Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 – Part 1

On June 9, 2022, the Central Consumer Protection Authority (CCPA) of India issued Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, intending to curb misleading advertisements and protect the consumers, who may be exploited or affected by such advertisements.

This article has been divided into three parts. In Part 1, we introduce the Guidelines and discuss the provisions related to bait advertising, surrogate advertising, and free claim advertising, along with the penalty for violating these Guidelines. In Part 2, we discuss the provisions related to advertisements targeting children and disclaimers in advertising.

The Guidelines seek to ensure that consumers are not being fooled by unsubstantiated claims, exaggerated promises, misinformation, and false claims. Such misleading advertisements violate various rights of consumers such as the right to be informed, the right to choose, and the right to be safeguarded against potentially unsafe products and services, which have been granted under Section 2(9) of the Consumer Protection Act, 2019.

The Guidelines apply to advertisements published on all platforms including print, television, and digital platforms. Central Consumer Protection Authority (CCPA) Chief Commissioner and Additional Secretary in the Consumer Affairs Ministry, Nidhi Khare, stated that while these Guidelines will not bring change overnight, it gives a framework for the industry stakeholders to prevent misleading ads even by mistake and will also empower consumers and consumer organizations to file complaints against misleading ads. The advertising guidelines for self-regulation issued by the Advertising Standards Council of India (ASCI) will also be in place in a parallel manner, she added.

While “misleading advertisements” are already defined under the Consumer Protection Act, 2019, as, “an advertisement, which— (i) falsely describes such product or service; or (ii) gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or (iii) 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 (iv) deliberately conceals important information”, the Guidelines for Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, (“Guidelines”) officially defines terms such as “surrogate advertisement” and “bait advertisements” and provides what constitutes as “free claim advertisements”.

Specifically, “bait advertisement” has been defined as “an advertisement in which goods, product, or service is offered for sale at a low price to attract consumers.” According to Section 5 of the Guidelines, to classify as bait, the advertisement should fulfil the following conditions:

1. Not seek to entice consumers to purchase without any reasonable prospect of selling the advertised goods, products, or services at the price offered;
2. The advertiser must ensure that there is an adequate supply of the advertised goods, products, or services to meet the foreseeable demand generated by such advertisement;
3. State the reasonable grounds that the advertiser has for believing that he might not be able to supply the advertised goods, products, or services within a reasonable period and in reasonable quantities;
4. Not mislead consumers about the market conditions with respect to the advertised goods, products, or services or the lack of their availability in order to induce consumers to purchase in conditions less favorable than normal market conditions.

For example, advertisements of “sales .....till stocks last” are a bait that persuades a consumer to buy at a given time to merely push a product as if it is the last piece of the product or service irrespective of the affordability and the real need as opposed to created need. Another example of bait advertising was observed in Aero Club v. Rakesh Sharma[1] , wherein, Aero Club was engaged in the business of selling Woodland shoes and apparel. While the advertisement claimed a flat 40% discount, Aeroclub charged VAT on the price arrived at after giving the said discount. The Court held the advertisement to be a misleading advertisement amounting to unfair trade practices. Fun fact –  In August 2020, LocalCircles released a consumer study that suggested that 73% of consumers had come across bait advertising in the last year.

Moving on, surrogate advertisement has been defined as, “an advertisement for goods, product or service, whose advertising is otherwise prohibited or restricted by law, by circumventing such prohibition or restriction and portraying it to be an advertisement for other goods, product or service, the advertising of which is not prohibited or restricted by law.” According to Section 6 of the Guidelines, an advertisement shall be considered to be a surrogate advertisement or indirect advertisement, if:

1. such advertisement indicates or suggests that it is an advertisement for the goods, product, or service whose advertising is prohibited or restricted by law;
2. such advertisement uses any brand name, logo, color, layout, and presentation associated with such goods, products, or services whose advertisement is prohibited or restricted, provided 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 a surrogate advertisement or indirect advertisement if such advertisement is not otherwise objectionable.

The most popular method of surrogate advertising in India involves advertisements for alcohol and tobacco products (advertisements of which have been prohibited under the Cigarettes and other Tobacco Products Act, 2003 and the Cable Television Network Rules, 1994) in the form of music CDs or airlines, or digitally by way of sponsoring IPL matches.

However, the Guidelines have now prohibited surrogate advertisements and all such indirect advertisements that circumvent such prohibition or restriction by portraying to be an advertisement for other goods or services, the advertising of which is not prohibited by law. CCPA can impose a penalty of up to 10 lakh rupees on manufacturers, advertisers, and endorsers for any misleading advertisements. For subsequent contraventions, CCPA may impose a penalty of up to 50 lakh rupees. The Authority can prohibit the endorser of a misleading advertisement from making any endorsement for up to 1 year and for subsequent contravention, prohibition can extend up to 3 years.

Next, the guidelines require a free claim advertisement to:

1. not describe any goods, products, or service to be ‘free’, ‘without charge’ or use such other terms if the consumer has to pay anything other than the unavoidable cost of responding to such advertisement and collecting or paying for the delivery of such item
2. make clear the extent of commitment that a consumer shall make to take advantage of a free offer
3. not describe any goods, products, or service to be free, if–

the consumer has to pay for packing, packaging, handling, or administration of such free goods, products, or services;

the cost of response, including the price of goods, products, or services which the consumer has to purchase to take advantage of such offer, has been increased, except where such increase results from factors unrelated to the cost of promotion; or

the quality or quantity of the goods, products, or services that a consumer shall purchase to take advantage of the offer has been reduced

1. not describe an element of a package as free if such element is included in the package price
2. not use the term ‘free trial’ to describe a ‘satisfaction or your money back’ offer or an offer for which a non-refundable purchase is required.

For example, free calls in mobile phone tariff plans might seem attractive until the consumer realizes that to get a “free” service of a call or an SMS, very often one call or SMS is required to be made to pay for all the so-called free ones.

We will continue our discussion on the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 in Part 2.

Citations:

[1] https://pib.gov.in/PressReleasePage.aspx?PRID=1832906

[2] https://indianexpress.com/article/india/govt-new-guidelines-misleading-ads-bans-surrogate-ads-7963330/

[3] https://cuts-cart.org/pdf/Study_on_the_Status_of_Law_Enforcement_for_Misleading_Advertisements_in_India.pdf

[1] RP No. 3477 of 2016