corporate law
The Central Consumer Protection Authority (CCPA), operating under the Department of Consumer Affairs, has issued the 'Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, which impacts targeted advertising.' These guidelines are designed to safeguard consumers from misleading advertisements that may exploit or adversely affect them.
The primary aim of these guidelines is to prevent consumers from being misled by unsubstantiated claims, exaggerated promises, misinformation, and false statements. Such advertisements inherently violate consumer rights, including the right to be informed, the right to choose, and the right to protection from potentially hazardous products and services.
Established under Section 10 of the Consumer Protection Act, 2019, the CCPA regulates violations of consumer rights, unfair trade practices, and misleading advertisements that could harm the public's interests. The guidelines were enacted under the authority given by Section 18 of the same Act.
Misleading advertisements are defined in Section 2(28) of the Consumer Protection Act, 2019. The new guidelines further clarify terms such as “bait advertisement,” “surrogate advertisement,” and provide a clear definition of “free claim advertisements.”
Given the susceptibility of children to advertising, there are specific provisions aimed at protecting them. Advertisements targeting children must not exaggerate product features, make unsupported health claims, or depict personalities from sports, music, or cinema for products that require health warnings or cannot be purchased by children.
Disclaimers in advertisements are essential as they delineate the responsibilities of companies. The guidelines state that disclaimers must not obscure essential information and must match the language and font of the claims made in the advertisement.
The guidelines outline the responsibilities of manufacturers, service providers, advertisers, and advertising agencies. Due diligence is required before endorsing any product or service to ensure transparency and clarity in advertising, enabling consumers to make informed choices.
Penalties for breaching these guidelines are significant. The CCPA can impose fines of up to ₹10 lakh for misleading advertisements, with penalties for subsequent violations reaching ₹1 crore. Endorsers of misleading advertisements may face prohibition from endorsements for up to one year, which may extend to five years for repeat offenders. The CCPA now attracts imprisonment for 2 years (under Section 89 of CPA, 2019) for deceptive ads that harms consumers, in addition to penalties.
Short Title and Commencement: The guidelines are called the "Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022,"
Definitions: Key definitions include:
Application: The guidelines apply to all forms of advertisements, including those by manufacturers, service providers, traders, advertising agencies, and endorsers.
Validity of Advertisements: Advertisements must be truthful, avoid misleading exaggerations, accurately present consumer rights, and comply with all relevant laws.
Conditions for Bait Advertisements: These advertisements must not entice consumers without reasonable sales forecasts, ensure adequate supply, and be transparent about any limitations or risks.
Prohibition of Surrogate Advertising: Indirect advertisements circumventing legal prohibitions are strictly forbidden.
Regulations on AI and Deepfake Content: New regulations mandate the disclosure of AI-generated content in advertisements.
Free Claims: Advertisements claiming products are “free” must not impose additional costs on consumers, clearly outline requirements for taking advantage of free offers, and avoid misleading representations.
Children's Targeted Advertisements: Advertisements targeting children must avoid manipulative or harmful content, unrealistic portrayals, and excessive promotion of unhealthy products.
General Prohibitions: Ads for goods or services prohibited by law cannot be published.
Compliance with Other Laws: These guidelines complement existing regulations and do not supersede them.
Requirements for Disclaimers: Disclaimers must be clear, visible, and consistent with the advertisement claims in terms of language and presentation.
Duties of Advertisers: Advertisers must ensure claims can be substantiated and must not mislead consumers about products or services.
Endorsement Due Diligence: Endorsements must accurately reflect the endorser's opinions and experiences while complying with existing laws that may restrict endorsements.
Disclosure of Material Connections: Any significant connection between endorsers and advertisers that could affect credibility must be disclosed.
Interpretation of Guidelines: In case of ambiguity, the decisions of the Central Authority will prevail to ensure adherence to the guidelines.
The 'Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022' serve as critical measures to enhance consumer protection in the advertising landscape. By promoting transparency, accountability, and responsible advertising practices, these guidelines aim to empower consumers and build trust within the market.