Changing How India Advertises

1. Introduction

1.1. The Central Consumer Protection Authority (CCPA) notified the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (Guidelines) on 9-6-2022, for prevention of false or misleading advertisements and endorsements. The guidelines largely aim to flesh out the different types of advertisements, contours of acceptable advertisements, prohibitions on certain kinds of advertisements, format for publication of advertisements, duties of advertisers and endorsers, due diligence, disclosures, and material connection requirements.

2. Background

2.1. Under the Consumer Protection Act, 2019 (CPA), “misleading advertisements” are defined to mean any advertisements which falsely describe products/services, or, give a false guarantee as to the product/service, or, conveys a representation constituting an unfair trade practice, or, which deliberately conceals important information. Currently, the CPA governs “misleading advertisements” only to the extent of setting out an advertiser agnostic definition of “misleading advertisements”, and imposing penalties and actions for any publication of misleading advertisements.

2.2. Over and above the CPA, the Advertising Standards Council of India (ASCI) has also introduced the “code for self-regulation in advertising” (ASCI Code), “guidelines for influencer advertising in digital media”, “guidelines on celebrities in advertising”, “ASCI’s guide for social media influencers”, which set out self-regulatory mechanisms for ensuring that advertisements follow a certain standard, include requisite disclaimers, disclose material relationships and follow a due diligence process. However, these regulations and guidelines have generally been adopted at the discretion of the advertisers, given that ASCI is not a statutory authority and therefore ASCI’s guidelines, though recognised under certain legislations and judicial bodies, do not have statutory force.

3. Key provisions under the guidelines

3.1. Conditions for non-misleading and valid advertisements

The guidelines lay out a descriptive set of characteristics which deem advertisements valid and compliant with law, and which require advertisements to inter alia (i) contain truthful and honest representations; (ii) not mislead consumers by exaggerating the accuracy; (iii) not present rights conferred on consumers by any law as a distinctive feature of the advertiser’s offer; and (iv) be compliant with specific and applicable laws.

3.2. Conditions for bait advertisements

Bait advertisements are generally used for advertising lesser interest rates in the case of a mortgage, loan, or investment product. The guidelines define “bait advertisements” as advertisements which offer products/services at low prices to attract consumers. While the guidelines do not restrict the publication of bait advertisements, they set out the following specific conditions to be followed by advertisers with respect to such advertisements:

3.2.1. The advertisement should not entice consumers to purchase goods/services without a reasonable prospect of selling goods at the price offered.

3.2.2. The advertiser should ensure there is sufficient stock of goods/services to meet foreseeable demand generated by the particular advertisement.

3.2.3. The advertiser should state reasonable grounds for believing that they may not be able to supply advertised goods within a reasonable period and in reasonable quantities.

3.2.4. The advertisement should not induce consumers to purchase goods/services at less favourable conditions than normal market conditions.

3.3. Prohibition on surrogate advertisements

The guidelines define “surrogate advertisement” as advertising any product/service which is prohibited by law by portraying the advertisement to be an advertisement for other goods/services, the advertising of which is not prohibited by law. Generally, surrogate advertising takes place in case of goods such as alcohol, tobacco, drugs, etc., since they are prohibited from being advertised under law through any mode or medium. To curb this type of advertising, the guidelines prohibits any advertisement of a good/service (i) whose advertising is prohibited by law; or (ii) which uses any brand, logo, colour, layout, and presentation associated with goods whose advertisement is prohibited. However, the guidelines provide leeway to advertisers to the extent that a mere use of the brand name or company name for goods/services whose advertising is prohibited will not be considered as surrogate advertisement if the advertisement is not otherwise objectionable under the guidelines.

3.4. Free claims and children target advertisements

3.4.1. Free claims advertisements: The guidelines restrict free claims advertisements which inter alia (i) require consumers to pay any amounts over and above the cost of responding to the advertisement; or (ii) describes any element of a package as free when the price is included in the package price; or (iii) uses the term “free trial” to describe a “satisfaction or your money back” offer or an offer for which a non-refundable purchase is required; or (iv) do not make clear the extent of commitment a consumer is required to make to take advantage of an offer.

3.4.2. Children targeted advertisements: The guidelines restrict advertisements which inter alia fall under the bucket of (i) negatively impacting body image of children; (ii) adversely impacting food habits; (iii) inducing children to have unrealistic expectations and consume goods which are prohibited or require a health warning; (iv) exploiting children’s innocence and susceptibility to charitable appeals; and (v) making it difficult for children to distinguish between real life and fantasy.

3.5. The guidelines have also set out detailed due diligence requirements, duties of advertisers, requirements to impose disclaimers and disclose material connections.

3.6. Notably, the guidelines have borrowed certain provisions from the ASCI Code with respect to “disclaimers”. While the guidelines set out requirements of disclaimers to the extent of characteristics, placement, language, font and prominence, the ASCI Code goes a step further and sets out (i) examples of disclaimers which mislead consumers; (ii) detailed provisions on text height of disclaimers in television, print and static mediums; and (iii) colour, speed, hold duration of disclaimers. While the CCPA borrowing these provisions from the ASCI guidelines makes them a legal requirement for all advertisers and endorsers alike, an illustrative list of disclaimers being included in the guidelines (like that in the ASCI Code) would also assist industry players to utilise the guidelines as a “ready reckoner” for advertisement purposes.

4. Conclusion

Unlike any of the existing legislations, the guidelines focus on free claim advertisements. Often, advertisers do not clarify that goods/services are not actually free but are “inclusive” of the price being paid for a separate item. This has led to consumers being subjected to multiple scams. Further, since children are impressionable, the CCPA has laid out specific contours of acceptable advertisements where the target audience may be children. It is touted that the guidelines introduced by the CCPA should now be able to fill the regulatory gap in the otherwise unregulated advertising industry. The guidelines will also give teeth to the self-regulatory mechanisms introduced by the ASCI. However, it will be interesting to see how the guidelines will be implemented since “content” by itself is subjective. That said, the guidelines are well intentioned and balanced, and give sufficient power to punish any violation while also granting creative freedom to advertisers.

† Partner, Khaitan & Co.

†† Associate, Khaitan & Co.

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