Innovate Articles

With Great Popularity, Comes Great Responsibility

Authored by Dr. Mohan Dewan
Assisted by Adv. Sachi Kapoor

Endorsement, in a matter of speaking, is a strategic method of influencing the minds of consumers. A brand owner typically approaches an influential figure to act as a brand ambassador, generally an exclusive brand ambassador for a limited period of time in exchange for a fee. The brand owner then publicizes videos, images and statements of the celebrity/public figure, to promote the brand owner’s products/services. The endorsement gives an impression that the celebrity is certifying (endorsing) the claims made by the brand owner in respect of the products/services. There is an implied connection, that the celebrity, has himself/herself used the product or has availed of the services and approves of or is satisfied with them. This is the subliminal message conveyed by the endorsement. 

*We claim no rights on the above image. All rights are reserved with the appropriate owner of the work (Pic credits: The Wedgwood museum). Image Source

The most common form of endorsement is ‘celebrity endorsement.’ The first celebrity endorsement dates back to the 1760’s when the term “brand” had not even been coined and ‘royal endorsements’ was used as ‘celebrity branding’. The first product endorsed was ‘Wedgwood’ of UK, producers of hi-quality pottery and chinaware.[1] Celebrity endorsement or celebrity branding is identified as a preferred mode of advertising. The status, popularity and fan following associated with a celebrity tends to play on the minds of consumers when purchasing a product or opting for a service. When a popular/congenial person endorses a product in such a manner that the viewers are made to believe that the endorser has formed a positive opinion of the product/service by using it himself/herself, sales tend to rise. This is the primary reason why businesses allocate, emphasize and invest huge sums of money on celebrities to endorse their brands. The theory is that, greater the popularity and mass appeal of the celebrity, greater is the impact on the consumer. In this day and age where brands are competing for eyeballs, there is also the concept of recollection value of the brand when a celebrity endorses it. It is also a common trend that if the endorser loses his/her credibility, the brand owners instantly terminate the endorsement contracts.

While this form of an advertisement and promotion is ideal for a spike in sales, the claims made in the course of the advertisements ought to be reliable. Especially in India, where there is ample fan following of celebrities, the onus and responsibility that a celebrity endorser carries is much higher as opposed to other countries! One can only imagine that if a celebrity like Rajnikanth (an actor from South India) or Amitabh Bachchan (arguably the doyen of the Indian Film Industry) or Sachin Tendulkar (the darling of the die-hard cricket fans) recommends using a product/service  it is believed that a large number of their fans will opt for the product/service blindfolded. That is the power of celebrity endorsement in India.

Over the years, celebrity endorsement has turned into a professionally managed commercial business, wherein public figures are paid millions to convincingly read out the content of a script provided by brand owners. A well-known film actress promotes a skin care product assuring that such use will result in a skin as flawless as her own. A popular celebrity extolls the virtues a hair cream assuring that the user’s hair will be free from dandruff and result in luxuriant hair growth. A sports person endorses a health drink which will supposedly result in the same level of fitness of a user. Such claims are more often than not found to be unreliable. However, there has been no accountability for any false claims made by such endorsers. Consumers believe the claims made in the advertisements, experiment with the products/services and are often disappointed with the results since the products do not live up to the high expectations set.

It is interesting to note that, in 2017, the Advertising Standards Council of India (ASCI), released a set of guidelines viz., ‘Guidelines for Celebrity Advertising’ which were required to be known to all featuring celebrities and were to be followed by them. The guidelines also mentioned that it is the duty of the advertiser and the agency to ensure that the celebrity they wish to engage is made aware of the guidelines. 

Some guidelines include[2]:

• Celebrities are expected to have adequate knowledge of the endorsements, i.e., the representations or opinions or preferences of celebrities showcased must reflect genuine and reasonably current opinion of the celebrity making such representations,
• Such celebrity opinions must be based upon adequate information of or experience with the product/service being advertised.
• The celebrity should ensure that all the description, claims and comparisons made in the advertisements they endorse do not mislead or appear deceptive. 

Well, although this covered the essence of the issue at hand, history is witness to the fact that, it is only a penalty or a severe liability which acts as a deterrent in Indian Society.

Further, in July, 2019 the ASCI and the Food Safety and Standards (Advertising and Claims) (FSSAI) signed a Memorandum Of Understanding, in order to combat ‘ambiguous advertisement for food and beverages’ in India. The regulation states that, “all stakeholders, including manufacturers, the celebrities and the channel endorsing a product that puts out a false or misleading advertisement about the food product’s quality, nature or the substance, would be liable for prosecution.”[3] It was decided that, offenders would be punished under Section 53 of the Food Safety and Standards Act, 2006 which extended the liability up to a sum of Rs. 10 Lakhs (approx. USD 13500). In 2019, the then prevalent Consumer Protection Act of 1986, had no power to summon celebrities, who were involved in endorsing products by merely reading out of a set of baseless claims.

However, a new era is about to commence. With a zillion things going wrong in 2020, the new Consumer Protection Act in India seems to have taken this opportunity to set a few things right by addressing some very crucial and long pending issues.

