The central government’s new draft guidelines on advertising and endorsement disclosures could mean a world of change for celebrities who endorse products, including social media “influencers” — people who use their clout on platforms such as Facebook and Instagram to get paid for endorsing products.

The draft guidelines cover all forms, formats and medium of advertising and marketing communications — print, TV and social media. All advertisers and endorsers would have to be more careful about what they associate themselves with. The guidelines propose to make them responsible for verifying all of the manufacturer’s claims regarding a certain product or service.

Earlier this week, the Ministry had issued a draft of the Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements) Guidelines, 2020. People can submit their comments and suggestions on the guidelines until September 18, 2020. Comments can be mailed to dscpu-ca@nic.in.

Background: The guidelines have been drafted under a law passed last year — The Consumer Protection Act, 2019  — which allowed for the creation of a Central Consumer Protection Authority (CCPA). The CCPA was given wide powers, including the ability to penalise and prosecute against “misleading advertisements”. For the first time ever in the country, the Act brought into ambit all endorsers, who could be made accountable for misleading advertisements. Earlier, such a provision existed only with regard to the endorsement of food products (more on this later).

The CCPA was finally established in July this year. It is headquartered in New Delhi.

‘Due diligence’ by endorsers: The real meat of the guidelines

The draft guidelines cover advertising and marketing over all forms, formats and media. They are applicable to both manufacturers/service providers as well as the advertisement agency and endorsers. They have a long list of conditions for endorsers such as actors and sportspersons and which most likely includes social media influencers, based on a simple interpretation of the text. They would:

  • Have to substantiate their claims: Endorsers would have to take care that any claims they make in the advertisement can be substantiated by them.
  • Ensure the manufacturer isn’t lying: The endorsers would have the tricky task of verifying that the trader or manufacturer’s claim in the advertisement are not “false, misleading or deceptive”.

The endorsers have been allowed to seek advice from an advertising “self-regulatory” organisation or and indepedent practitioner regarding the honesty of the statements in their endorsements. This would be enough to qualify as “due diligence”. Essentially, such an organisation or legal practitioner would have to stick their neck out to vouch for a company’s claims. If they were to follow the spirit of the guidelines, they would have to conduct their own research to verify the company’s claims for a product.

If a person is endorsing a product or service through a testimonial of their own usage, they would have to be a “bona fide” user of it a the time of endorsement. This is perhaps the most common form of endorsement on social media, where influencers post their experiences with a certain product, and urge their followers to use it as well. This is similar to guidelines prescribed to endorsers in the United States (see below).

Disclosure of material connection

Endorsers are also required to disclose their relation to the manufacturer, trader or advertiser of the product, however it doesn’t seem mandatory. The guideline says that when such a connection, that might affect the credibility of the endorsement, exists and the audience is not “reasonably expected” to realise it, it is mandatory for disclosure. This rule allows for loose interpretations in which endorsers may claim innocence by claiming good faith, that their connection to the company or manufacturer was obvious and hence didn’t need disclosure. 

Currently, endorsers are not liable for any penalties or legal action, except in the case of food products. The Food Safety and Standards (Advertising and Claims) Regulations notified last year prescribed penalties on endorsers for false claims about products.

On ‘expert’ endorsements

Endorsements by “experts” need to have the necessary qualification that can prove their expertise with respect to their endorsement message. An expert endorsement has to be supported by an actual exercise of that expertise in evaluating the product’s features. Interestingly, the expert has been allowed to take into consideration subjective factors such as taste or price into their opinion as well.

New criteria for ‘valid’ advertisements, and other requirements

The guidelines prescribe a very thorough criteria for an advertisement to be considered “valid”. Many of the prescribed conditions are defined vaguely, leaving them open to wide interpretations:

1. Ads need to have honest and truthful representations: “Valid” advertisements will be those that contain “truthful and honest representations” of a product. In essence, they cannot mislead consumers by exaggerating a product or service’s capabilities.

  • However, puffery is allowed. Puffery is advertising term for claims that are obvious exaggerations, and are unlikely to be taken seriously by a consumer. For instance, if a company advertises its shampoo, claiming “it will change your life”, it will be considered fine, since no one really expects a shampoo to change their lives.

2. Ads cannot brush aside scientific opinion: Advertisements cannot make claims about a product or service and present them as “universal” when there is a division of scientific opinion on the matter. For instance, a company cannot claim a particular medicine would cure the common cold if there is significant scientific material that points against it.

