1. INTRODUCTION

1.1. The Indian advertising market has been subject to consistent and strong growth for some time, and this has been assisted by the adoption of technology and the massive growth in smart devices which has facilitated the transition to digital advertising across the subcontinent. India had 1.2 billion smart phone subscribers in 2021 and about 750 million smart phone users which is expected to grow to 1 billion users by 2026.1 It is no wonder then that the advertising sector in India has had an annual revenue growth rate of 16 percent and is expected to be more than USD 11.1 billion by the end of 2022.2

1.2. Consistent growth in the Indian economy and the rapid urbanization of India has resulted in the development of a massive consumer market which is continuing to grow. Advertising is a key component of almost every business marketing strategy, whether to promote existing products or services or to launch new products or services, in order to position such products and services within the Indian market. Both domestic and foreign companies offering products and services in India need to be cognizant of the regulatory framework and laws applicable to advertising.

1.3. The objective of this article is to to provide an outline of the Indian regulatory system for advertising and some of the key issues in Indian advertising law today.

2. REGULATORY FRAMEWORK

2.1. There are two main elements to the regulatory framework namely industry self-regulation and statute law.

2.2. Historically, a significant element of advertising regulation has been undertaken through the advertising industry itself. This self-regulatory regime is administered by the Advertising Standards Council of India ("ASCI") which has significant advertising industry support. ASCI is a self-regulatory body whose members include advertisers, advertising agencies, media (including broadcasters and the press), PR agencies and market research companies. The role of ASCI has been recognised by various government bodies and it has been successful in regulating and controlling misleading advertisements for several decades. ASCI has developed and administers an exhaustive advertising code including advertising standards and rules to be observed by the industry, which is known as the "The Code for Self-Regulation of Advertising in India" ("ASCI Code"). The ASCI Code includes a broad code for self-regulation in advertising, as well as guidelines for various specific categories of advertisements including "Guidelines for Celebrities in Advertising"; 'Guidelines for Influencer Advertising in Digital Media'; 'Online Gaming for Real Money Winnings'; 'Advertising of Foods and Beverages'. The ASCI Code not only contains consolidated guidelines for advertisements but also provides an exhaustive complaint mechanism to address grievances from consumers, consumer bodies, and the industry at large in relation to misleading advertisements. The ASCI Code is generally accepted and followed by advertisers as well as the industry in India. Many of the guidelines and principles in the ASCI Code are reflected in advertising legislations as well. For example, the ASCI Code has statutory recognition in the Cable Television Rules 1994.

2.3. However, the Government has also progressively introduced legalisation to deal with specific issues in advertising. As a result, there is no single statute governing advertising in India but rather multiple statutes, some of which are general in application and others of which are relevant to specific products, services, or media. The Consumer Protection Act, 2019 is the most recent and it is a statute which sets out general principles applicable to advertising. There are also subject-specific laws including those which regulate or prohibit advertising of tobacco, alcohol, medicinal products, and devices. Other specific laws and regulations include:

2.3.1. Cable Television Networks (Regulation) Act, 1995 and the Cable Television Rules, 19943 - which regulates advertising on cable/satellite television.

2.3.2. For State-run All India Radio, the Code for Commercial Advertising issued by the Prasar Bharti has to be followed.4 Prasar Bharti has been empowered by the Prasar Bharti Act (Broadcasting Corporation of India) Act, 1990 to make rules and regulations. The Ministry of Information and Broadcasting ("MIB") has mandated the adherence to the Code for Commercial Advertising issued by Prasar Bharti by private FM radio operators.5

2.3.3. Information Technology Act, 2000 ("IT Act") and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 ("IT Rules 2021") and the 2022 Amendments to the IT Rules 2021 regulate internet advertising.

2.4. Therefore, Indian advertisers need to deal with two parallel regulatory systems, which sometimes overlap namely the statutory regime and the ASCI regime.

