Misleading advertisements in the age of social media

IntroductionAs per the report published by the Telecom Regulatory Authority of India (TRAI), the number of internet users in India as of March 2021, has reached around 825.30 million. Usage of social media platforms such as Facebook, Instagram, Telegram, YouTube, etc., has also grown tremendously and are emerging as key platforms of communication in the society. The increasing internet penetration in the country has also resulted in business enterprises significantly increasing their budgets and participation in advertising their products and services on social media platforms so that they can reach out to their prospective consumers in a targeted and efficient manner. However, at times overzealous strategies by business enterprises to sell its products or services to consumers, may result in false or misleading advertisement. Social media advertisement: The key playersMainly the following two players are involved in social media advertisement: (i) the business enterprise advertising their products / services; and (ii) the social media platforms in which the advertisements are made. It may also happen that the business enterprise may engage ‘influencers’ (i.e., person who has access to an audience and has the power to affect the decision-making power of the audience about any product / service / brand) to endorse their products / services. So, influencers may also be a key player depending on the marketing strategy adopted by the business enterprise.  In this write-up, we have analyzed the consequences of misleading advertisement by business enterprises using social media platforms in India. We will cover separately, in our following articles the consequences of publishing and/or promoting such misleading advertisement by social media platforms and influencers. What is social media advertisement? The term social media advertisement is not defined specifically under Indian statutes. The term ‘social media intermediary’ is defined under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code), 2021 (Intermediary Guidelines). As per the Intermediary Guidelines, social media intermediary means an intermediary which primarily or solely enables online interaction between two or more users and allows them to create, upload, share, disseminate, modify or access information using its services. The term ‘digital media’ is defined under the guidelines issued by the Advertising Standards Council of India (ASCI). ASCI issues self-regulating codes and guidelines for advertising in all forms of media with an aim to protect the interest of consumers. ASCI is neither a government body nor does it formulate rules for the public or the relevant industries. The term ‘digital media’ is defined under the ASCI Guidelines for Influencer Advertising in Digital Media (Guidelines) as a means of communication that can be transmitted over the internet or digital networks and includes communication received, stored, transmitted, edited, or processed by a digital media platform. The definition of digital media is inclusive in nature as it includes websites, blogs, apps, etc., and hence digital media will also cover ‘social media’ within its ambit. Additionally, Consumer Protection Act, 2019 (Consumer Protection Act) defines ‘advertisement’ as, any audio or visual publicity, representation, endorsement or pronouncement made by means of light, sound, smoke, gas, print, electronic media, internet or website and includes any notice, circular, label, wrapper, invoice or such other documents. The definition of advertisement under Consumer Protection Act is very broad, and it covers both traditional way of advertising (i.e., print media, television ads, billboards, etc.) and modern way of advertising (i.e., social media). Therefore, social media advertisement may could be explained as, promotion or marketing of a product by business enterprises / advertisers / individuals on a platform developed by the social media intermediary, that can be transmitted over the internet to large group of people.What is misleading advertisement? The term ‘misleading advertisement’ is defined under the Consumer Protection Act as any advertisement where a business enterprise advertises its product or service by disclosing false information or gives a false guarantee, or deliberately conceals any important information. Other instances of misleading advertisements include instances where the business enterprise may (a) exaggerate or overstate the effectiveness of the product / services; (b) express unrealistic attributes of the product / services; (c) use high sounding and sophisticated concepts / terms which mis-represent the nature or quality of the product / services; (d) give false warranties; (e) use cinematic tricks and misleading images; or (f) give discounts and gifts, etc., to make the product / services attractive for the prospective consumer.  Regulations governing misleading advertisementAs of date there is no law in place which directly regulates misleading advertisements on social media platforms in India. However, there are a few laws in effect which address this issue. The Central Consumer Protection Authority (CCPA) is constituted under the Consumer Protection Act for regulating matters relating to the violation of the rights of the consumers, unfair trade practices and false or misleading advertisements detrimental to the interests of consumers. The term ‘consumer’ is defined under the Consumer Protection Act, as a person who buys products or services digitally or offline, via teleshopping, direct selling, or multi-level marketing. Therefore, both traditional and online advertisement will fall within the ambit of the Consumer Protection Act. The Consumer Protection Act also stipulates a penalty in the form of imprisonment or fine, in case business enterprises are involved in any misleading advertisements. Recently, Press Information Bureau vide its press release dated 22 March 2022 reported that CCPA vide its order dated 27 January 2022 directed GSK Healthcare Limited (GSK) to discontinue advertisements of ‘Sensodyne’ on all platforms including social media platforms. The Sensodyne advertisement claimed that the toothpaste was recommended by dentists worldwide and that it was the world’s number one toothpaste. The CCPA was of the view that such advertisement was misleading and