The Consumer Protection Act, 2019 (‘Act’), which came into force on 20 July 2020, defines ‘misleading advertisement’ in relation to any product or service as an advertisement which:
- falsely describes such product or service;
- gives a false guarantee to, or is likely to mislead consumers as to the nature, substance, quantity or quality of such product or service;
- conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or
- deliberately conceals vital information;
Said Act also provides for establishment of Central Consumer Protection Authority (‘CCPA’) by the Central Government, to promote, protect and enforce the rights of consumers and regulate matters relating to false or misleading advertisements. CCPA, on 9 June 2022, notified the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (‘Guidelines’) to ensure that consumers are not deceived by exaggerated promises, misinformation, and false claims pertaining to any product or service, and that the rights of consumers are adequately protected.
These Guidelines aim to restrict companies from releasing misleading advertisements in any form, format or medium, and are applicable to manufacturers, service providers or traders whose products or services are subject of advertisements, and advertising agencies or endorsers whose services are availed for advertisements of products and services.
A voluntary self-regulatory body called ‘The Advertising Standards Council of India’ (ASCI), in its Code for Self-Regulation of Advertising Content in India (“Code”), also provides for advertisements to be an honest and truthful representation of products and services, and holds that advertisements should not mislead the general public in any manner detrimental to their well-being. The latest Guidelines contain provisions which conform to the position taken under the Code with respect to misleading advertisements, disclaimers, and advertisements targeting children, along with regulating bait advertisements, surrogate advertisements, and free claims advertisements.
The Guidelines define ‘bait advertisements’ as those advertisements in which goods, products or services are offered for sale at a low price to attract consumers. There is no specific prohibition on bait advertisements under these Guidelines, provided such an advertisement fulfils the conditions as laid down in the Guidelines such as:
- there is no enticement of consumers to purchase goods or services without a reasonable prospect of selling them at the offered price.
- there is adequate supply of goods or services to meet foreseeable demand generated by such advertisement.
- there is no misleading of consumers about the market conditions with respect to the goods or services.
- there is not misleading of consumers by not stating geographic or age-limit restrictions on the availability of goods or services; and
- appropriate disclaimers regarding the limited stock, or if such goods or services are offered to assess potential demand, are made.
‘Surrogate Advertisement’, as defined under the Guidelines, means an advertisement of such goods or services whose advertisement is otherwise prohibited by law, and is done by circumventing such prohibition by portraying it to be advertisements of other permitted goods or services. For example, alcohol manufacturing companies have been using this type of advertisement strategy to advertise their products in surrogate advertisements for soda water, music etc.
As per the Guidelines, any ‘free claims advertisement’ is permitted provided it does not describe any goods or services as ‘free’, ‘without charge’ or similar terms if the consumer will be required to pay any charges (such as packaging charges, handling, or administration charges) in addition the avoided charges. The Guidelines also prohibits the use of term ‘free trial’ to describe a ‘satisfaction or your money back’ offer, or an offer for which a non-refundable purchase is required.
Bearing in mind the adverse impact advertisements may cause on children, the Guidelines provide a set of conditions that must be adhered to in the event an advertisement addresses or targets or uses children.
In line with the Code, the Guidelines also provide directions for usage of disclaimers in advertisements. Certain conditions pertaining to disclaimers under the Guidelines include, without limitation, that:
- a disclaimer shall not attempt to correct a misleading claim made in an advertisement.
- a disclaimer shall not attempt to hide material information, omission of which may make such advertisement misleading.
- a disclaimer shall be in the same language as that of the advertisement claim; and
- a disclaimer shall be clear and prominently placed.
Section 12 of the Guidelines mandates manufacturers, service providers, advertisers, and advertising agencies to comply with certain conditions when advertisements portray obvious untruths and exaggerations which are intended to amuse or catch the eye of consumers.
Another key inclusion in these Guidelines is due diligence to be conducted by endorsers of goods or services to ensure that genuine and reasonably current opinion of the endorser is represented in an advertisement, which must be based on adequate information about, or experience with, such goods or services advertised.
For violation of these Guidelines, CCPA under Section 21(2) of the Act may impose a penalty of INR 10 lakh for a first offense, and up to INR 50 lakh for subsequent contraventions.
Advertisements have played a pivotal role in enticing customers for sale of goods and services. Before, these Guidelines were notified, misleading advertisements were governed solely by the ASCI’s Code. The ASCI is not a statutory body and, thus, it does not have a binding effect. In 2019, when the new Consumer Protection Act was notified, the Central Government identified the importance of true and honest advertisements and introduced the concept of ‘misleading advertisements’. Especially with the impact that digital marketing, influencer advertisements and celebrity endorsements are causing in the Indian market, it is essential that there is a legally binding framework which mandates a company to take responsibility for the advertisements. Such binding effect is now created with these Guidelines.
Further, with e-commerce being the go-to mode for consumers to purchase goods and services, the Guidelines also address the bait and free claims advertisements, which was being exploited by companies on e-commerce platforms especially during flash sales.
The wide coverage of these Guidelines i.e., covering advertisements in any format and medium, and the stringent penalties which can be imposed by the CCPA under the Act, will reform the way advertisements are being made and perceived by consumers. The Guidelines will now allow the consumers to opt for genuine goods and services based on clear, true and honest advertisements.
[The author is a Senior Associate in the Corporate and M&A advisory practice at Lakshmikumaran & Sridharan Attorneys, Hyderabad]