New Delhi: The government made it mandatory for social media influencers to disclose all “material” interest such as gifts, hotel accommodation, equity, discounts and awards when endorsing any products, services or scheme, failing which strict legal action, including ban on endorsements can be taken.
The government cracked down on the booming market of social influencers on Friday with new rules, including publishing clear disclosures about brand associations, to bring transparency and protect consumers. Influencers who fail to comply risk facing hefty fines of as much as ₹50 lakh or being barred from endorsing products for up to six years.
Disclosures will be required to be published when there is a “material connection” between an advertiser and a celebrity or influencer, Central Consumer Protection Authority (CCPA) chief Nidhi Khare said at a press conference.
The market size of the social influencer industry is projected to reach ₹2,800 crore by 2025 as firms increasingly rely on them to push products to their audience in a more relatable and personal way. Mint first reported about the plans to rein in influencers in September.
The guidelines will apply to all individuals who have “access to an audience and the power to affect audiences’ purchasing decisions”, Khare added. “The disclosure in an endorsement message should be in a manner that is clear, prominent and extremely hard to miss. In case of endorsement in a picture, disclosure should be superimposed over the image for viewers to notice. In a video, it should be placed in the video and not just in the description. And in the case of a livestream, disclosure should be displayed continuously in the form of a ticker during the entire length of the stream.”
Consumer affairs secretary Rohit Kumar Singh said the new guidelines would most impact personal care and the clothing segments as they are the biggest category that employs social media influencers to promote products.
“The overarching framework is the Consumer Protection Act, which is supposed to protect the rights of the consumers. And the bottom line in this context is the control and prevention of unfair trading practice,” Singh added. “Consumers should know if something is thrown at them from digital media, the person or entity sponsoring it have taken money or any form of connection they have with the brand.”
If non-compliance occurs, there are provisions under the law for consumers to approach authorities to seek legal action against people who violated the rules, Singh added.
Khare emphasized that misleading ads in any form, format or medium are prohibited. The new guidelines have specified who all need to disclose, when to disclose and how to disclose, she added.
“Material connections are not limited to benefits and incentives alone. It could be monetary or other kinds of compensation. It could be free products with or without conditions attached, including those that received unsolicited discounts or gifts. Trips or hotel stays, media barters, coverage and awards or any family, personal or employment relationship will be called material connection,” Khare said.
The new rules are in alignment with the guidelines set by the Consumer Protection Act of 2019. The law established procedures for protecting consumers from unfair trade practices and misleading advertisements.
The department of consumer affairs issued rules for preventing misleading ads and endorsements last June. The rules lay down the criteria for valid ads and the responsibilities of manufacturers, service providers, advertisers, and agencies. Additionally, the rules address the role of celebrities and endorsers.
