Celebrities beware: Greater diligence expected

Thanks to the Consumer Protection Act, 2019, which was fully notified earlier this month, endorsers have the responsibility now to check out the veracity of a brand's claims

It took a nasty troll wishing a celebrity death by Covid. The sickness-induced lowering of guard led to an incensed Amitabh Bachchan replying with a threat of being able to turn, with the flash of an eye, his 90-mi­llion-plus followers into an “extermination family” to snuff out trolls that wish him death. 

The point of this column is not abusive exchanges on social media. The po­int, however, is a new legislation that has been given effect to deal with the impact of such celebrity power endorsing goods and services. The Consumer Protection Act, 2019, which was fully no­tified earlier this month, has introduced this new key change. 

The term “endorsement” is now de­fined to mean any message, verbal statement, demonstration or depiction of the name, signature, likeness or other identifiable personal characteristics of an in­dividual making an endorsement, whi­ch makes the consumer believe that it reflects the opinion, finding or experience of such person. The term “advertisement” is defined to bring within its scope an endorsement. 

Therefore, when any individual en­dorses a product or a service, she would be advertising it. If the “Central Au­tho­rity” (a new institution created under the law with the name, Central Co­n­su­mer Protection Authority), is satisfied after investigation that any advertisement is false or misleading and is prejudicial to the interests of any consumer or “in contravention of consumer ri­gh­ts”, it may issue directions to not only the trader or manufacturer, but also the endorser to discontinue or modify the advertisement.

Over and above such a direction, if the Central Authority is of the opinion that a penalty is necessary, it may im­po­se a fine of up to Rs 10 lakh on the manufacturer or the endorser. Subsequent contraventions by the same endorser would lead to a penalty that may extend up to Rs 50 lakh.

If you felt that seems like a cheap li­cence fee to violate at a small price, the law also provides that an endorser of a false or misleading advertisement may be banned from making any endorsement of any product or service for a period that may extend up to one year. Repeat contraventions could lead to ba­ns that may extend to three years.

Pertinently, in determining the penalty, the Central Authority must have regard to the population and area im­pacted or affected (greater the following, greater the responsibility); the fre­que­n­cy and duration (bigger the celebrity, chances are wider the carpet-bombing nature of the advertisement); vulnera­bility of the class of persons likely to be adversely affected (greater the mass appeal, higher the impact); and gross revenue from the sales effected (stro­nger the power of endorsement, higher the penalty). 

The safeguard for the endorser is that there would be no penalty if he/she has exercised due diligence to verify the ve­racity of the claims made in the advertisement regarding the product or service being endorsed by him. In short, pe­rsons who know and believe that they have a following that can be turned into a mob in an instant, must be alive to the fact that their endorsement means a lot to the audience. The market, in any ca­se, would give them that knowledge — fees for endorsement are proportionate to the perception of impact, but now the law requires an element of diligence to be exercised to check out the veracity of what is being endorsed.

The new law will have overlaps and clashes with other laws that seek to protect consumers in their respective fields. That would be subject matter of future litigation. One can foresee litigation about whether a sectoral regulator should first arrive at a finding for the Central Authority to then act — competition law has been riddled with such hurdles — because other regulators may have general motherhood statements in their regulations about consumer protection being their regulatory objective as well. The financial sector is already alive to inexplicable contradictions — film actors can endorse a bank, but even the smiling face of a model is prohibited by stock exchanges for promoting stock broking services.

While the dust will eventually settle, the new law will kick up a storm and celebrities who are aware of their power to make things happen, not necessarily in the flash of an eye, will have to be diligent and cautious about what and how they endorse.

The author is an  advocate and  independent counsel; Twitter: @SomasekharS