campaigns on the lines of Jago Grahak Jago. 

Conclusion

The latest guidelines aim to protect consumers’ interest by bringing in more transparency and clarity in the way advertisements are being published. They will enable the consumers to make informed decisions based on facts rather than false narratives and exaggerations. The guidelines are pathbreaking because they fill significant consumer protection gaps while explicitly outlining advertiser duties.

Source: The Hindu, The Hindu, Financial Express, PIB, FICCI