Guidelines on misleading advertisements in India

GUIDELINES ON MIS-LEADING ADVERTISEMENTS IN INDIA: MUCH  NEEDED CLARITY ON DO’S AND DON’TS FOR ADVERTISEMENTS IN INDIA

The Central Consumer Protection Authority (CCPA) under the Department of Consumer Affairs has notified ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’ (Guidelines) on June 9, 2022. While the parent legislation i.e. the Consumer Protection Act, 2019 (CPA) has been in force since 2020 and already contains provisions regulating misleading advertisements, it is for the first time, through these Guidelines, that the Government has clarified on the elements of a valid advertisement, laying down parameters for businesses to verify if their advertisements are compliant. The Guidelines also clarify key aspects of advertisements such as bait advertisements, surrogate advertisements, and advertisements addressing children and right usage of a disclaimer.

The key takeaways from the notified Guidelines are enlisted below:

Applicability of the Guidelines/coverage of entities under the Guidelines
The Guidelines will apply to all advertisements irrespective of their form, format or medium.  Further, the Guidelines apply to three broad categories of entities:

• a manufacturer, service provider or trader whose goods, product or service is the subject of an advertisement;
• an advertising agency; and
• endorser whose service is availed for the advertisement of such goods, product or service.

Parameters for a valid advertisement
While the CPA contains a definition of “misleading advertisement”, these Guidelines clarify the concept further and lays down an indicative list of elements which possibly constitutes a valid advertisement.

A valid advertisement:

• includes truthful and honest representations;
• does not mislead consumers by exaggerating the accuracy, scientific validity or practical usefulness or capability or performance or service of the goods or product;
• does not provide/offer as a distinctive feature any rights conferred on consumers by any law;
• does not suggest any false claims about the advertisement being universally acceptable if there is a significant division of informed or scientific opinion pertaining to such claims;
• does not mislead the consumer about the risk to its personal security or that of their family in case they fail to purchase the advertised goods/product/service;
• complies with the provisions contained in any other sector specific law and the rules and regulations made thereunder.

Guidance on disclaimers
The disclaimers shown in an advertisement shall not contradict the material claim made in the advertisement or the main message conveyed by the advertiser and should not attempt to hide or conceal a material information which if provided is likely to make the advertisement deceptive or conceal its commercial intent. The Guidelines also mention certain requirements to be fulfilled by a disclaimer such as the following:

• the font used in a disclaimer shall be the same as that used in the claim;
• the disclaimer shall be at a prominent and visible place on the packaging;
• in case claim is presented as voice over, the disclaimer shall be displayed in sync with the voice over and at the same speed as that of original claim made in the advertisement.

Advertisements targeting children
The Guidelines enumerates various factors to be considered in publishing advertisements especially targeting children. Considering the sensitiveness and vulnerability of children and severe impact advertisements possibly make on the younger minds, several pre-emptive provisions have been laid down on advertisements targeting children. Some of the noteworthy guidelines for advertisements targeting children are:

Such advertisements shall not-

• take advantage of children’s inexperience, credulity or sense of loyalty;
• claim any health or nutritional claims or benefits without being adequately and scientifically substantiated by a recognized body;
• make the children feel inferior/disloyal if they do not purchase the goods/product/service;
• use qualifiers such as ‘just’ or ‘only’ to make the price of goods, product or service seem less expensive where such advertisement includes additional cost or charge;
• exaggerate what is attainable by an ordinary child using the product being marketed.

Moreover, the advertisements shall not feature personalities from the field of sports, music or cinema for products which under any law requires a health warning for such advertisement or cannot be purchased by children.

Bait advertisements
Bait advertising has been defined as “an advertisement in which goods, product or service is offered for sale at a low price to attract consumers”. The conditions given under Guidelines to be fulfilled for bait advertisements are:

• it shall not seek to entice consumers to purchase goods/products/services without a reasonable prospect of selling such advertised goods/products/services at the price offered;
• the advertiser shall ensure that there is adequate supply of goods/products/services to meet foreseeable demand generated by such advertisement;
• such advertisement shall state the reasonable grounds which the advertiser has for believing that he might not be able to supply the advertised goods, products or services within a reasonable period and in reasonable quantities, and in particular:

– if the estimated demand exceeds the supply, such advertisement shall make clear that the stock of the goods or services is limited;

– if the purpose of the advertisement is to assess potential demand, it shall be clearly stated such advertisement; and

– the advertisement shall not mislead consumers by omitting restrictions, including geographic restrictions and age-limit on the availability of the goods, products or services;

– such advertisement does not mislead consumers about the market conditions with respect to the goods, products or services or the lack of their availability in order to induce consumers to purchase such goods, products or services at conditions less favorable than normal market conditions.

