Influencer Liability in India: When Does a Sponsored Post Become a Legal Risk?
Introduction : Social media influencers have become powerful intermediaries in the digital economy. Many brands use them to market a wide variety of goods and services (e.g., cosmetics, dietary supplements, financial services, and video games). Globally, influencer marketing has exploded into a multi-billion-dollar industry, with India emerging as one of its fastest-growing markets. There are growing concerns about how much consumers rely on these recommendations from influencers as to whether they should be held accountable by law if they mislead consumers (for example, by providing false endorsements, failing to disclose sponsorships, or misleading consumers with advertisements). Regulatory agencies are now questioning the role of an influencer in the creation and distribution of content, and whether or not they should be held legally liable for creating misleading content as part of their promotion to consumers. In order to determine how to answer these questions, we can refer to guidelines outlined in the Indian Consumer Protection Act, 2019 and the ASCI Guidelines for Influencer Marketing.
The Rise of Influencer Marketing and Regulatory Concerns
Influencers occupy a unique placement regarding their ability to connect with an audience, as they provide an authentic connection to the audience because they create content that is more personal than will be created by usual types of advertising. Therefore, when consumers receive endorsement messages, those messages may be interpreted as a connection between the consumer and the brand rather than as an advertisement that pays for the individual to market the brand. Because personal opinion often cannot be separated from commercial advertising, this presents a very large opportunity for consumers to be misled through deception. In order to address this concern, in 2021, the ASCI developed its Advertising Guidelines for Marketing Influencers to create clarity and transparency in digital advertising and allow consumers to distinguish between independent opinion and advertising endorsements. The guidelines were developed in consultation with the marketers themselves, influencers, and digital stakeholders and serve as one of the primary self-regulatory systems currently in use in India for influencer marketing.
ASCI Influencer Advertising Guidelines
The Advertising Standards Council of India (ASCI) released Influencer Advertising Guidelines for Digital Media. The goal was to give consumers an easy way to identify when content is advertising. Influencers must reveal to their audience any type of “material relationship” they have with the sponsor. Material relationships can include monetary compensation, products provided, gifts given, discounts received or anything that may affect what consumers might think of their endorsement. To ensure transparency, ASCI requires influencers to use clear disclosure labels such as:
The disclosure should be clear, prominent, and hard to miss. It cannot be concealed in long strings of hashtags or otherwise be in a location consumers do not pay attention to. Video disclosures need to stay on-screen long enough; with live streaming, periodic disclosures need to be made. The goal is simple and direct i.e., the consumer should be able to distinguish immediately when the content being consumed is promotional.
Consumer Protection Act, 2019: A Stronger Statutory Framework
The Advertising Standards Council of India (ASCI) is a self-regulatory agency, while the Consumer Protection Act of 2019 establishes legal footing for prohibiting advertising that is deceptive, unethical and/or unlawful. A Central Consumer Protection Authority (CCPA) is established under the Act and may investigate or enforce against false or deceptive advertisements. According to section 21 of the Act, the CCPA may impose penalties on the manufacturers of false advertising as well as advertisers and endorsers. In addition, under the legal definition of an endorser, anyone who promotes or recommends a good/service is an endorser and may be held liable as such for any false or misleading advertising action. Further, an influencer who makes false representations about a good/service is subject to the same liabilities as an endorser under the law and the advertiser is also subject to the same liabilities as an endorser. The Guidelines/Regulations For Preventing Misleading Advertising and Endorsements in 2022 established a new standard of care for determining whether an endorser/advertiser exercised appropriate care in presenting a product before making representations on that product.
When Does a Sponsored Post Become Legally Risky?
A sponsored post may become legally problematic in several situations.
1. Failure to Disclose Sponsorship
Failure to disclose the existence of a financial relationship with a brand can lead an influencer to mislead the audience as to whether or not there is any independence in the endorsement. Furthermore, this type of behavior could violate disclosure requirements under ASCI policy and result in regulatory investigations.
2. Making False or Unsubstantiated Claims
Influencers are frequently able to claim a specific benefit from their promotional products to promote them. The issue arises when there is no scientific, technical or factual basis for the claims being made. For example, an influencer who promoted a supplement for health and cured ailments, guaranteed to help the user lose weight or achieve amazing results without having proven the product's effectiveness could be considered to be creating a false advertisement.
3. Endorsing Products Without Due Diligence
The law is becoming increasingly clear in requiring endorsers to exercise appropriate care and consideration prior to representing a product. As such, influencers cannot simply repeat the marketing claim made by a brand without conducting reasonable verification of the claim made. If the marketing claim is false, then the influencer may be held liable if they failed to conduct reasonable verification of the claim.
4. Misleading Financial or Investment Promotions
Recently, influencers may have been promoting investment schemes, trading platforms and/or financial products without having disclosed the risk associated with these products, and there is a growing concern about the potential impact on the public which will likely lead to increased regulatory scrutiny of these promotional activities.
Penalties and Consequences
Penalties for not complying with CCPA regulations can be substantial. CCPA allows the imposition of penalties of up to ₹10 lakh for misleading advertisements and up to ₹50 lakh for repeat violations. In addition to statutory penalties, influencers will suffer reputational harm, loss of trust from their audience, contractual disputes with the brands they partner with, and potentially even civil claims for engaging in misleading representations. Endorsers may be barred from endorsements for one year, and repeat offending endorsers could be barred for up to three years.
Conclusion
The importance of marketer-mediated advertising (or influencer advertising) only continues to grow in modern-day marketing, but there are also laws that govern these types of advertising. The ASCI's disclosure framework, along with the Consumer Protection Act, 2019 is indicative of this, as there are both a regulatory intent to protect consumers from false endorsements and/or misleading representations in the marketplace. Influencers have shifted from being just "a middleman" to now being viewed as endorsing advertising that affects consumer behaviour through the expression of their endorsement. As such, the act of being transparent, providing required disclosures and conducting due diligence has transformed from being merely "best practices" to "emerging legal obligations" in the ever-evolving Indian digital advertising ecosystem. Influencers who take compliance and integrity seriously will be in a strong position to retain consumer confidence as well as regulatory agencies' confidence.
Author: Vaibhav Pandey in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney
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