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Baba’s Explainer – CCPA: Advertisement Rules & Service Charge

  • IASbaba
  • July 7, 2022
  • 0
Governance
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Syllabus

  • GS-3: Economy and associated challenges
  • GS-2: Government policies and interventions for development in various sectors

Context: The Central Consumer Protection Authority (CCPA) recently issued guidelines to prevent false or misleading advertisements.

The guidelines are pathbreaking because they fill significant consumer protection gaps while explicitly outlining advertiser duties.

What is CCPA?
  • The Central Consumer Protection Authority (CCPA) is being constituted under Section 10(1) of The Consumer Protection Act, 2019.
    • The Act replaced The Consumer Protection Act, 1986, and seeks to widen its scope in addressing consumer concerns.
  • The objective of the Central Consumer Protection Authority (CCPA) is to promote, protect and enforce the rights of consumers as a class.

Powers of CCPA include

  • Conduct investigations into violation of consumer rights and institute complaints / prosecution
  • Order recall of unsafe goods and services
  • Order discontinuation of unfair trade practices and misleading advertisements,
  • Impose penalties on manufacturers/endorsers/publishers of misleading advertisements.
What are the provisions under the freshly issued guidelines of the CCPA?
  • The guidelines fill significant consumer protection gaps while explicitly outlining advertiser duties.
  • The guidelines try to discourage the promotion of illogical consumerism aimed at children.
  1. Defining a ‘valid’ advertisement
  • The guidelines lay down the conditions for non-misleading and valid advertisements.
  • Briefly, an advertisement can be considered non-misleading if it contains true and honest representation of goods and does not exaggerate the accuracy, scientific validity or practical usefulness or capability.
  • In case of unintentional lapse, the advertisement may still be considered as valid if the advertiser has taken prompt action in letting the consumer know the deficiency.
  1. Surrogate advertisements
  • “Surrogate advertisement” refers to the advertisement of goods in the shadow of other goods.
  • For example, the advertisement of tobacco in the garb of pan masala. Advertisement of tobacco as such is prohibited by the law.
  • While existing laws such as the Cigarettes and other Tobacco Products Act, 2003 already seeks to govern advertisements related to tobacco, manufacturers and advertisers have been able to circumvent the regulation through the grey area created by a surrogate advertisement.
  • The new guidelines completely disallows any attempts to advertise products that are otherwise prohibited by law.
  1. Advertisements targeting children
  • Another important issue taken up by the new guidelines is the discouragement of “children targeted advertisements”.
  • Advertisements that condone, encourage, inspire or unreasonably emulate behaviour that could be dangerous for children or take advantage of children’s inexperience have been prohibited.
  • The guidelines further require that the goods which require a health warning should not be advertised through children as well as personalities from music, sports and cinema.
  • Advertisements that state “any health or nutritional claims or benefits without being adequately and scientifically substantiated” or any surgery which may have adverse effects on the physical and mental health of children are prohibited.
  • Furthermore, an advertisement may be considered as children targeted if the advertisement of any goods, product or service which addresses or targets children may develop negative body image in children or give any impression that such goods, product or service is better than natural or traditional food.
    • For example, advertisements relating to milk additive products often imply that the products have higher nutritional value for the growth of children, increase retention power of the brain during exams, strengthen bones in sports etc., even though these claims are yet to be scientifically proven.
  • Additionally, the guidelines also require that advertisements including “chips, carbonated beverages and such other snacks and drinks” shall not be cast on channels exclusively meant for children.
  1. Other Reforms
  • The guidelines have also introduced the need to have disclaimers in advertisements to clarify any claim made in advertisements.
  • Moreover, the advertiser must not “attempt to hide material information with respect to any claim made in such advertisement, the omission or absence of which is likely to make it deceptive.
  • The guidelines require that the disclaimer must be visible to normally sighted persons and prominently placed so that the consumer may read it carefully.
  • The guidelines also impose duties on the manufacturers, service providers and advertising agency to not claim and make comparisons in an advertisement which relate to matters of objectively ascertainable facts.
  1. Penalties for misleading advertisement include
  • The CCPA may impose a penalty on a manufacturer or an endorser of up to Rs 10 lakh and imprisonment for up to two years for a false or misleading advertisement.  In case of a subsequent offence, the fine may extend to Rs 50 lakh and imprisonment of up to five years.
What are the significance of the new advertisement guidelines?
  • Long festering issues being addressed: The problem of misleading, bait, surrogate and children-targeted advertisement has festered without respite for far too long. The guidelines try to address these issues.
  • Aligned with International standards: The guidelines also performs an essential function in bringing the Indian regulatory framework at par with international norms and standards.
  • Definition reduces the scope of Exploitation: It must be noted that rather than defining what constitutes a ‘misleading or invalid advertisement,’ the guidelines have sought to define ‘valid or non-misleading advertisement.’ This take on policy drafting significantly reduces the scope for exploitation of any inadvertent loopholes.
  • Plug loopholes in the law: The guidelines on surrogate advertising seek to ensure that these grey areas are filled by the black letter of the law, completely disallowing any attempts to advertise products through surrogate advertisements.
  • Upholding Child Interests: A marketing strategy that seeks to aggressively play on the immaturity of the younger audience can invariably impinge upon their ‘right to choose’ as well as their right to be informed and protected against unsafe goods and services as well as unfair trade practices. New guidelines helps protects children from unwarranted advertisements.
  • Setting right the intention of Advertisements: The new guidelines show that the advertisement must be framed to gain the trust of the consumers and not to “abuse the trust of consumers or exploit their lack of experience or knowledge”.

What are the concerns raised with new guidelines on advertisement?