Surrogate Advertising
Surrogate advertising has been defined as “advertisement for goods, product or service, whose advertising is otherwise prohibited or restricted by law, by circumventing such prohibition or restriction and portraying it to be an advertisement for other goods, product or service, the advertising of which is not prohibited or restricted by law.” The Guidelines prescribe that an advertisement will be considered to be a surrogate advertisement, if:

• it indicates or suggests directly or indirectly that it is an advertisement for a prohibited product or service, and
• it uses any brand name, logo, colour, layout and presentation associated with such prohibited product or service.

The Guidelines prohibit any surrogate or indirect advertising on all forms of media, for goods or services whose advertising is otherwise prohibited or restricted by law (hereinafter ‘prohibited products or services’). However, the Guidelines specifically state that a mere use of the brand name or company name which may be applied to prohibited products or services would not render the advertisement to be a surrogate advertisement, if it is otherwise not objectionable as per the provisions.

It is noteworthy that the Guidelines do not impose a blanket ban on surrogate advertising. It is an attempt to regulate such advertising and prohibit advertisements that seek to indirectly advertise prohibited products or services. This is much in line with the intention and provisions of the guidelines on valid Brand Extensions issued by Advertising Standards Council of India (ASCI). Therefore, genuine brand extensions that fulfill the ASCI guidelines may continue to advertise.

Free claims advertisements
A free claims advertisement shall not describe any goods, product or service to be ‘free’, ‘without charge’ or use such other terms if the consumer has to pay anything other than the unavoidable cost of responding to such advertisement and collecting or paying for the delivery of such item; or make clear the extent of commitment that a consumer shall make to take advantage of a free offer.

Due diligence to be carried out before endorsing
The Guidelines provides that a due diligence be conducted before endorsing the advertisements. Moreover, the endorsement in an advertisement must be genuine and based on the adequate information and shall not be deceptive. The endorsement should depict reasonably current opinion of the individual/group/organization while making such representation. The Guidelines also prescribe that in case there exists a connection between the endorser and the trader, manufacturer or advertiser of the endorsed product that might materially affect the value or credibility of the endorsement and the connection is not reasonably expected by the audience, such connection shall be fully disclosed in making the endorsement.

Penalty on manufacturers, advertisers and endorsers
The Guidelines do not mention any penalty for its violation. However, the CCPA established under the CPA may impose penalty of upto INR 10 lacs on manufacturers, advertisers and endorsers for any misleading advertisements. For subsequent contraventions, CCPA may impose a penalty of upto INR 50 lacs. In addition to the above penalties, CCPA can also prohibit the endorser of a misleading advertisement from making any endorsement for upto 1 year and for subsequent contravention, prohibition can extend upto 3 years.

Conclusion
The concept of misleading advertisement was loosely included under the broad concept of ‘unfair trade practice’, which germinated under the Monopolies and Restrictive Trade Practices, 1969, found its way to the erstwhile Consumer Protection Act, 1986 and continues even under the present Consumer Protection Act, 2019. However, the new CPA carves out the concept of ‘misleading advertisement’ separately, which highlights the focus of the government to enforce against the misleading advertisement. Now the new Guidelines clarifies their scope even further, allowing better administration and enforcement in relation to this concept, in this day and time, when advertisement/representation come in all forms, shapes and formats, whether physical or digital.

In the recent past, the CCPA has been increasingly seen to take an active role both as an enforcing agency as well as issuing guidelines on aspects governed by the CCPA. As per reports, the CCPA has already issued notices in 113 instances, of which 57 are notices for misleading advertisements, 47 notices relate to unfair trade practices and nine are for violation of consumer rights. With the new Guidelines now, one can anticipate further traction in efforts by the CCPA to curb misleading advertisement. At the same time, it acts as a useful benchmark and framework for the industry stakeholders to proactively prevent misleading advertisements.

 We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

Stella Joseph, Partner – Email – StellaJoseph@elp-in.com
Prakhil Mishra, Senior Associate – Email – prakhilmishra@elp-in.com;
Pulkit Devpura, Advocate – Email – pulkitdevpura@elp-in.com

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice