GUEST POST- AISWARYA MUDALIAR- LOK SABHA PASSES THE CONSUMER PROTECTION BILL 2018- IMPLICATIONS FOR CELEBRITY ENDORSERS

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Aiswarya Mudaliar is a final year BBA.LLB. (Hons.) student at Symbiosis Law School, Pune. On account of her keen interest in media and entertainment law, she has presented papers related to this practice area at various conferences. Her previous internships have been instrumental in providing her exposure to the transactional and dispute resolution practice areas in the media and entertainment law domain.

The Lok Sabha on December 20, 2018 after an hour-long discussion passed the Consumer Protection Bill 2018 (“Bill”) which would repeal the prevailing Consumer Protection Act, 1986 (“1986 Act”). The Bill now awaits approval by the Rajya Sabha. The Bill as passed by the Lok Sabha can be accessed here. The Bill significantly overhauls the prevailing framework and aims to provide for protection of consumer interest, uphold their rights and to establish authorities for timely and effective redressal of consumer disputes.

I. Key Highlights:

a. Functionaries under the Bill:

The Bill contemplates a new national level regulator- the Central Consumer Protection Authority (“Central Authority”) which did not find place in the 1986 Act. The role of the Central Authority is to work towards promoting, protecting and enforcing the rights of consumers as a class. The Central Protection Councils established at the district, State and national level would also act as advisory bodies for promotion and protection of consumer rights. The Central Authority has a wider role extending to inter alia conducting inquiry and calling for investigation into violation of consumer rights or unfair trade practices (suo motu or on complaint or central government directions), issuing guidelines to prevent unfair trade practices and protect consumers, ordering product recall, reimbursement of price of recalled product and discontinuation of unfair practices. It can also impose penalties for false and misleading advertisements.

i). Composition of consumer dispute redressal forums: Consumer Disputes Redressal Commissions set up at the district, state and national levels which would adjudicate complaints under the Bill. This machinery already exists under the 1986 Act however the Bill has revised their pecuniary jurisdiction and composition. The Bill has received criticism for deviating from the provisions in the 1986 Act as per which the commissions were presided by a member with judicial qualifications. The Bill does not set out minimum qualifications for the members leaving it to be determined by the Government. Under the Bill, the selection mechanism of the members would also be decided by the Central government rather than a selection committee involving judicial members as stipulated by the 1986 Act. Considering the expansion in the scope of the Bill and the resultant increase in matters that would come up before these forums it is essential that this aspect of the Bill be reconsidered and hopefully they would more discussions in this regard in the Rajya Sabha.

ii). Jurisdiction of consumer dispute redressal forums: Under the Bill, the jurisdiction of the district commissions has been extended to Rupees 1 crore from Rupees 20 lakh under the 1986 Act. The State Commissions’ limit is increased from Rupees 1 crore to 15 crore rupees. Complaints over this limit would be under the jurisdiction of the National Commission.

b). Product Liability

In the event of an injury, damage to property or death resulting from defect in a product or service, the aggrieved consumer can claim compensation on the ground of product liability from the manufacturer, service provider, and seller upon satisfaction of the conditions as set out in the Bill.

c). Unfair contracts

The Bill also seeks to protect consumers from unfair contracts with manufacturers, traders or service providers which significantly change the rights of the consumer such as requiring exorbitant security deposits, disproportionate penalty for a breach of contract, imposing unreasonable obligations on the consumer and unilateral termination without reasonable cause. The redressal forums envisaged under the Bill are empowered to declare such unfair contracts to be void.

d). Alternate Dispute Resolution Mechanism

The Bill provides that consumer mediation cells will be attached with the Consumer Disputes Redressal Commissions. If the concerned commission is satisfied that settlement of the matter is possible, it may direct the parties to give written consent to have their dispute settled by mediation. If the parties agree for settlement by mediation and written consent, the commission shall refer the matter for mediation. (Section 37 of the Bill).

e). The Bill includes provisions for safeguards for consumers regarding e-commerce and online shopping in order to make it more effective and align it with contemporary developments. The Bill empowers the Central Government to take measures for preventing unfair trade practices in e-commerce, direct selling and to protect the interest and rights of consumers.

II. Celebrity endorsers:

The implications of the Consumer Protection Bill, 2018 (introduced in the Lok Sabha on December 23, 2017) for endorsers and brands have also been previously covered in a post which can be accessed here.

A. What is an endorsement?

Section 2 (18) of the Bill defines an “endorsement”, in relation to an advertisement, as:

  1. any message, verbal statement, demonstration; or
  2. depiction of the name, signature, likeness or other identifiable personal characteristics of an individual; or
  3. depiction of the name or seal of any institution or organisation,

which makes the consumer to believe that it reflects the opinion, finding or experience of the person making such endorsement.

B. When can an endorser be held liable under the Bill?

The Bill empowers the Central Authority to direct the trader, manufacturer, endorser, advertiser or publisher to discontinue/modify an advertisement which is found by investigation to be false or misleading and is prejudicial to the interest of any consumer or contravenes consumer rights. The Central Authority has also been vested by virtue of Section 21 of the Bill with discretion to impose penalty for the false or misleading advertisement as specified below after hearing the concerned party:

Penalty Manufacturer Endorser
First contravention Rs. 10 lakh Rs. 10 lakh

Central Authority can also prohibit the endorser from making endorsement of any product or service for upto 1 year.

 

Subsequent contravention Rs. 50 lakh Rs. 50 lakh

Central Authority can also prohibit the endorser from making endorsement in respect of any product or service upto 3 years.

 

Penalty extending to Rs. 10 lakh can also be imposed by the Central Authority on the publisher/person party to the publication of a misleading advertisement. Unless it is proved that he/she published or arranged for publication of the advertisement in the ordinary course of business. However, such person would continue to be liable if he/she had previous knowledge of the order passed by the Central Authority for withdrawal or modification of the advertisement.

It is also pertinent to note that under Section 89, the manufacturer or service provider responsible for making a false or misleading advertisement prejudicial to the interest of consumers can also be punished with imprisonment for a term extending to 2 years for the first contravention. For subsequent offence, he/she can be punished with imprisonment for a term which may extend to 5 years.

C. What amounts to a misleading advertisement under the Bill?

As per Section 2(28) of the Bill, “misleading advertisement” in relation to any product or service, means an advertisement, which:

i) falsely describes such product or service; or

ii) gives a false guarantee to or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or

iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or

iv) deliberately conceals important information.

D. What steps are required to be taken by endorsers to avoid liability under the Bill?

The endorser must exercise due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed. The Bill does not indicate as to what steps taken by endorsers would be construed as due diligence.

Previously, ASCI had released guidelines for celebrity endorsers in 2017 as per which if the celebrity either directly or through the concerned Advertiser/Agency chooses to seek Advertising Advice from ASCI on whether the advertisement potentially violates any provisions of the ASCI code or not and if the Advertisement is developed fully following the Advertising Advice provided by the ASCI, then the Celebrity would be considered as having completed due diligence. The ASCI had also called upon celebrities to undertake due diligence to ensure that all description, claims and comparisons made in the advertisements that they appear in or endorse can be objectively ascertained, are capable of substantiation and do not mislead or appear deceptive.

A Parliamentary Standing Committee in 2016 was of the view that a stern approach should be taken against misrepresentation of a products particularly food products in the light the significant influence wielded by celebrities. While the Bill does not propose imprisonment for endorsers of misleading advertisement as was recommended by the Parliamentary Committee it is still a cause for concern for endorsers. This could be addressed by seeking a representation from the brand that the advertisement does not portray untrue and misleading facts in relation to the product. Further, the endorser can seek indemnification from the brand for any potential claims that could be made against him/her as it is the brand which controls the content in relation the product specifications.

RECENT APPROACH TOWARDS MISLEADING ADVERTISEMENTS

Recently, while deciding a case relating to competitive advertising, the Delhi High Court in its order dated December 17, 2018 referred to an earlier decision of the Court in Havells India Ltd & Anr vs Amritanshu Khaitan & Ors which laid down a test for determining when an advertisement would be considered misleading. As per this test, two essential elements are required to be satisfied:

  • First, misleading advertising must deceive the persons to whom it is addressed or at least, must have the potential to deceive them.
  • Secondly, as a consequence of its deceptive nature, misleading advertising must be likely to affect the economic behaviour of the public to whom it is addressed, or harm a competitor of the advertiser.

As the Court was dealing with a case of comparative advertising, it was of the view that this test had to be harmonized with competitive interests. Significantly, the Court noted that whether the advertisement is misleading or not “has to be seen not from a hyper sensitive viewpoint, but from the eyes of an average consumer who is used to certain hyperbole and rhetoric.”

As per Rule 7(9) of the Cable Television Network Rules, 1994, advertisements which violate the Code for self-regulation in advertising, as adopted by the Advertising Standard Council of India (ASCI), cannot carried in the cable service.

Recently, ASCI released its report on complaints processed by it against 590 advertisements, out of which 558 pertained to misleading claims. ASCI’s Consumer Complaints Council (CCC) found that certain advertisements contravened ASCI’s Guidelines for Celebrities as “The advertisers did not provide any evidence to show that the celebrities did due diligence prior to lending their name for the endorsements, to ensure that claims made in the advertisements are capable of substantiation”. This included inter alia advertisements where a celebrity was found endorsing a well-known air hostess training institute claiming to be “World’s No. 1 institute” (not substantiated and misleading by exaggeration), endorsing an anti-pimple product promising pimple free skin (inadequately substantiated and misleading by exaggeration), a celebrity couple endorsed a soap brand where the advertisement implied that the product has the effectiveness of turmeric whereas the mechanism of action was due to another antimicrobial ingredient.

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