Cracking the whip on brands and celeb endorsers


Over the past few days, brands, agencies, talent management firms and celebrity endorsers have been busy decoding guidelines set by the Ministry of Consumer Affairs, aimed at checking misleading advertisements. These guidelines have been issued by the Central Consumer Protection Authority (CCPA) after a year of stakeholder consultations. Reactions have been mixed.

For starters, the guidelines place more accountability on brands and celebrity endorsers, a step welcomed by many. Celebrity brand endorsers will not only now need to do due diligence of claims made in the ads they endorse, but will also disclose their material connection with the brand if it is something that is not reasonably expected by the consumers.

The guidelines also focus on norms for ads targeted at children or featuring children, specifying duties of brands, advertisers and agencies and defines the manner in which disclaimers should be disclosed in ads. They also crack down on bait ads and “free” claim ads.

However, some provisions are confusing — such as the one on surrogate ads versus brand extension ads.

Beyond self-regulation

Chadrima Mitra, Partner, DSK Legal, said, “While the Consumer Protection Act always had general provisions regarding misleading ads, these guidelines now specify what can and cannot be done. They give power of enforcement to certain provisions that are in the ASCI (Advertising Standards Council of India) code. This definitely increases accountability for all stakeholders. It’s now more than just a world of self-regulation.”

In a report released by Rediffusion Consumer Lab, Sandeep Goyal, MD, Rediffusion, stated, “For a long time now, I have said advertising in this country requires clearer (if not stricter) guidelines. Too many brands, and their ad agencies in concert, are doing stuff which is inherently unacceptable. Which is why the recent intervention by the Government of India’s Consumer Affairs department through notification of new guidelines as part of the Consumer Protection Act, 2019, is really good news.”

A lot depends on how these guidelines get interpreted and enforced, say industry players.

Anjali Malthankar, National Strategy Director, Tonic Worldwide, said, “The thing about guidelines is that until they are practically applied, either the possibilities or the limitations are unknown. Agencies will have teething issues with these as old liberties are curtailed. More than conceptually, I see execution challenges.”

For instance, Malthankar explains, “Conceptually we have always taken care of whether it’s principally/ethically right or not, but things like fonts (in disclaimers) also have implications on duration and message focus, which have cost implications. As far as surrogate ads are concerned, it lacks clarity, especially in terms of usage of branding elements.”

But she is quick to add these guidelines will put a stop to a lot of “short cuts and lazy creative solutions or spamming” of consumers. “Considering we live in an ephemeral world where things are constantly changing in terms of definitions of what’s good and bad, consumption patterns and mode of consumption, new guidelines are imperative to counter the misuse of new mediums and platforms,” Malthankar added.

Interpretation issues

As far as surrogate advertising is concerned, different interpretations are doing the rounds in the industry.

While surrogate advertising was always prohibited, liquor and tobacco companies have been using brand extensions such as music festivals, packaged water and elaichi to advertise their flagship brands. According to the ASCI code, such brand extensions can be advertised provided the product has a sales turnover of over ₹5 crore annually nationally or ₹1 crore per annum, per State (where distribution is established), and this needs to be validated by an independent market agency, among other conditions..

The CCPA’s guidelines state surrogate advertisements are prohibited, but it goes on to add that “mere use of a brand name or company name (which may also be applied to goods, product or service whose advertising is prohibited or restricted) shall not be considered to Be surrogate advertisement or indirect advertisement, if such advertisement is not otherwise objectionable as per the provisions set out in these guidelines.

While some in the industry believe this provision allows for legit brand extensions to continue advertising, others believe this puts brand extensions under the scanner and it remains to be seen how CCPA enforces this provision in the coming days. Another gray area is the for brand ambassadors to disclose their material connection with a brand if it affects the value or credibility of the endorsement and if it is not reasonably expected by the audience.

Legal experts believe mere payment for brand endorsement fees to celebrities by brands is unlikely to be interpreted as a material connection that requires disclosure. Instead, they construe material connection to be in the form of equity shareholding or profit sharing. Many celebs are in fact now picking up minority stakes in start-ups in return for endorsements.

Ambika Sharma, Founder and MD, Pulp Strategy, which has digital mandates of various brands including Jagjit Industries, said surrogate advertising provisions too are a “grey area”. She added how brand ambassadors are expected to disclose their material connections are also “creases which will need to be ironed out in the near future.” She added that in the meantime, the agency is working with its clients “to recalibrate the creative strategy moving forward”.

Meanwhile, ASCI CEO and Secretary General, Manisha Kapoor, said, “ASCI’s code is constantly evolving and we are happy that the CCPA guidelines are quite synchronous with ASCI’s code that is well established and accepted.”

Published on

June 26, 2022

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