Social media influencers must disclose all “material” interests, including gifts, hotel accommodations, equity, discounts, and awards, when endorsing any products, services or schemes, the government said on Friday. Otherwise, strict legal action could be taken, including a ban on endorsements.
Disclosures should be simple and clear, be long enough to catch your attention, have endorsements, including live streams, and be platform-agnostic.
The regulations are part of ongoing efforts to curb misleading advertisements and protect the interests of consumers amid the expanding social influencer market, which is expected to grow 20 percent every year to reach $2,800 crore by 2025.
It’s called ‘Endorsement Know Hows for celebrities, influencers, and virtual media influencers (Avatars or computer generated characters) on social media platforms’.
If there is a violation, the Consumer Protection Act 2019 will apply.
The Central Consumer Protection Authority (CCPA) can fine manufacturers, advertisers, and endorsers up to $10 lakh. A penalty of up to $50 lakh can be imposed for subsequent offenses.
Ad endorsers of misleading ads can be banned from making endorsements for 1 year and 3 years for subsequent violations.
The guidelines were launched by Consumer Affairs Secretary Rohit Kumar Singh at a press conference. The CCPA protects consumers from unfair trade practices and misleading ads.
He hoped the guidelines would deter social media influencers.
This is a very important topic. The market for social influencers in India was 1,275 crore in 2022. By 2025, it’s likely to hit 2,800 crore with a compound annual growth rate of 19-20 percent. In India, there are over a lakh social media influencers of substance, which means people with a lot of followers,” Mr Singh said.
Social media influence is here to stay and will only grow exponentially, so we need to regulate misleading social media ads.
It’s an obligation for social media influencers who have material connections to the brands they want to promote to behave responsibly when it comes to consumer disclosure.
One of the biggest paradigms of consumer law is the right to know, and this is part of it. If digital media throws something at you, you should know who’s sponsoring it, if they’ve taken money or if they’re in any way connected to it,” Singh said.
When people don’t comply, Singh said, they can approach the authority to seek legal action against them. Investigations can be conducted by the authority, and it can also take up cases on its own.
According to Nidhi Khare, material connections include but aren’t limited to benefits and incentives, such as monetary or other compensation; free products, including unsolicited ones, discounts, gifts; contests and sweepstakes entries; trips or hotels; media barters; coverage and awards; or family, personal, or employment relationships.
New guidelines specify who to disclose, when to disclose, and how to disclose.
Influencers/celebrity who have access to an audience and can influence their audiences’ buying decisions or opinions about a product, service, brand or experience will have to disclose if they have authority, knowledge, position, or relationship with their audience.
It’s important to disclose “when there’s a connection between an advertiser and a celebrity/influencer that could affect the weight or credibility of their representation”, Ms Khare said.
It should be in a way that’s easy to understand and hard to miss.
Disclosures should be placed in the endorsement message so that they’re clear, prominent and hard to miss. Don’t mix disclosures with hashtags or links.
The picture endorsement should be visible enough to be noticed by viewers. Video disclosures should be in the video, not just in the description, and in both audio and video.
Live streams should display disclosures continuously and prominently.
The term ‘XYZAmbassador’ (where XYZ is a brand) is also acceptable on limited space platforms like Twitter.
This guideline is being issued under the Consumer Protection Act and one of the main principles of the law is preventing unfair trade practices.
A major unfair trading practice is misleading advertisements, by trying to sell something that’s not exactly what’s shown in the ad.
TV, print, and radio have handled it well, but social and digital media are a whole new ballgame,” Mr Singh said.
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