Misleading & surrogate ads: ‘Grey areas in govt guidelines’

On June 9, the Union Consumers Affairs Ministry notified ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022’, sparking a fresh round of debate over misleading advertising and celebrity endorsements.

The guidelines, framed under the Consumer Protection Act 2019 came into force from 20th July, 2020, with the establishment of the Central Consumer Protection Authority (CCPA) and stipulate strict rules and penalties in order to protect consumers from misleading advertisements and protect consumer rights.

While the Advertising Standards Council of India (ASCI) has already stipulated comprehensive guidelines, they are meant for self-regulation only as ASCI lacks the power to penalize violators of the code.

The government, on the other hand, has empowered the Central Consumer Protect Authority (CCPA) to impose a penalty of Rs 10 lakh to Rs 50 lakh on manufacturers, advertisers and endorsers for any misleading ads. The CCPA can also prohibit an endorser flouting the rules from making any endorsement for one to three years. 

These regulations come with several grey areas, point out ad industry observers, and offer a long rope to advertisers and celebs who take the liberty of bringing out misleading and surrogate ads.

As per experts, the loopholes are primarily in three key advertising domains: junk food advertisement for kids, surrogate advertisement and influencer marketing.

Ban on surrogate but what about brand extension?

Clause 6 of the CCPA notification prohibits surrogate advertising, both direct and indirect. However, it misses mentioning “brand extension”, which has been used by many advertisers in the past to propagate a different product using the brand name that is otherwise not allowed to advertise, like in the case of tobacco and liquor.  

The clause states, “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 surrogate advertisement or indirect advertisement, if such advertisement is not otherwise objectionable as per the provisions set out in these guidelines”.

On the other hand, ASCI guidelines clearly define Brand Extension and state “Brand Extension Product or Service should be registered with appropriate Government authority and must meet other requirements such as Rs 20 lakh turnover or presence in the market for two years”.

With this loophole in the government notification, if a brand sells tobacco, it can use the same brand name to advertise an airline or a clothing range without meeting any criteria, industry experts point out. It is to be noted that liquor brand extensions are illegal as per COTPA.

Sam Balsara, Founder and Chairman of Madison World, says, “Any rule that furthers the cause of consumer protection is welcome because it increases consumer confidence in advertising. However, the rule must be clear cut, specific and not capable of different interpretations by different advertisers to suit their convenience.”

According to the senior adman, a blanket ban on liquor advertising has resulted in a flurry of surrogate ads and calls for lifting the ban.

“The country has an unreasonable rule that completely bans advertising at all times. This has led to initially surrogate advertising and then to the creation of what we now call extension brands. All this would not happen if liquor advertising was allowed with restrictions like being allowed only after 10 PM, not showing minors drinking or even not showing any age models in the ad,” Balsara noted. 

Rahul Vengalil, Managing Partner of Isobar, echoes the sentiments. “Liquor and tobacco brands have always been using surrogate ads. With fresh guidelines, I wonder whether tech giants like FB will continue to run ads for liquor brands.”

Sharing a different perspective was Rediffusion MD Sandeep Goyal. He hails the notification and believes it is a big step forward in the case of surrogate ads. He, however, finds the brand extension issue a bit problematic. “The government notification legalizes the ban on surrogate advertising. There are no two ways about it. Liquor brands, going forward will find it very hard to justify CDs and glasses as genuine lines of business,” Dr Goyal noted, adding, “Yes the brand extension part can be misused but this is only the start of the process. We need to just watch the space. Soon there will be consumer complaints and the CCPA judgments will help amplify what is allowed and what is not.”

When asked about the differences between ASCI and the government guidelines, with the former being more extensive than the latter one, Manisha Kapoor, CEO of ASCI said, “No guidelines or notifications are perfect. There is always a scope for updates and fine-tuning. We also update our code from time to time. The government notification is a powerful tool to nail those who make misleading ads to fool consumers. The notification does need some clarification on a few points. I am sure the government will review them after receiving feedback from all stakeholders.”

Junk Food Not Defined 

Clause 8 of the notification states, “An advertisement for junk foods, including chips, carbonated beverages and such other snacks and drinks shall not be advertised during a program meant for children or on a channel meant exclusively for children.”

However, the notification doesn’t explain what is included in the junk food category. “There must be a clear definition of junk food. It can be left to the discretion of the advertisers. Only chips and carbonated drinks are not junk. From biscuits to instant noodles to cakes, most processed foods fall under the category of junk food. But the rules must specify them,” Vengalil asserted.

He also questions the ban on junk food ads on only kids’ channels and programs. “Kids watch other channels too. Hence, banning junk food ads only on kids’ programs and channels is an eye wash. Anyone can find these loopholes and exploit them,”

So, what does ASCI say in this regard? The ASCI code reads: “Advertisements for food or beverages unless nutritionally designed as such should not be promoted or portrayed as a meal replacement.  Advertisements should also not undermine the importance of healthy lifestyles or mislead as to the nutritive value of the food or beverage.”

Notably, there has been a marked increase in the number of complaints against foods and beverages ads during the Covid-19 pandemic. In the last financial year, ASCI processed a total number of 284 complaints compared to 175 in FY 2019-20.

“On junk food again clarity will emerge only when consumer complaints get filed and CCPA rulings follow. The important thing is that a first step has been initiated and it is a big step in putting through some method in the madness,” Dr Goyal stated.

How do influencers disclose stakes in the brand?

Section 14 of the CCPA notification states that the celebrity endorsers need to disclose their material interest in the products that they endorse.

“Disclosure of material connection – Where there exists a connection between the endorser and the trader, manufacturer or advertiser of the endorsed product that might materially affect the value or credibility of the endorsement and the connection is not reasonably expected by the audience, such connection shall be fully disclosed in making the endorsement.”

But how and where they should disclose it, has not been explained. This needs to be clarified, industry experts note.

The ASCI guidelines, on the other hand, clearly ask influencers to disclose their material connection with the brand.

The influencers’ accounts must carry a disclosure label that clearly identifies it as an advertisement or partnership, ASCI says, while listing out the methods of disclosure on all platforms. For example, a 15-second video must cover disclosure for at least 3 seconds, and for videos longer than 2 minutes, disclosure should be for the entire length of the video.