Consumer safeguard: Influencers must disclose paid promotions; Face fines of up to Rs 50 lakh, suspension

The Rs 1,275-crore market for online endorsements, growing at a CAGR of over 15% and tipped to hit Rs 2,457 crore by 2025, is in for a upheaval after the consumer affairs ministry on Friday announced guidelines requiring social media and virtual influencers, including celebrities, to disclose paid promotions. Any misleading advertising will attract a fine of up to Rs 50 lakh or a suspension from online platforms for as long as two years.

Consumer Safeguard: Influencers Must Disclose Paid Promotions; Face Fines Of Up To Rs 50 Lakh, Suspension

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Consumer Safeguard: Influencers Must Disclose Paid Promotions; Face Fines Of Up To Rs 50 Lakh, Suspension

Rohit Agarwal, founder & director, Alpha Zegus, a marketing agency that handles over 70 influencers, said that at present, most influencer ads come across as ‘personal recommendations’ without any indication of a monetary advantage to the influencer behind it. “This becomes unfair to the audience,” Agarwal said.

Consumer Safeguard: Influencers Must Disclose Paid Promotions; Face Fines Of Up To Rs 50 Lakh, Suspension

Industry experts believe the number of brand-influencer deals is bound to fall, but assert that influencers cannot abandon their responsibilities. So far, many influencers protected themselves against liabilities by inserting an indemnity clause in their agreements. The new guidelines, which come into effect immediately, make the influencers equally accountable to consumers in the event the brand or product they endorse fails to meet the promised standards.

Consumer Safeguard: Influencers Must Disclose Paid Promotions; Face Fines Of Up To Rs 50 Lakh, Suspension

Dhruv Suri, partner at PSA Legal, said contracts between influencers and brands may see the inclusion of many more clauses spelling out the liabilities of both parties. “The new guidelines could also pose a challenge to significant social media intermediaries. They may be under pressure to comply with directives, which could hamper their ease of doing business,” added Siddhant Sethi, partner at Sethi & Mehandru Advocates.

Consumer Safeguard: Influencers Must Disclose Paid Promotions; Face Fines Of Up To Rs 50 Lakh, Suspension

Moreover, the standard method of takedowns through intermediaries under the IT Act may not work as efficiently given the sheer volume of social media content, according to Karnika Vallabh, senior associate of Bharucha and Partners.

Consumer Safeguard: Influencers Must Disclose Paid Promotions; Face Fines Of Up To Rs 50 Lakh, Suspension

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Rohit Kumar Singh, secretary, department of consumer affairs, said the objective of the guidelines is to prevent unfair trade practices. “This issue is being handled well by conventional media, but social media is a different ball game. Social media influencers have an obligation to behave responsibly, and consumers have a right to know if a person has been paid to promote a product,” Singh said.

By one estimate, nearly two-thirds of Indians follow an influencer. The top four categories using influencers are personal care (25%), F&B (20%), fashion & jewellery (15%), and mobile & electronics (10%). Celebrities contribute 27% to the volumes while other influences account for the remaining 73%.

As per the new guidelines, disclosures must be made when there is a “material connection” between an advertiser and an influencer that may affect the credibility of the representation made, the ministry said. This “connect “ includes but is not limited to monetary compensation, free products with or even without any conditions attached, discounts, gifts, trips, hotel stays, media barters, coverage, and awards.

The key principle, the ministry said, was that the disclosures must be “hard to miss”. In the case of pictures, they should be superimposed over the image “enough for viewers to notice”. In video formats, they must be both visual and included in the audio. For live videos, they must be displayed as a constant ticker.

Claims made in these advertisements but also be substantiated, and there should not be a significant difference from scientific opinion.

Flouting these rules could lead to a fine of `10 lakh in the first instance along with the suspension of an account for a period of six months to two years. Repeat offenders could attract fines of up to Rs 50 lakh. Nidhi Khare, additional secretary, department of consumer affairs, said, “If social media intermediaries fail to suspend these accounts after the government’s orders, they could also be held liable.” The inquiry would be carried out by the consumer affairs ministry and the complaint can be taken up suo motu or referred by someone else. Welcoming the government’s move, Manisha Kapoor, CEO & secretary general, ASCI, said the ministry’s guidelines are aligned with ASCI’s influencer guidelines of 2021. “Influencer violations comprise almost 30% of ads taken up by ASCI, hence this legal backing for disclosure requirements is a welcome step. The ministry had been in touch with ASCI to review the various global guidelines on influencers.”

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