  • Implementation is the key to success: The enforcement issues in existing advertisement laws have been addressed by the guidelines in as much as it imposes severe penalties. Nevertheless, implementation of them is required to achieve the objectives outlined in the new guidelines.
  • Regulatory Overburden: Given the huge amount of advertisement that occur at National, state and local level, it becomes challenging for the regulatory authorities to enforce the guidelines even if it has the intention of doing it. The sheer size of the economy can overburden the already thinly staffed CCPA.
  • Difficult to define what’s misleading. A lot of things are in the grey area in advertising. For example, some products may claim they make your child stronger, or taller, or provide vitamin C, but how do you prove that. A lot of things are intangibles in advertising.  So, it’s very difficult for a celebrity to verify claims because sometimes even the clients can’t verify those claims
  • Possibility of Judicial Review: Guidelines on children advertisement bans certain ads on channels exclusively meant for children. This can be challenged under Article 14 and Article 19(1)(g) of the Indian Constitution as it impinges upon the right of the channels such as Cartoon Network to earn revenue from such advertisements.
  • Need Cooperation of Advertisers: The guidelines are momentous in empowering customers against mischievous advertisers. The advertisers, too, must take a cue from the guidelines and impose self-regulation to comply with the same.
What are the new CCPA guidelines on brand endorsers?
  • Government has tightened norms for endorsers, including celebrities and sportspersons, as they are now required to make material connection disclosures and undertake due diligence while endorsing in advertisements.
  • Endorsements must reflect the honest opinions, belief or experience of the endorsers.
  • If there exists a connection between the endorser and the trader, manufacturer or advertiser of the endorsed product, then such a connection must be fully disclosed.
  • Violation of these guidelines will attract a penalty of ₹10 lakh for the first offence and ₹50 lakh for the subsequent offence, under the CPA.
  • CCPA can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to one year.

What are the reasons for hiring brand ambassadors?

  • In India, people are generally worshippers of celebrities be it actors or cricketers.
  • Therefore, lot of brands these days have either actors or cricketers as brand endorsers. It adds to the credibility of the brand.
  • It’s the trust which people repose in some of the celebrities that they pass on to the image of the brand.
  • Having such brand endorsers impacts the buyers’ purchasing decisions because of the celebrity’s authority and/or relationship with the audience.
  • In mature categories, which have high penetration, established brands that have little to differentiate among them and have almost reached a parity stage, celebrities are used as identifiers.
  • Sometimes it is also lazy marketing to hire a celebrity to sell the product.
  • In March 2022, celebrity endorsements saw a 44% rise in 2021 over 2020.
What are the implications of the recent guidelines on brand ambassadors?
  • Endorsers are service providers. They do have responsibilities given the kind of impact they have on the audience. But it’s not solely on them. They wouldn’t have the technical knowledge to verify the products.
  • Even though the ASCI self-regulation guidelines provide something similar in terms of the due diligence exercise to be carried out by the celebrities, the new guidelines make due diligence by endorser a statutory obligation for them.
    • Code for Self-Regulation in Advertising’ was adopted by the Advertising Standards Council of India (ASCI)
  • New guidelines point out that they can’t endorse the product merely for monetary gains without any responsibility towards their endorsements
  • The guidelines require the celebrities to reflect their genuine or current opinion, to disclose any connection which they have with the brand
  • This will increase instances where brand endorsers may need to take some technical advice, to verify whether the endorsements are substantiated or not
  • Penalty in the form of prohibiting the endorser for a year will lead to loss of reputation of the celebrity which deters them from blindly endorsing the product.
  • With these guidelines there will be an increase in transparency and more responsible advertising.

Concerns raised are:

  • Penalty is too low for violation of the guidelines. So, a ₹10 lakh penalty is nothing if they had a deal of ₹4 crores. Hence, there are arguments that penalty should have been much more.
  • Also, celebrities are nowadays ensuring that there are clauses of no responsibility inserted into the contract that they sign with the brand.
What was the recent guidelines by CCPA on service charges?
  • Issue: A number of complaints have been registered in the National Consumer Helpline (NCH) by consumers with regard to levying of service charge. The issues raised by consumers include restaurants making service charge compulsory and adding it in the bill by default, suppressing that paying such charge is optional and voluntary and embarrassing consumers in case they resist paying service charge.
  • Various cases relating to levying of service charge have also been decided by consumer commissions in favor of consumers, holding the same as an unfair trade practice and in violation of consumer rights.

The Central Consumer Protection Authority (CCPA) has issued guidelines for preventing unfair trade practices and violation of consumer rights with regard to levying of service charge in hotels and restaurants.

  • The guidelines issued by CCPA stipulate that hotels or restaurant shall not add service charge automatically or by default in the food bill.
  • No collection of service charge shall be done by any other name.
  • No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion.
  • No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.
  • Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.
  • If any consumer finds that a hotel or restaurant is levying service charge in violation to the guidelines, a consumer may make a request to the concerned hotel or restaurant to remove service charge from the bill amount.
  • Also, the consumer may lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level by calling 1915 or through the NCH mobile app.
  • The consumer may also file a complaint against unfair trade practice with the Consumer Commission. The Complaint can also be filed electronically through e-daakhil portal e-daakhil.nic.in for its speedy and effective redressal.
  • Furthermore, the consumer may submit a complaint to the District Collector of the concerned district for investigation and subsequent proceeding by the CCPA. The complaint may also be sent to the CCPA by e-mail at com-ccpa@nic.in.

Mains Practice Question –Why is there an increase in celebrity endorsement in recent times? What are the challenges with regulating celebrity endorsements?

Note: Write answers to this question in the comment section.


 

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