Brand endorsers under watch as Rajya Sabha passes new consumer Bill

Churn in celebrity endorsement market could grow

Celebrities — big and small — may now have to err on the side of caution to avoid being penalised or sent to jail for misleading claims and endorsements. The Consumer Protection Bill, 2019, which was passed in the Lok Sabha last week, has been cleared by the Upper House (Rajya Sabha) on Tuesday, putting the onus on celebrities to avoid making tall claims when endorsing a brand.

The Bill, which replaces the Consumer Protection Act, 1986, includes a penalty of Rs 10 lakh for celebrities appearing in misleading ads. Repeat offenders will be fined Rs 50 lakh, with a jail term of up to five years.

Experts say the new Act has far-reaching implications since celebrity endorsements will now be governed by rules and regulations, something that didn’t exist earlier.

In 2017, the Advertising Standards Council of India (ASCI) had come up with only guidelines to check whether celebrities had done enough due diligence before taking up an endorsement.

“We welcome the passing of the Consumer Protection Bill, 2019,” D Shivakumar, chairman, ASCI, said. “As an expert body dealing with complaints pertaining to misleading ads, ASCI has been working closely with the Department of Consumer Affairs. We expect this co-regulation model to be strengthened further,” he said.

While the churn in the celebrity endorsement market could grow, say experts, as celebrity managers and their clients become cautious, it is the smaller stars who are likely to be hit the most. This is because bigger stars have legal teams to help safeguard their interests, said experts, while smaller stars do not have these resources at their disposal. In addition, smaller stars, they said, tend to view endorsements as an easy and convenient means to cash in on their popularity.

“The intent of the Bill is in the right place. But I see it affecting lower and mid-rung celebrities more. It is a warning sign to them to endorse responsibly,” said Harish Bijoor, chief executive officer, Harish Bijoor Consults Inc.

A Mumbai-based celebrity manager, who handles top Bollywood stars, says he saw contracts getting watertight. “With the emergence of social media, brands and celebrities have in the past few years become meticulous, including indemnity clauses within contracts. But with the passage of the new Consumer Protection Bill in both Houses of Parliament, I see contracts now getting even more watertight. I won’t be surprised if stars choose to walk away from a contract if the brand has a history of making misleading claims.”

Advertisers now will have to be careful when engaging with a brand endorser, say experts, since celebrities have the option under the new Bill to show that they have done enough due diligence of the company and its advertising before endorsing its product or service.

H M Bharuka, vice-chairman and managing director, Kansai Nerolac, says celebrities should not be held responsible for misleading claims in ads, since the onus lies with the company. “Large firms are responsible with their advertising and avoid making misleading claims. Having said that, I am not sure whether penalising celebrities for a company’s advertising would be appropriate. It is the responsibility of the company,” he said.

Eric Braganza, president, Haier Appliances India, said he found the Rs 50-lakh penalty too stiff, saying celebrity endorsements in general could come down in the future as a result.

But some experts believe that strong deterrents need to be in place to tackle misleading claims. “People trust celebrities who endorse a brand. And the format has been a tried-and-trusted method to build brand recall and saliency. Our study of brands shows that those who use endorsements get a fillip in the marketplace,” said N Chandramouli, chief executive officer of advisory firm TRA Research, which brings out the annual Brand Trust Report.

In the past, top celebrities have found themselves in the eye of a storm over misleading claims. Actors Amitabh Bachchan and Madhuri Dixit Nene faced public ire during the Maggi crisis in 2015, and more recently, cricketer M S Dhoni was questioned about associating with Amrapali builders, when the real estate company failed to deliver on its promises to homebuyers in Noida.