Mak­ing en­dorsers li­able

The let­ter of the law cur­rently favours celeb en­dorsers, un­less the gov­ern­ment de­cides to bring in stricter pro­vi­sions to make them accountable for lapses in a prod­uct or ser­vice

Business Standard - - FRONT PAGE - SUDIPTO DEY

The law cur­rently favours celebrity en­dorsers, un­less the govt de­cides to bring in stricter pro­vi­sions to make them accountable for lapses in a prod­uct or ser­vice.

SUDIPTO DEY re­ports

The ques­tion whether celeb en­dorsers are li­able for lapses of a man­u­fac­turer or ser­vice provider in In­dia has been de­bated ever since Nestle’s Maggi brand of in­stant noodles fell afoul of food testing au­thor­i­ties. The legal fra­ter­nity, too, ap­pears to be di­vided on the mat­ter. How­ever, most legal ex­perts be­lieve even if celeb en­dorsers are booked un­der cer­tain pro­vi­sions of the law, it is dif­fi­cult to prove in the court of law that the act of en­dorse­ment was done with a clear in­tent to harm any­one.

Legal ex­perts point out that rights and obligations of a brand am­bas­sador are cov­ered by the con­tract be­tween the en­dorser and the com­pany. “It is pos­si­ble that the en­dorser is en­gaged by an ad­ver­tis­ing agency and not the com­pany; in which case, the terms and con­di­tions of the con­tract will be dif­fer­ent. Ad­di­tion­ally, there may not be any con­trac­tual re­la­tion be­tween the en­dorser and the com­pany,” says Gowree Gokhale, Part­ner, Nishith De­sai As­so­ciates.

Ramesh Vaidyanathan, man­ag­ing part­ner, Ad­vaya Legal, points out that it is com­mon prac­tice that both the brand owner and the brand en­dorser pro­vide con­trac­tual rep­re­sen­ta­tions to each other. “The celebrity’s rep­re­sen­ta­tions are mostly re­stricted to non-en­dorse­ment of com­pet­ing prod­ucts, while the brand owner pro­vides spe­cific rep­re­sen­ta­tions about the prod­uct qual­ity. Celebri­ties also seek ex­ten­sive in­dem­ni­ties from the brand own­ers to pro­tect them against any civil li­a­bil­ity,” says Vaidyanathan.

Un­der the In­dian Pe­nal Code, any per­son who sells or of­fers for sale nox­ious or un­fit food, can be pros­e­cuted if he knew that the food was un­fit. In the Maggi case, a crim­i­nal li­a­bil­ity case has re­port­edly been filed un­der the In­dian Pe­nal Code un­der Sec­tions 270 (ma­lig­nant act likely to spread in­fec­tion of dis­ease danger­ous to life), 273 (sale of nox­ious food or drink), 276 (sale of drug as a dif­fer­ent drug or prepa­ra­tion) and 420 (cheat­ing and dis­hon­esty) against celebrity en­dorsers.

“A bare read­ing of the law will show that the charges filed un­der Sec­tions 420 and 276 are likely to fall apart in court as they deal with ‘cheat­ing with re­gard to prop­erty’ and the ‘sale of drug as a dif­fer­ent drug or prepa­ra­tion’ re­spec­tively, which is not the case here. The other two sec­tions specif­i­cally re­quire the ac­cused to have done the act with a clear in­tent, which looks very dif­fi­cult to prove in this case,” says Vaidyanathan.

While In­dian laws are si­lent on the li­a­bil­ity of en­dorsers, the Food Safety and Stan­dards Act, 2006 (FSSA) ex­pressly pro­vides that “any per­son who is party to an ad­ver­tise­ment” that falsely de­scribes any food, or is likely to mis­lead as to the na­ture or qual­ity of the food can be held li­able for a penalty of up to ~10 lakh. Legal ex­perts say that any mon­e­tary penalty if im­posed is typ­i­cally picked up in the con­trac­tual in­dem­ni­ties pro­vided by the brand owner.

