Consumption Of Fake Information Is Injurious To Health: Progressive Steps Towards Ad Regulation In India – Live Law – Indian Legal News

According to the ASCI Complaint Analysis Report of 2021-22, 94% of the advertisement complaints received across various media platforms needed correction. Advertisements featuring celebrities saw a 41% rise in complaints and with the digital media taking the central stage, new categories like crypto assets came into the top 5 violative categories.^[2] Now with the increase in units of advertising over every known platform, it was estimated that an average person was exposed to about 6000-10000 ads per day.^[3]

NEED FOR AD REGULATION IN INDIA

In the month of July 2021, the Hon’ble High Court of Delhi issued notices to the Securities and Exchange Board of India (SEBI) and the Ministry of I&B over a writ petition seeking action against advertisements on crypto assets without adequate standardised disclaimers. The Petition^[4] stated that current advertisements on crypto-assets used the following disclaimer: “Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks”; which is displayed in very small fonts at the bottom of the screen and is thus very likely to be ignored by most viewers. The Division Bench consisting of the then Chief Justice of Delhi High Court, Justice DN Patel and Justice Jyoti Singh, while listening to the petition, sought answers from the corresponding agencies and related companies over such advertising.^[5]

Due to the lack of comprehensive rules governing cryptocurrency like the traditional financial assets, the ASCI began working on a separate set of guidelines to govern advertising of the VDAs (Virtual Digital Asset). Some of these changes proposed, were mainly a reaction to the sudden explosion of several one-sided crypto ads which blatantly did not choose to disclose the risks associated with it and as a result of which there had been a lot of criticism surrounding it on several fronts.

ASCI’S GUIDELINES FOR ADVERTISING AND PROMOTION OF VIRTUAL DIGITAL ASSETS AND SERVICES ^[6]

The 12-point guidelines which came into force from the 1^st of April 2020 mandated that all VDA products and services should carry the disclaimer: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”

The guidelines also stated that, “Since this is a risky category (VDAs), celebrities or prominent personalities who appear in such advertisements must take special care to ensure that they have done their due diligence about the statements and claims made in the advertisement, so as not to mislead consumers.” It further stated that, concerned celebrity must give a duly signed written confirmation to the ASCI stating that the celebrity has undertaken proper due diligence while reviewing the claims and representations made in each advertisement featuring the celebrity.

The Guidelines also detailed how the disclaimer should look across the print media, in video & audio format as well as on social media platforms: it must stand out, be prominent and be unmissable to an average consumer. The 12-point directive also stated that advertisements must not promise or guarantee profits and should not compare VDA products to a regulated asset or depict minors in advertisements.

SEBI’S RECOMMENDATIONS

Since the risk associated with such assets is very high, the country’s financial regulator has added its own guidelines to the above guidelines. Pursuant to its written report on the same subject to the Parliamentary Standing Committee on Finance, the Securities Exchange Board suggested the re-wording of the disclaimer as put up by the ASCI by adding the words “dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc” to emphasise that no legal recourse would be available for fraud. The Securities and Exchange Board of India also encouraged notable public figures to avoid endorsing anything related to the digital asset market as such endorsements may be in possible violation of the Consumer Protection Act or any other law and may then attract strict penal action against them. Thus, discouraging celebrities and any other prominent figure from sponsoring the unregulated crypto products. These suggestions by SEBI on cryptos mirrors the regulations already in place for mutual funds and other regulated financial assets.

Since the legitimacy of cryptocurrency is currently in the grey zone with no law governing or negating its lawfulness, some of these changes proposed from the lens of the regulator can be seen as protective in nature. Albeit cryptocurrency being relatively new and still evolving, the advertising of cryptocurrency exchanges is everywhere and therefore, the guidelines are needed in regulating the information about the same. As for the changes proposed, we believe, that SEBI may want to have further prescribed additional disclosures and more detailed ways for monitoring, keeping in mind the low awareness about these financial instruments and the high levels of associated risks with it.

