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.