2.5. Consumer Protection Act 2019

2.5.1. The Consumer Protection Act, 2019 ("CPA") prohibits misleading advertisements and unfair trade practices including those involving disparagement of another person's goods / services on the basis of false or misleading facts.6

2.5.2. The recently formed Central Consumer Protection Authority ("CCPA") is tasked to monitor any false or misleading advertisements.7 The CCPA has the power to investigate complaints, conduct inquiries, and issue orders. If a person (which would include advertisers, endorsers, brands, manufacturers, etc.) is found guilty of publishing a misleading advertisement, the CCPA has the power to order such person to discontinue / modify the advertisement and impose fines which may extend to INR 10 lakhs (~USD 12,000) for the first contravention and INR 50 lakhs (~USD 60,000) for subsequent contravention. Further, on any non-compliance with the order of the CCPA, the CCPA may order an imprisonment of upto 6 months and a fine up to INR 20 lakhs (~USD 24,000). The CCPA can also prohibit an endorser of a false or misleading advertisement from making an endorsement for any product or service for a maximum of 1 year. While the CCPA regime is fairly new, it has imposed fines on various manufacturers and advertisers. For example, in February 2022, it passed an order for discontinuation of advertisements made by a toothpaste brand.8 The CCPA had also imposed a fine of INR 10 lakhs (~ USD 12,000) against a telemarketing and e-commerce website for misleading consumers regarding information pertaining to inventory and production of goods.9

2.5.3. In June 2022, the Ministry of Consumer Affairs ("MCA") notified Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements ("Advertisement Guidelines") under the CPA.10 The key provisions under the Advertisements Guidelines are summarised below:

  1. Conditions for Permissible Advertisements: Advertisements should be objective and capable of substantiation; should make claims based on independent research; should not make misleading communications and should specify fixed prices / periods of guarantee.
  2. Bait Advertisements: The Advertisement Guidelines restrict advertisements which entice consumers to purchase products at low prices unless any conditions associated with such offers or limitations on availability of stock etc are clearly stated to avoid misleading consumers. There should also be no inducement to purchase the good / product / service in market conditions less favourable than normal market condition.
  3. Free Claims: What constitutes permissible free claims / an offer for without charge products and the manner of advertising them are set out. Advertisements mentioning free products must clarify the extent of commitment a consumer is required to make to avail such free offers.
  4. Advertisements Targeting Children: The Advertisement Guidelines restrict advertisements which generally seek to exploit the credulity and inexperience of children and/or try to promote dangerous behaviour, illogical consumerism, unhealthy eating habits, etc. amongst children.11
  5. Surrogate Advertisements: The Advertisement Guidelines clearly state that no advertisements can be made suggesting directly or indirectly that it is for products or services whose advertising is otherwise prohibited/restricted by law. Circumvention of a prohibition or restriction by portraying an advertisement to be an advertisement for other goods or services is prohibited.
  6. Disclaimers: Disclaimers may expand, set out terms or resolve ambiguities in a claim made in an advertisement.12 Guidelines mandating placement and visibility of disclaimers, language, specifications of the text, voice-overs, and comprehension of disclaimers form part of the Advertisement Guidelines.13
  7. Due Diligence by Endorsers: The Advertisement Guidelines require that due diligence should be undertaken by endorsers and endorsement should not be deceptive. Endorsements should reflect the genuine, reasonably current opinion of and be based on adequate information about or experience with the identified goods / products / services. Any material connection between the endorser and trader / manufacturer / advertiser that can affect the credibility of the endorsement needs to be disclosed.
  8. Class Actions: Notably, the CPA also includes the following in the definition of a "complainant": "one or more consumers, where there are numerous consumers having the same interest". Therefore, where one or more consumers have a common interest against any misleading advertisement, they may proceed with a complaint before the appropriate authority as mentioned in the CPA. However, there have not been any class actions in respect of advertising related claims yet.

3. COMPARATIVE ADVERTISING

3.1. Comparative advertisements involve the comparison of two or more competing products or services.14 Understandably, brands use comparative advertising to communicate value in their offering and provide consumers with a direct point of comparison to enable selection of products. However, this unregulated strategy has been subject matter of significant amount of litigation and Indian courts have consistently held that comparative advertising is permitted so long as brands do not indicate a competitor's goods as bad while saying goods of their brand are better,15 or undervalue the product of a rival,16 or disparage a rival's products as unsafe for consumers.17 Judicial precedents, the Advertisements Guidelines, the ASCI Code, and the provisions of the Trademark Act 1999 ("TMA") provide the framework for permissible comparative advertising.

