Business Standard

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


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.


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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