3. Ads should be “decent”: All advertisements cannot be “offensive”, and have to adhere to “generally accepted standards of public decency” in India. They should not cause “grave and widespread offence” to the consumer. The language in this particular requirement is left wide open, without specifying what could qualify as the “generally accepted standard of public decency” in India.

4. Ads cannot mislead about “risk” to consumer if they don’t buy a product: Advertisements cannot mislead consumers into believing that they are at risk if they do not buy a certain product or service. This assumes significance during the pandemic, where products such as sanitisers are being advertised as “lifesavers”.

The guidelines, however, allow for mistakes in advertisements, as long as they are unintentional. If a certain claim made in an advertisement is not fulfilled because of “occasional, unintentional” lapses during manufacture and distribution, they would not invalidate the advertisements. This is as long as the proportion of product failures is within “generally acceptable” limits and the advertiser has taken action to come clean to the consumer.

Ads should be distinct, and not confuse customers

Advertisements cannot be similar in general layout, copy, slogans, visual presentation, music or sound effects to other advertising and promotion campaigns so that consumers don’t get confused between two products or services. In essence, if an instant noodle manufacturer copies and makes its advertising campaign look like that of a competitor’s, it would no longer be allowed. Also, advertisements would need to have a clear indicator of who the real manufacturer really is.

Comparative advertising is allowed, but has to be based on facts

The guidelines allow for advertisements that compare a product or service with another as long as they can substantiate their claims with facts. Advertisers, however, cannot compare their product with a product that imitates a competitor is a replica of it. For instance, if Brand A detergent is being compared to Brand B detergent in a TV ad, it has to be Brand B detergent on the screen; not a packet that looks like Brand B.

Disclaimers have to be made in good faith

The guidelines make it clear that disclaimers cannot hide any information that could make the advertisement deceptive. They cannot be used to correct a misleading claim made int he advertisement itself.

  • Disclaimers have to be made in the same language as the advertisement. The font should be same as the claim. They should be prominently placed on the packaging.
  • When a claim is made as a voice over (VO), the disclaimer must also be made as a VO.
  • The disclaimer should be clear, prominent enough and legible. They should be clearly visible to a normally-sighted person who can read it at from a “reasonable distance and at a reasonable speed”.

Through these rules, advertisements for products such as mutual funds cannot get by without lengthy and prominent disclaimers at the end of a TV ad or at the bottom of a print ad.

Manufacturers, service provider and advertising agencies get duties

The guidelines prescribe several duties for product manufacturers, service providers and advertising agencies. These duties are essentially the same as endorsers’ along with a few additional ones. The manufacturers, service providers and advertising agencies need to:

  • Ensure that the claims they make in advertisements are truthful and honest representations of what they are trying to sell
  • Ensure that all claims can be substantiated if required by a Central Authority. They also need to have available the source and date of the independent research or assessment based on which they have made their claims.
  • Ensure they don’t reference to a person, firm or institution without taking their permission. They can not use these references in a way that gives the product “unjustified advantage”. They can also not use these references in a way that causes the person, firm or institution “ridicule or disrepute”.
  • Exercise “special care and restraint” while publishing advertisements directed at health issues or any real or perceived “inadequacy” of any physical attribute such as height, weight, impotence, infertility and baldness. They are also required to ensure the claims do not exceed what is considered “prudent” by standards of medical practice.

Advertisers are permitted to use obvious untruths or exaggerations to attract consumers or amuse them, provided it is clear that they are seen as humorous or hyperbolic, and not misunderstood as literal. 

Advertisements for lottery games are allowed only if they clearly inform participants about their true chances of winning. All pertinent material and terms and conditions should be made available to them.

No baiting customers: Could affect flash sales of electronics

The draft guidelines make clear mention of the restrictions on baiting consumers. “Bait advertisements” refer to ads that attract consumers to buy a product that is marketed to be sold “at a steal”. Once the consumer shows interest, the product is then shown to be out of stock and the customer is encouraged to buy a similar, but expensive, product.

The guidelines go a bit further. The manufacturers have to ensure that there is an adequate supply of the goods or services to meet the demand that such advertisements generate. If supply is short, the advertisements have to say that the stock is limited. The guidelines add that advertisements cannot entice customers to buy something without a “reasonable prospect” of selling it at the price offered.