Ac­cord­ing to Gokhale, one can com­plain to the Ad­ver­tis­ing Stan­dards Coun­cil of In­dia (ASCI), a self-reg­u­lat­ing body, against any per­ceived mis-rep­re­sen­ta­tion in an ad­ver­tise­ment. The ASCI can give a di­rec­tion for mod­i­fi­ca­tion or with­drawal of an ad­ver­tise­ment. “Such ad­ver­tise­ments are eval­u­ated on prin­ci­ples of hon­esty, re­spon­si­bil­ity, fair­ness and de­cency. How­ever the or­ders are not en­force­able, but are gen­er­ally fol­lowed by in­dus­try”, says Gokhale.

Con­sumers may make a claim un­der the law of tort against an en­dorser, but there is no prece­dent for such a claim in In­dia, says M S Ananth from law firm Nishith De­sai As­so­ciates. Un­der the Con­sumer Pro­tec­tion Act, a trader or ser­vice provider may be pros­e­cuted for de­fi­ciency of ser­vice, un­fair trade prac­tice or any de­fect. “How­ever, it does not pros­e­cute an en­dorser,” he adds.

In­ter­na­tional norms

In the US, Fed­eral Trade Com­mis­sion (FTC), the com­pe­ti­tion law reg­u­la­tor, has cer­tain guide­lines for endorsements by celebri­ties. FTC has pre­scribed stan­dards for en­dorsers, and when an en­dorser would be li­able.

“Ad­ver­tise­ments are eval­u­ated on ‘good rea­son to be­lieve’ test to ex­am­ine if the en­dorser ac­tu­ally uses or be­lieves the fea­tures of the prod­uct. Celebri­ties can be li­able if they fail the ‘good rea­son to be­lieve test’,” ex­plains Gokhale. How­ever, Vaidyanathan notes that there is still no crim­i­nal li­a­bil­ity in such sit­u­a­tions, and that there can only be civil li­a­bil­ity.

In Europe, a vol­un­tary self­im­posed code pre­cludes celebri­ties from en­dors­ing medicines, med­i­cal treat­ments, tobacco and al­co­hol. In China, there have been at­tempts to hold celebri­ties li­able for var­i­ous prod­ucts. For in­stance, Jackie Chan, too, was sought to be pros­e­cuted for en­dors­ing a ‘chem­i­cal free’ sham­poo which al­legedly had can­cer- caus­ing in­gre­di­ents. “China does not have a ‘false and mis­lead­ing’ test, and suits against en­dorsers failed since there was no legal re­la­tion be­tween the en­dorser and the prod­uct or com­pany,” says Gokhale.

Chang­ing the law

Legal ex­perts and con­sumer right ac­tivists point out that the Cen­tral Con­sumer Pro­tec­tion Coun­cil con­sti­tuted un­der the Con­sumer Pro­tec­tion Act had in a meet­ing at Kochi in Fe­bru­ary last year sug­gested the need for strate­gies to deal with li­a­bil­ity of stake­hold­ers, in­clud­ing celebri­ties, for mis­lead­ing ad­ver­tise­ments. It had set up a sub-com­mit­tee to look into the is­sue. How­ever, no sug­ges­tions came up from the com­mit­tee, and there has been no amend­ment to the Con­sumer Pro­tec­tion Act. Many in the legal fra­ter­nity feel that the gov­ern­ment should amend ex­ist­ing laws to come out with clear guide­lines around rights and li­a­bil­i­ties of celeb en­dorsers.

Still many, like Amit Vyas, as­so­ciate part­ner in law firm Eco­nomic Laws Prac­tice, are not con­vinced of the need to bring celeb en­dorsers un­der the ambit of law. “It looks like a far-fetched propo­si­tion to make brand am­bas­sadors per­son­ally li­able for de­fi­cient prod­ucts. As long as the brand am­bas­sadors see to it that the prod­uct that they are en­dors­ing has been granted the re­quired ap­provals or per­mits, if re­quired, from the req­ui­site statu­tory author­ity, they ought not to be held per­son­ally li­able for de­fi­ciency in goods or ser­vice” he says.

One thing cer­tain to come out of the cur­rent de­bate over the legal li­a­bil­i­ties of brand am­bas­sadors is that the busi­ness of brand en­dorse­ment will be­come more cir­cum­spect.

In the US, Fed­eral Trade Com­mis­sion, the com­pe­ti­tion law reg­u­la­tor, has cer­tain guide­lines for endorsements by celebri­ties. FTC has pre­scribed stan­dards for en­dorsers, and when an en­dorser would be li­able

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