3.2. Under the ASCI Code, comparative advertising is permitted provided that it encourages competition and public enlightenment, and fulfils the following conditions:

3.2.1. the comparison is factual and capable of substantiation,

3.2.2. the advertisement is clear on the aspects of the advertiser's products being compared,

3.2.3. the subject of comparison does not mislead consumers,

3.2.4. it does not confer an artificial advantage to the advertiser's product,

3.2.5. the advertisement does not make unjustifiable use of the name / initials of any other entity; and

3.2.6. the advertisement is not similar to the general layout of an earlier run advertisement.

3.3. Under the TMA, a registered trademark is infringed when an advertisement:

3.3.1. takes unfair advantage of and is contrary to honest practices in commercial matters;

3.3.2. is detrimental to the distinctive character of the mark. For example, where a competitor makes a parody or imitation of another's trademark; or

3.3.3. is against the reputation of the trademark, and a person uses another person's trademark in a disparaging manner.18

Any comparative advertisement which falls foul of the above, would be prohibited.

4. SURROGATE ADVERTISING

4.1. While the advertisement of certain kinds of products is prohibited by law, manufacturers often make brand extensions to increase recall value of such products (the advertising of which is otherwise prohibited). For example - many alcohol, beverage and tobacco businesses advertise club sodas, music compact discs, and merchandise to advertise the primary alcohol brand. To that end, stakeholders must ensure compliance with the following in advertising of products bearing brands identical to those used for tobacco and alcohol:19

4.1.1. The story board or visuals of the advertisements should only depict the product being advertised;

4.1.2. The product should not make any direct / indirect reference to the prohibited products;

4.1.3. The advertisement should not use particular colours and layout / presentations associated with prohibited products; and

4.1.4. Whether the unrestricted product sought to be promoted is produced and distributed in reasonable quantities, having regard to the scale of the advertising in question, the media used, and the markets targeted.

4.2. Further, as per an important communication by the Central Board of Film Certification of India, an advertisement for a brand extension should not use situations typical for promotion of prohibited products and the advertiser should fulfil sales turnover requirements for such products.20

5. SECTOR-SPECIFIC GUIDELINES

5.1. Virtual Digital Assets

5.1.1. In 2018, the Reserve Bank of India ("RBI") issued a circular prohibiting banks and other regulated entities from dealing with entities dealing in cryptocurrencies, virtually banning cryptocurrencies.21 Subsequently in 2019, the Supreme Court of India ("SC") quashed the RBI's ban on cryptocurrencies and held it as "disproportional to the threats posed by cryptocurrencies".22 Therefore at present there is no comprehensive regulatory framework for cryptocurrencies and other digital assets in India such as nonfungible-tokens (collectively "VDAs"). The Government of India also imposed tax obligations on transactions involving VDAs.23 In our view, it is likely that the Government of India and RBI may seek to further regulate the cryptocurrency ecosystem including restrictions on marketing and promotional activities related to VDAs.24

5.1.2. However, the number of investors and market participants in this segment has seen steady growth in India. Reflecting upon the volatile nature of VDAs, and the regulatory uncertainty, the ASCI has published the 'Guidelines for Advertising and Promotion of Virtual Digital Assets and Services' ("VDA Guidelines").25 The VDA Guidelines mandate disclaimer and placement obligations on commercial entities engaged in distribution, trading, and advertising of VDAs. The VDA Guidelines require advertisements to carry the following disclaimer: "Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions." Key provisions under the VDA Guidelines also include restrictions on manner and placement of the disclaimers in various media; usage of words such as "currency", "securities"; "custodian" and "depositories" as these terms are associated with regulated products; comparison with regulated assets; and guarantee of future increase in profits.

