• CCPA issues new guidelines for prevention of misleading advertisements
  • Specifies due diligence requirement for endorsers and brand ambassadors
  • Companies urged to review current communications to avoid legal consequences

India’s newly-formed Central Consumer Protection Authority (CCPA) has issued extensive guidelines designed to regulate advertising and clamp down on misleading claims and practices. A local legal expert has told WTR that companies should now review their advertisements and communications to ensure compliance, as violations could have severe legal and brand reputation consequences.

Following the Consumer Protection Act 2019 coming into force on 20 July 2020, the CCPA was established to regulate matters relating to the violation of consumer rights, unfair trade practices and false and misleading advertisements. Under its powers it has now issued the Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements guidelines, which are open for comment until 18 September and cover all forms of advertising and marketing communications. Ranjan Narula of RNA Technology and IP Attorneys notes: “As the definition of an advertisement (under the new Consumer Protection Act 2019) covers those made on electronic media, the Internet or websites, the law covers digital platforms and e-commerce websites and social media websites.” 

As well as stating that advertisements should contain truthful representations and should not mislead consumers, the guidelines contain provisions on imitation advertising, noting that ads should not be too similar to others. Safir Anand, senior partner and head of trademarks at Anand and Anand, explains: “The guidelines very nicely encapsulate that any advertisement must not be ‘similar in general layout, copy, slogans, visual presentation, music or sound effects to other advertisements or promotions so as to be likely to mislead or confuse the consumer and shall not be similar to previous advertisements published by any other’. This in turn will be not only prevent consumers to be fooled by any misleading claims but also prevents the hard-earned reputation of already established brands and their identity. Thus, this aspect of the guidelines will act as a two-edged sword and is surely a noteworthy move.”

The document also addresses the issue of third-party endorsements, following the long-running debate over the liability of brand ambassadors. While celebrity endorsements are a powerful tool, there have been questions over the degree to which those endorsing goods should be vetting the products that they promote. The new guidelines state that all endorsers will have to take due care to ensure that claims made in ads they appear in are capable of substantiation. In practice, such due diligence will be deemed to have been carried out if the endorser obtains advice from an “advertising self-regulatory organisation or a legal opinion from an independent legal practitioner”.

Anand expands: “Besides companies and brands, brand ambassadors will need to do due diligence to ensure that all ‘descriptions, claims and comparisons’ made by products that they endorse or that are made in advertisements they feature in are capable of being factually determined. In addition, endorsers will need to make a full disclosure of their ‘material connection’ (ie, their stake in the manufacturing company or the product), in case ‘the connection is not reasonably expected by the audience’.” Importantly, adds Narula: “The guidelines cover personal endorsement, expert endorsement and even endorsement of a fictitious character. These guidelines will cover ‘influencers’ as well.”

Elsewhere, the guidelines state the following:

  • Comparative advertising is permitted where factual and where the subject matter of the comparison is not of such nature as to confer an artificial or unjustifiable advantage upon the advertiser.
  • In terms of ‘bait’ advertising, ads should not seek to entice consumers to make a purchase without a reasonable prospect of obtaining the advertised goods or service at the price offered.
  • Advertisements for goods or services whose advertising is otherwise prohibited or restricted by law must not circumvent the restrictions by purporting to be ads for other goods or services.
  • With respect to puffery, an advertisement may make a claim in the nature of obvious exaggeration if the claim is such that a reasonable consumer is unlikely to take it literally.
  • An advertisement must not describe a good or service as ‘free’, ‘without charge’ or similar if a consumer has to pay anything other than the unavoidable cost of responding to the advertisement and collecting/paying for the delivery of the product.
  • Ads targeted at children should not condone or encourage behaviour that could be dangerous for children to copy, nor should they include a direct exhortation to children to purchase a good or service or to persuade their parents or guardians to do so.

Narula suggests that the guidelines for ads targeted at children “are likely to profoundly impact the manufacturers of goods and services in this sector and the promotion strategy currently employed by them”. He also highlights the treatment of disclaimers made in supporting, limiting or explaining claims: “Current practice is to make a claim but downplay the disclaimer. The guidelines require a disclaimer to be clear, prominent enough and legible. Further, the disclaimer should be clearly visible to a normally-sighted person reading the marketing communication once, from a reasonable distance and at a reasonable speed.”

Overall, Anand notes: “These guidelines cover all marketing and advertising communications regardless of form, format or medium. Thus, any and every claim made by a brand should be capable of authentication.”

While currently out for comment, the draft guidelines are therefore set to have a significant impact on advertising practices in the country – or more specifically, their regulation. Anand notes that the Advertising Standards Council of India’s (ASCI) general rules regarding advertising have been in place for some time to ensure the truthfulness and honesty of representations. However, the CCPA has been given new powers and “advertisers will now have to be more vigilant of violations”. He continues: “The ASCI code guidelines were advisory in nature, but since these guidelines are now a part of the CCPA they are enforceable and have statutory backing, making it an effective mechanism to ensure curbing of unfair trade practices.”

Going forward, then, Anand says: “It is recommended that international brands seek legal review of their advertisements as non-compliance with the statutory regulations not only causes severe damage to brand reputation but also involves legal consequences. Moreover, a review from a local legal perspective ensures that the advertisements are sympathetic to local mindsets... [Ultimately,] no loose comments or false advertising can escape from the loophole of inadequate safeguarding anymore. The guidelines embrace all the manufacturers, service providers, advertising agencies and brand endorsers accountable for any misleading claims in their attempt towards any unfair trade practice.”

Narula also stresses the need to pay attention to local nuance: “Cultural differences will have to be paid close attention to by international brands. Thus, a global rollout of an advert may need to be carefully assessed (eg, guidelines related to ‘prohibited advertisements’ may have a different interpretation in different cultures and countries). For example, the prohibited advertisement guidelines provide for no advertisement that ‘shows, glorifies, or refers to a dangerous practice, or manifests a disregard for safety or encourages negligent behavior’.” 

Of course, responsible brands that do their due diligence should have little to fear. And for Anand, the rules are important and timely. He concludes: “In a country where a majority of the population is not educated and the information disseminated through the media holds massive relevance in the consumer’s mind, such guidelines have come at the right time. Especially during the current global situation with adversities impacting the population at large, advertisements should not be misleading and add to the panic. There is the expectation of a much higher degree of vigilance to be observed by all stakeholders involved in brand advertising.”

This is particularly the case for those in the healthcare and education sectors given the impact of the coronavirus, concludes Narula: “Advertisers in the healthcare and education sectors need to be particularly mindful of the claims they make and the promotions they run. As more of these services move online and with social distancing norms due to covid-19, consumer buying habits are also changing. These two sectors will come under intense scrutiny.”

This article first appeared in World Trademark Review. For further information please visit https://www.worldtrademarkreview.com/corporate/subscribe