IMPACT OF CELEBRITY ENDORSEMENTS

People around the globe idolize celebrities, and when such celebrities promote or endorse a product, their words are treated as words of gospel and very often than not people are tempted to buy or invest in that product. An element of legitimacy is brought about immediately whenever a familiar face endorses it. A good example here is of the case^[7] of CoinDCX and CoinSwitch Kuber, both cryptocurrency platforms which saw a 730% jump in its user base within 10 months of onboarding the likes of celebrities such as Ranveer Singh and Amitabh Bachchan as their brand ambassadors. As per a study conducted by the ASCI: 7 out of 10 people have depicted trust in Ads endorsed by celebrities^[8]. Shouldn’t public figures then take more due precaution whilst endorsing something?

Today most of the products and services we use are consciously or unconsciously a result of the advertisements we watch. But several advertisements today are misleading, they overpromise and are based on false claims. To put a cap on such activities, the Central Consumer Protection Authority has issued guidelines to provide for the prevention of false or misleading advertisements which can be said to be at par with international norms and standards.

GUIDELINES FOR PREVENTION OF MISLEADING ADVERTISEMENTS AND ENDORSEMENTS FOR MISLEADING ADVERTISEMENTS

Section 18 of the Consumer Protection Act, 2019 enounces the powers and functions of the Central Consumer Protection Authority and in the exercise of such powers granted to it, the Central Authority issued the “Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements”^[9] in the month of June. The guidelines came into effect from the 10^th of June 2022.

Albeit the Consumer Protection Act already containing a few provisions for thwarting of such misleading advertisements, these guidelines serve as an extension of such existing provisions. The Guidelines are very comprehensive and whilst expanding the scope set out detailed parameters of what is permissible and what is not.

Ingenious methods, new notions and recent strategies pioneered in advertising to circumvent the rules have been duly delt with and defined in the Guidelines relating to ‘bait advertisements’, ‘free claims advertisements’, ‘children targeted advertisements’ and ‘prohibition of surrogate advertising’. In addition, the Guidelines also lay out conditions and ingredients for valid (non-misleading) advertisements.

Bait Advertising is the offering of goods, services, and products at a discounted price to entice consumers, to ‘bait’ or lure them towards the business and then finally redirect the buyer to buy an entirely different product.

Children Targeted Advertising: The guidelines quite extensively lay out various pre-emptive conditions “keeping in view the sensitiveness and vulnerability of children and severe impact advertisements make on the younger minds,”.^[10]

The Guidelines disallow advertisements from exaggerating features of product or service in such manner which would lead children to have unrealistic expectations of such product or service; to claim any health or nutritional benefit without being adequately and scientifically substantiated by a recognized body; prevent ads which may develop negative body image in children, to name a few. Also, Clause 8 (3) of the Guidelines specifically prohibits advertisements of junk food from being aired during a program/show which is meant for children or on a channel meant exclusively for children.

Surrogate Advertisements: These are advertisements relating to products which are generally not allowed to be advertised and still are advertised by camouflaging themselves in the garb of selling something permissible. A good example of this type of advertisement is the advertisements by liquor brands who advertise ostensibly using packaged drinking water, non-alcoholic beverages and via Parties/Music events.

Thus recently, the Consumer Affairs Ministry issued notices to a number of liquor brands for their non-compliance with such rules. Advertisements for liquor has been banned in the country since 1995 but still liquor companies have often indulged in such advertisements. The new guidelines should help ensure strict compliance with the law now.

Disclaimers: Disclaimers in advertisements play a pivotal role from consumer perspective since, in a way it limits the responsibility of the company^[11]. This disclaimer guidelines in addition to the ASCI’s one stipulate that disclaimer

• Shall not attempt to hide material information with respect to claim
• Shall not attempt to correct a misleading claim made in an advertisement

Besides, a disclaimer shall be in the same language as the claim and the font size used in a disclaimer shall be the same as that of the claim.

Due Diligence – Clause 13(1): Generally, celebrities do not do a detailed legal due diligence either of the product or the advertisement and the Pierce Brosnan incident serves as the real-life testimony to this, it so happened that the Irish Actor was admonished by the Delhi government for endorsing a surrogate advertisement. Brosnan claimed to be cheated by the brand and put out a statement saying he had no intention to help disguise the actual product. Such instances re endorse the question as to what extend is a celebrity liable when taking part in such advertisements; well, this has been resolved by the way of these guidelines as Clause 13 of the guidelines places an onerous obligation on the endorser to do their due diligence prior to partaking in endorsing a product or service.