5.1.3. Further, the Securities and Exchange Board of India ("SEBI"), the securities regulator of India, made a representation to a Parliamentary Standing Committee on Finance on 6 June 2022 that "Given that crypto products are unregulated, prominent public figures including celebrities, sportsmen, etc. or their voice shall not be used for endorsement/advertisement of crypto products".26 While these representations do not reflect the official position of the Government of India, they show the regulatory interest and concern regarding crypto-currency advertisements.

5.2. Influencer Marketing

5.2.1. The influencer economy on social media platforms has witnessed unprecedented growth in claims arising out of influencer marketing practices and subsequently posed a question over consumer protection in cases of conflict. Engagement of influencers is a cheaper and faster way of reaching the masses than traditional advertisements as brands no longer need to invest in huge production and distribution costs. That said, the Indian Government recognised the need for a clear framework for engagement of influencers and has set out the following responsibilities on both advertisers and influencers under the Advertising Guidelines,27 namely, that any endorsement must:

  1. be genuine and reflect the current opinion of the endorser;
  2. disclose any "material connection" between the endorser and the advertiser which would have an impact on the endorsement;
  3. (iii) not be deceptive;
  4. not endorse a product by way of foreign professionals if such endorsement is prohibited for Indian individuals; and
  5. carry prominent disclosures.

5.2.2. Further, the ASCI also published the Influencer Guidelines in 202128 which aim to prevent consumers from being misled by lack of or insufficient disclosures by influencers. The Influencer Guidelines mandate: insertion of sufficient disclosures in content that is endorsed; due diligence by influencers on claims made while endorsing products; disclosures of "material connection" between the influencers and the advertisers; and upfront and prominent placement of disclosures.

5.3. Gaming

5.3.1. Betting and gambling are illegal in many parts of the country and are a state subject under the Constitution of India i.e. every State in India is free to regulate betting and gambling in their State as per their own discretion. The Public Gambling Act, 1867 is the central Act regulating gaming in India. It prohibits gambling but excludes games of skill as they do not fall within the scope of gambling.29 The determination as to whether certain games are games of skill has been done by courts in numerous cases.30 Further, there are certain games which, though involving a high element of monetary risk, have been deemed as 'games of skill' by judicial interpretation.31 Lately, there have been many entries by players with digital iterations of 'games of skill' like online rummy, poker, and fantasy-sports.32

5.3.2. As a result, the ASCI published the 'Guidelines on Online Gaming' in 2020 to regulate games which contain elements of real money and financial risk and provide for disclaimers to be added for such games.33 Key provisions under the guidelines include restrictions on (i) engagement of anyone below 18 years to appear in any advertisement; (ii) suggestion that those below 18 can play the games offered; (ii) games being presented as an income / employment opportunity; and (iii) suggesting that persons engaged in the gaming activities are more successful than others.

5.3.3. In 2022, the MIB also issued advisories against online sports betting and gambling platforms running surrogate advertisements as news websites on news channels and over-the-top platforms.34 The MIB categorised such advertisements as a violation of the IT Rules 2021 and the Advertisement Guidelines and cautioned platforms from hosting such advertising content.

6. CONCLUSION

The Indian regulatory framework for advertising and the myriad of applicable laws are complex and testing for advertisers. New laws of general application like the CPA are largely untested and present a new landscape for advertisers to deal with in India. It's likely that other new statutes will follow both for specific sectors like VDA and others of general application. These factors necessitate continuous diligence by advertisers to ensure that their advertisements are compliant.

If you are interested in advertising in India you can find out more by attending our webinar on the Mondaq platform "Are you ready for India's new advertising laws" on 10 November 2022 at UTC 3.30pm for which you can register at https://www.mondaq.com/webinars/webinar/483/Are-You-Ready-For-Indias-New-Advertising-Laws

Footnotes

1. Deloitte, TMT Predictions 2022 (February 2022), available at https://www2.deloitte.com/content/dam/Deloitte/in/Documents/technology-media-telecommunications/in-TMT-predictions-2022-noexp.pdf.