An interpretation of these rules could include flash sales of electronic items, mostly of mobile phones, on e-commerce websites. The products are often sold out within minutes, if not seconds. Such sales would have to, at the very least, include disclosures of limited stock from now on.

Also, advertisements cannot mislead customers about market conditions or the possibility of finding a good or product elsewhere to induce customers into buying it at less favourable conditions that those available in the market.

No more surrogate ads

The guidelines clearly prohibit surrogate advertising — the practice of promoting banned products like liquor and tobacco by promoting one of the brand’s products that isn’t its main business. For instance, when a company that is known for its alcohol business advertises “music CDs”, instead of alcohol, with the same branding.

Advertisements would be judged as surrogates if the product they are actually advertising is produced, sold or distributed in “reasonable quantities”. They can also not have any direct or indirect indication of a banned good. The guidelines give some breathing room as well: such advertisements wouldn’t be disqualified just for using similar branding of a banned product. For instance: if a liquor company uses its general branding to advertise and indeed sell “music CDs”, they wouldn’t have any trouble.

When something is advertised as ‘free’, it has to be just that — free

Advertisements cannot describe a good or service as “free”, if there are hidden charges associated with it, according to the proposed rules. Hidden charges exclude delivery charges or charges incurred for collecting the item. However, advertisements cannot describe a product or service as free if consumers have to pay for “packing, packaging, handling or administration”. It is not clear how “delivery charges” are not a part of “administration” or “handling” charges.

Also, pertaining to the promotional offer, the price of the product of good cannot be increased just so consumers can take advantage of the offer. For instance, say, a bar of chocolate costs ₹10. The manufacturer introduces as “buy one, get one” offer, but prices a single bar of chocolate at ₹15, instead of the normal ₹10. Such a promotion would no longer be allowed, according to the draft guidelines.

Also, manufacturers cannot reduce the quality or quantity of a product that a consumer has to purchase to take advantage of a “free offer”.

Additionally, advertisers cannot use the term “free trail” or “satisfaction or your money is back” in offers if it availing the offer requires a “non-refundable” purchase. 

New rules for ads that target children

The draft rules prescribe a long list of rules and guidelines for advertisements that target children. In fact, they go into great detail. Advertisements targeted at children cannot:

  • Condone, encourage or emulate behaviour dangerous to children. They cannot condone or encourage bullying, or encourage practices that can be detrimental to the children’s health or well being.
  • Exaggerate features of a product or service that could lead children into having “unreasonable expectations” from them.
  • Imply that if the children don’t use a product or service, they would be ridiculed or considered inferior to others, less popular. Through this rule, a certain TV ad, aired regularly across the country, in which children make fun of a certain “Bunty” for not using a particular soap could be deemed invalid.
  • Encourage children to persuade their parents, guardians or other to purchase something for them.
  • Use words like “just” and “only” to make the price of a product or service seem less expensive.
  • Feature personalities from the fields of sports, music or cinema for products that require a health warning, or cannot be purchased by children.
  • Make it difficult for children to judge the size, characteristics and performance of advertised products or to distinguish between “real life situations and fantasy”.
  • Encourage children to participate in charity-linked promotions.
  • Encourage children to copy unsafe practices.
  • Feature children for tobacco or alcohol-based products.

What ads are prohibited altogether?

The guidelines also prohibit certain advertisements that contain “prohibited activities”, which:

  • Can incite persons to commit crime and promote disorder, violence or intolerance.
  • Depicts persons of a caste, race, creed, sex, gender or nationality in an unfavourable manner
  • Affects foreign relations of India
  • Encourages or propagates use of products banned under laws
  • Shows, glorifies or refers to dangerous practices, or manifests a disregard for safety or encourages negligent behaviour.

Related: How are endorsers treated in the US?

One of the earliest pieces of legislation surrounding endorsements came from the United States of America, where the Federal Trade Commission has a clear list of guidelines for endorsers. The first set of guidelines was issued in 1975, and there have been many iterations of it since. The guidelines have assumed great significance with the rise of social media and consequently, influencers in the country.

Endorsers in the US are required to disclose any their connection to the company or advertiser. They can also not air their experience with a product without directly using it, or make claims that cannot be proven. This means users of social media platforms such as Facebook, Instagram and YouTube can endorse any product without disclosing that they are, in fact, being paid to endorse it.