The Penalty for violating the Guidelines is delt by the parent act i.e., Consumer Protection Act, 2019. Under the Act, the CCPA can impose a fine of Rs. 10 lakhs on manufacturers, advertisers, and endorsers. For subsequent violations, CCPA can impose a penalty extending up to Rs. 50 lakhs. The CCPA can also prohibit the endorser of a misleading advertisement from making any endorsements for up to one year, which can extend to 3 years on subsequent non-compliance^[12]. Nonetheless in the Author’s opinion, the penalty for the same is too little for the likes of big endorsers and celebrities who charge whooping five times the fine amount sometimes for the advertisements itself. Thus, perhaps an increased penalty would serve better as a deterrent.

ASCI’S ROLE

India does not have a single comprehensive legislation which regulates advertising. Specific modes of advertising are regulated by specific legislations. Additionally, advertisers have formulated a voluntary self-regulatory council called the Advertising Standards Council of India (ASCI) which has issued the “Code for Self-Regulation of Advertising Content in India” (ASCI Code). The ASCI Code imposes certain restrictions and regulates the content of advertisements. However, the codes/guidelines issued by the ASCI are binding on advertisers who are members of this council only. ASCI even though not legally binding has received recognition from the Hon’ble Supreme Court^[13] for its code on self-regulating advertisable content in India. Recently, the guardrails and guidelines issued by the ASCI have been seen as the broadly accepted standard and have been seen at the forefront of monitoring the ever-transforming advertising landscape of the country.

Along with the aforesaid guidelines, the ASCI has been actively taking more industry focused initiatives to further the cause of consumer protection. The Advertising Standards Council of India has in recent times introduced the “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 i.e., contain proper disclaimers, disclose material relationships, and follow due diligence process. Further, Guidelines for Online Gaming has been introduced to protect users from risks associated with games involving monetary gains. Further, the study conducted in partnership with ISA (Indian Society of Advertisers) and NielsenIQ called ‘The Truth in Advertising Study: 2020′ created a lot of buzz on social media and led to further conversations on the issue and drove consumer education and awareness.

A very proactive role has been played by ASCI with studies such as “What India takes offence to” which is a study undertaken to analysis the complaints individuals make and to determine what sentiment or ground are triggered whilst making such complaints.

Needless to say, legislations like this show a step in the right direction. It shows that even a complex area such as advertising can be regulated fairly and transparently while protecting the interests of both consumers and advertisers.

The Guidelines were the need of the hour as the number of misleading advertisements had increased significantly in recent years, coupled with the rise in the new age instruments such as cryptocurrencies. The law now helps consumers make a more informed decision based on facts rather than false claims and narratives. The impact of these guidelines was clearly visible in the recent IPL season which barely had any advertisements relating to crypto exchanges during the interval.

The guidelines introduced by the CCPA help close the gaps in the Consumer Protection framework by addressing concepts such as bait advertising, free claims advertising, children targeted advertisements whilst supporting the self-regulatory mechanisms introduced by the ASCI. Since the guidelines apply to advertisements in all forms, formats, mediums, and spheres, 75% of the ads were processed suo-motu due to the increased active scrutiny. As a result, ASCI saw an overall compliance rate of 94% in the most recent quarterly report put forth by the authority^[14].

However, the Authors suggest that the focus should be on the need for preventive and self-regulatory measures rather that corrective action. As fixing or making an alteration in an advertisement is more time consuming and costly than raising awareness of the ASCI’s code, which will help minimise the occurrence of objectionable advertising. Also, stricter implementation of the Regulatory Code will act as a deterrent for all those making fraudulent claims.

The provisions surely are a positive leap towards ensuring protection of consumer rights, increasing consumer awareness while also encouraging genuine and authentic advertising. Such laws have served as a good deterrent, but it is also true that there is an absence of a single statue or body that can regulate or control the entire gamut of advertising as known to us today.

Authors: Abhinav Shrivastava is a Co-Founding Partner of GSL Chambers. Radhika Jalan is an Associate at GSL Chambers. Views are