2. Dentsu, Global Ad Spend Forecasts (July 2022), available at https://www.dentsu.com/sg/en/insights.

3. Cable Television Networks (Regulation) 1995; Rules 6 and 7, Cable Television Rules 1994.

4. Prasar Bharti, Revised Code for Commercial Advertising on Doordarshan, available at https://prasarbharati.gov.in/code-for-commercial-advertising/#1531079228267-56a72b14-62d3.

5. Policy Guidelines on Expansion of FM Radio Broadcasting Services through Private Agencies (Phase-III), Ministry of Information and Broadcasting (25 July 2011), available at http://aroi.in/pdf/PolicyGuidelines_FMPhaseIII.pdf.

6. Section 47(j), CPA.

7. Sections 10(1) and 18(1)(c), CPA.

8. CCPA Passes Order for Discontinuation of Sensodyne Ads in India, ET Healthworld.com (10 February 2022), available at , ET Healthworld.com (10 February 2022), available at https://health.economictimes.indiatimes.com/news/pharma/ccpa-passes-order-for-discontinuation-of-sensodyne-ads-in-india/89466077.

9. Naaptol Paid 10 Lakhs Penalty, Drops Misleading Ads, Times of India (26 July 2022), available at https://timesofindia.indiatimes.com/india/naaptol-paid-rs-10-lakh-penalty-drops-misleading-ads/articleshow/89854628.cms

10. Advertisement Guidelines, available at https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/CCPA%20Notification.pdf (hereinafter 'Advertisement Guidelines').

11. Section 8, Advertisement Guidelines.

12. Section 11, Advertisement Guidelines.

13. Id.

14. Chapter IV, ASCI Code.

15. Reckitt & Colman of India Ltd v M.P. Ramchandran, 1999 PTC (19) 741.

16. Pepsico Inc v Hindustan Coca-Cola Ltd, 2003 (27) PTC 305 Del.

17. Hindustan Unilever Ltd v USV Private Ltd, Bom HC (13 July 2022).

18. Section 29(8), TMA.

19. Rule 7(2)(viii)(A), Cable Television Rules 1994; ASCI Code; Section 6, Advertisement Guidelines.

20. Important Communication No.2/2021 dated 24 March 2021, Central Board of Film Certification.

21. Reserve Bank of India, Prohibition on dealing in Virtual Currencies (VCs) (2018), available at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11243

22. Internet and Mobile Association of India (IAMAI) v. Reserve Bank of India, (2020) SCCOnline SCC 275.

23. Section 2, Finance Act 2022.

24. T Rabi Sankar, Cryptocurrencies - An Assessment (14 February 2022), available at https://rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1196.

25. ASCI, Guidelines for Advertising and Promotion of Virtual Digital Assets and Services (2022), available at https://ascionline.in/images/pdf/vda-guidelines-press-release-feb-23.pdf.

26. SEBI Flags Concerns over Regulation of Cryptos, Hindu Business Line (6 June 2022), available at https://www.thehindubusinessline.com/money-and-banking/sebi-flags-concerns-over-regulation-of-cryptos/article65500608.ece.

27. Section 13 and 14, Advertisement Guidelines.

28. ASCI, Guidelines for Influencer Advertising in Digital Media, pages 46-49 (2021), available at https://ascionline.in/images/pdf/code_book.pdf.

29. Section 12, the Public Gambling Act 1867; RMD Chamarbaugwala v Union of India AIR 1957 SC 628.

30. State of Andhra Pradesh v K. Satyanarayana, AIR 1968 SC 825; Varun Gumber v Union Territory of Chandigarh, CWP No. 7559 of 2017.

31. Id.

32. State of Andhra Pradesh v K. Satyanarayana AIR 1968 SC 825; Indian Poker Association (IPA) v State of Karnataka (8 October 2013) Kar HC; Chandresh Sankhla v State of Rajasthan (14 February 2020) Raj HC; Gurdeep Singh Sachar v Union of India (30 April 2019) Bom HC.

33. ASCI, Guidelines on Online Gaming issued by Advertising Standards Council of India (2020), available at https://ascionline.in/images/pdf2/mib-advisory-on-ads-on-gaming.pdf.

34. Ministry of Information & Broadcasting, Advisory on Advertisements of Online Betting Platforms

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com