imposed a penalty of INR 1 million on GSK. Moreover, as discussed above, ASCI has also issued the Guidelines to monitor the advertisement sector on social media platforms in India and to control offensive content of advertisements. The Guidelines stipulate that, every advertisement on social media platforms should adhere to the following principles: (a) honest representations (i.e., truthful and honest to consumers and competitors); (b) non-offensive to public (i.e., within the bounds of generally accepted standards of public decency and propriety); (c) against harmful products / situations (i.e., not used indiscriminately for the promotion of products, hazardous or harmful to society or to individuals particularly minors, to a degree unacceptable to society at large); and (d) fair competition. Additionally, ASCI has also published guidelines for advertising in various sectors, such as: (i) virtual digital assets and services, (ii) education sector, and (iii) online gaming. These guidelines impose certain obligations on the business enterprises, such as, their duty to ensure that the influencers are aware of the ASCI guidelines and such advertisements are not in violation of ASCI guidelines. Strengthening the current regulatory framework A key concern associated with the current regulatory framework is that ASCI can only make recommendations to the business enterprises to remove the advertisement but lacks legal sanction to compel any such removal or grant any interim relief or compensation to the consumers. To further bolster the regulatory framework for social media advertisements in India, the Ministry of Consumer Affairs (MCA) had released a draft of the Central Consumer Protection Authority (Prevention of the Misleading Advertisements and Necessary Due Diligence of Endorsement of Advertisements) Guidelines, 2020 (Draft CCPA Guidelines). The Draft CCPA Guidelines cover “all types of advertising / marketing communications regardless of form, format or medium”. It is applicable to manufacturers, service providers, as well as to advertisement agencies and endorsers of products / services. The Draft CCPA Guidelines provides conditions for a valid advertisement, which inter alia, includes, (i) truthful and honest representations; (ii) not misleading consumers by exaggerating the capability or performance of the product; and (iii) not suggesting that the claims made in it are universally accepted. The Draft CCPA Guidelines have not yet been notified by the government. Once the Draft CCPA Guidelines comes into effect, CCPA will be empowered to pass any of the following orders against the business enterprise / social media platform / influencer involved in any misleading advertisement or unfair trade practices: (i) recalling of goods, (ii) to discontinue or modify such misleading advertisement, (ii) imposition of penalty which may extend to INR 1 million and in case of continuous offence the penalty may extend to INR 5 million, or (iii) prohibit any endorser from making any endorsement for a period of 1 year which may extend 3 years in case of subsequent contravention.  Is Draft CCPA Guidelines different from Consumer Protection Act and ASCI Guidelines: The Consumer Protection Act provides for a mechanism under which consumers may adjudicate disputes with the business enterprises regarding misleading advertisement and unfair trade practices on social media platforms. The Draft CCPA Guidelines is furthering the Consumer Protection Act as it provides stricter regulation for different forms of misleading advertisement to address additional issues such as imitation of advertisements, bait advertising, surrogate advertising, puffery, etc. Additionally, CCPA under the Consumer Protection Act, is empowered to issue directions and/or orders to concerned entity / individual to discontinue a misleading advertisement or modify it and have the power to impose penalties in case of non-compliance. ASCI does not have such investigative powers, nor can it impose any penalty on the business enterprise and compliance with ASCI order is completely voluntary in nature. Upon being brought into effect the Draft CCPA Guidelines when implemented along with the statutory powers vested by the Consumer Protection Act may effectively substitute the ASCI Guidelines to the extent there is an overlap and will result in the establishment of an enforceable regulatory framework. Thoughts: With the increased internet penetration, advertising through social media is becoming a highly potent tool to influence and persuade consumers within a very short period of time. Accordingly, to prevent success of misleading advertisements, ‘speed’ will be the essence of any action to limit losses, financial or otherwise, that may be suffered by a gullible consumer. Keeping this in view and to ensure that genuine players are engaged in social media advertisements, the regulatory authority dealing with social media based misleading advertisements may consider providing for the following: (i) mechanism to block and remove misleading advertisements within a short period of time; (ii) business enterprises using such social media platform being able to act on consumer complaints within a short period of time; (iii) creating a business enterprise identification process whereby legitimate business enterprises are only able to use social media as an advertising platform; (iv) influencers appointed by business enterprises are identified in social media platforms as being duly authorized to advertise the product / services of the said business enterprise; and (v) efficient process to impose penalties, especially financial penalties, on business enterprises, social media platforms or influencers or any other stakeholder if found to be in breach of regulatory norms. It’s time to protect the interest of business enterprises which genuinely advertises its product on social media platform and impose legal sanctions on business enterprises who are involved in the act of misleading advertisements. Such action is required to not only protect the interest of the consumer but to protect the interest of legitimate business enterprises and other players engaged in the growth and development of social media and advertisements.  Authors: Souvik Ganguly, Yogesh Chhajer and Aman Bagaria The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident or any other cause.