Liability of the Endorser of a Brand in Light of the Consumer Protection Bill, 2019

By: Saket Agarwal


“You can’t sell anything if you can’t tell anything.”

– Beth Comstock

Today, the success of a product depends upon how well it has been communicated to the people. An efficient marketing campaign speaks for the efficiency of the product. A good marketing campaign or advertisement requires the use of advanced technology, good content, etc. However, it is the celebrity which is considered indispensable. As per the Advertising Standards Council of India (hereinafter ‘ASCI’), celebrity endorsers are people from the field of entertainment and sports and would also include other well-known personalities like doctors, authors, activists, etc. It is the celebrity who is the face of the product. Sometimes, the name of the celebrity becomes synonymous with the product, be it Amitabh Bachchan for Cadbury or Aamir Khan for Titan. The purpose of this research is to assess the liability of the endorsers of a brand, keeping the recent Consumer Protection Bill, 2019 (hereinafter ‘the Bill’) in regard.

ANALYSIS

Vertical Expansion of ‘Endorser’

The recent Bill makes the endorser of a brand liable for a misleading advertisement. As per Section 2(1) of the Bill, ‘advertisement’ includes any audio or visual representation. However, no definition of ‘endorser’ has been provided in the Bill. From manufacturing to the sale of a product, it is not only the endorser who makes the audio-visual representation but the local retailers as well. They have a huge role to play in convincing customers to purchase a product. Whether the term ‘endorser’ could be extended to include local retailers, who suggest customers a particular product and on whose advice customers rely upon, is not clearly provided in the Bill.

Central Consumer Protection Authority: The Watchdog of Advertisements

With the coming of the Bill, the Central Consumer Protection Authority (hereinafter ‘the Authority’) has been created which will act as a regulator of consumer-related grievances. This is a welcome step because the regulator would have the power to take actions on misleading advertisements. In India, ASCI is responsible for providing guidelines for advertisements. However, these guidelines are often flouted by the companies/organisations and the endorsers as they are not binding. Section 21(1) of the Bill provides for the power of the Authority to discontinue any advertisement which is misleading or prejudicial to the interest of consumers. The power of the Authority further extends to imposing a penalty of up to ten lakh rupees, with additional power to prohibit the endorser from doing any advertisement for a year. With these extensive powers, the regulator would be able to administer advertisements.

No Objective Standards Mentioned for Testing Due Diligence

Section 21(5) of the Bill maintains that if the endorser has exercised due diligence, then he will not be liable for any claim arising in the future. However, what amounts to due diligence and what measures are required to be taken for this have not been specified. Expecting the endorsers to be aware of the scientific and medical effects of a product which generally appear only after the launch of the product would be like expecting too much from them. In Cooga Mooga, Inc. v. Charles E. Boone, the FTC held that if the celebrity is not in a position to check the veracity of the statements made, he will be required to hire an independent agency for the same. Can the same obligation of hiring an independent agency be made applicable to Indian endorsers as well?

This question is important to be discussed because, if implemented, it will severely affect the interests of consumers as the burden of cost of hiring such agencies will get shifted on them and they will have to ultimately suffer. More so, a major chunk of the population that will be affected by this measure will be the middle and lower-middle class. This is so because the top advertiser belongs to the Fast-Moving Consumer Goods sector and its majority of sales come from these two classes only. Moreover, there will be serious doubts about the efficiency of these independent agencies as well due to lack of proper resources and infrastructure facilities in India.

Overregulation will Curb the Pro Bono Services

The Bill does not define the term ‘endorser’. Endorsers in India are not only associated with commercial advertisements but also with the advertisements related to government and social causes. When celebrities do advertisements of the latter category, it is generally a pro bono work. Assuming such advertisements contain some misleading information, would it be correct to impose punishment on the endorsers given they are not deriving any benefit out of it?

For example, Mr. Amitabh Bachchan is the brand ambassador of Gujarat Tourism, which he is not paid anything for. Could a claim be made against Mr. Bachchan under the provisions of this Bill if the advertisement contains some misleading information?

The author opines that the endorsers will hesitate to do such advertisements considering these penal provisions which do not make any difference between commercial and charitable advertisements.

Applicability of the Principle of Estoppel

The principle of estoppel is considered to be a rule of equity. It provides that when one person, by act or omission, intentionally caused another to believe a particular thing, he cannot be allowed to withdraw from his earlier stated position. The majority of consumers in India purchase a product considering the presence of a celebrity in its advertisement. They trust a product because of the trust they have on the celebrity and the claims he makes in the advertisement. It was long felt that these endorsers should be held liable under this principle. The Bill recognised such need and made a provision for the same which should be appreciated.

However, the celebrities insist on keeping a clause of reimbursement in their contract with the company to cover any pecuniary liability arising out of any untoward incident, especially after the Maggi controversy. So, technically, this will still make the celebrities immune, at least with respect to the monetary penalty in the Bill.

Publication of Advertisement in the Ordinary Course of Business: A Blessing for the Endorsers?

Section 21(6) of the Bill lays down that no person shall be liable to such penalty if he proves that he had published or arranged for the publication of such advertisement in the ordinary course of his business. Section 2(31) of the Bill includes ‘individuals’ within the definition of ‘person’. Section 47(ii) of the Bill extends the publication of advertisements to ‘electronic records’ as well. The author recommends that the conjoint reading of the above-mentioned statements is a loophole which can be resorted to by the endorser to evade his liability. The author opines that promoters can also be called as individuals, and therefore, can also be included within the definition of person. The phrase ‘ordinary course of business’ is not defined in any Indian statute but it essentially means an activity which is done frequently and in a normal routine. The endorsement which an endorser does can well be brought within the ambit of his ordinary course of business. According to the author, it is certainly a boon for the endorsers to escape their liability with such possible interpretation.

CONCLUSION

Earlier, there was no provision for the endorser’s liability under the Consumer Protection Act, and therefore, one had to look at other regulations. This would include the IPC, Food Safety and Standards Act, etc. However, the current Bill has solved this problem completely. It for the first time has recognised the liability of an endorser compared to all the previous consumer protection legislation. However, there are gaps which are required to be filled. To begin with, there is no clarity as to who an endorser is. Additionally, there is an ambiguity as to whether the penal provisions are applicable only to commercial advertisements, or to pro bono advertisements as well. Moreover, a duty has been imposed on the endorsers to exercise due diligence while verifying the claims of an advertisement. However, no test is prescribed for the same. Unlike India, the US has a specific test, i.e., the ‘good reason to believe’ test. The test is about whether the endorser actually uses or believes in the features of the product. If he fails to satisfy this test, he is to be held liable.

Overall, the 2019 Bill is a milestone in the objective of the protection of the consumers’ interest. It is just a beginning and there is still a long way to go. With the passage of time, it will definitely witness improvements for the good.


(Saket is currently an undergraduate at National Law University, Jodhpur.)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s