The Consumer Protection Act, 2019 of India (hereinafter referred to as the ‘Act’) has come into force from July 20, 2020. The Act enforces the establishment of the Central Consumer Protection Authority (CCPA) with the motive to promote, protect and enforce the rights of consumers. One of the crucial aspects included in the new Act is the empowering of the CCPA to impose fines on endorsers of any misleading advertisements. This is sure to impact the entire ‘branding’ game for both national and international endorsers.

Under Section 2(18) of the Act, the term ‘endorsement’ is defined as:

Endorsement in relation to an advertisement, means—

(i) any message, verbal statement, demonstration; or

(ii) depiction of the name, signature, likeness or other identifiable personal characteristics of an individual; or

(iii) depiction of the name or seal of any institution or organisation, which makes the consumer to believe that it reflects the opinion, finding or experience of the person making such endorsement;

Under Section 18(2)(a) of the Act, the Central Authority has been granted the power ‘to inquire or, cause an inquiry or investigation suo moto’[4] i.e., without any complaint actually being filed.

Whereas, Section 21(1) of the Act provides that where the Central Authority upon investigation is satisfied that an advertisement is false or misleading, it may issue directions to the concerned trader or manufacturer or endorser or advertiser to discontinue or modify the advertisement within a time period as prescribed in the order.

If such an order is not complied with, under Section 21(2) the Central Authority may then impose penalty upon the above-mentioned entities with may extend up to Rs. 10 Lakhs (approx. USD 13500).  For every subsequent contravention, the Central Authority is empowered to impose a fine which may extend to Rs.50 Lakhs (approx. USD 67000). The Central Authority may also prohibit the endorser from making an endorsement of any product or service for a period which may extend to one year. If the endorser contravenes such an order, the prohibition on endorsing maybe extended for a period of three years. However, if the endorsers are able to prove that they did indulge in reasonable due diligence to verify the claims made in the advertisements, they would not be imposed with fines/penalties as per Section 21(5) of the Act.

Jurisdiction under the Act: A complainant may approach the District commission, the State Commission or the National Commission under the following circumstances:

1. Section 34: District Commission, if the complaint where the value of the goods or services paid as consideration, does not exceed Rs. 1crore (approx. USD 134000)
2. Section 47: State Commission, if the complaint where the value of the goods or services paid as consideration, exceed Rs. 1crore (approx. USD 134000) but is lesser than Rs. 10crores (approx. 1340000).
3. Section 58: National Commission, if the complaint where the value of the goods or services paid as consideration, exceeds Rs. 10crores(approx. USD 1340000)

The jurisdiction for the complaint to be instituted is to be determined as per the following:

1. The place of residence or place of business or place of branch office of the entity at the time of institution of the complaint, against whom the complaint is being filed
2. The place where the cause of action, wholly or in part, arises; or
3. The place where the complainant resides or personally works for gain.

*Copyright © 2020 R.K. Dewan & Co.

Since the Act, aims at protecting all consumers in India, the term ‘endorsement’ defined under the Act ought to cover all advertisements displayed in India through various media. This would include advertisements promoting international brands making use of international endorsers displayed on websites accessible in India for Indian consumers. Thus, if a consumer in India has the option to place an order for such a product, the advertisement on the webpage would have to be in line with the requisites of the new Act. Further, any deficiency in the product could attract liability on the foreign endorser/manufacturer/trader or advertiser by a complaint being filed in India as per clause (c) mentioned in the ‘Place of Jurisdiction’ above.

This would mean, that even before entering into endorsement contracts, influential models/sports men and women/celebrities will now have to consult their legal teams, who will have to confirm and verify the claims being made by the concerned product/service companies. Holding companies/manufacturers/traders and/or endorsers responsible for the claims made while advertising products/services, indeed is a big leap towards a fair market place and will assist consumers to make informed choices resulting in an upright and accountable society.

However, even though the Act seems to have covered all the aspects in protecting a consumer, there remain certain unanswered questions. For example: How is a celebrity to identify and ascertain the exact contents of the products? How can a celebrity be expected to know the effects (or the side effects) of a Kohl (an eye contour) worth Rs.120/- (approx. USD 1.6) or a bathing soap bar worth Rs.20/- (approx. 27 Cents) or a hair oil worth Rs. 100/- (approx. USD 2)? Would this mean that the endorser would now have to ‘try on’ the products? Let us briefly assume the celebrities do agree to try the products on themselves, however the side effects reflected on the consumers may result from the continuous use of the product as opposed to the ‘one time use’ by the celebrity. In such a case, what is the standard of due diligence expected from the endorsers? Would it be acceptable if an endorser makes a decision to endorse a product/service based on the claims provided by the brand itself which may or may not be doctored? Reasonable due diligence has not been defined in the Act. What constitutes ‘reasonable due diligence’? What do you think?!

[1] https://www.campaignindia.in/article/blog-raising-a-toast-to-250-years-of-celebrity-advertising/447282

[2] http://www.businessworld.in/article/ASCI-Releases-Guidelines-For-Celebrities-In-Advertising/14-04-2017-116319/

[3] https://www.fssai.gov.in/upload/media/FSSAI_News_Celebrities_Guardian_11_02_2019.pdf

[4] Consumer Protection Act, 2019