Misleading Advertisements and the Liability of an Endorser

In one line

A false or misleading advertisement may be stopped, and the manufacturer, the endorser and the publisher may all be penalised.

In the wording a student can write in an exam: section 2(28) defines a misleading advertisement as one which falsely describes a product or service, gives a false guarantee or is likely to mislead consumers as to its nature, substance, quantity or quality, conveys a representation which would constitute an unfair trade practice if made by the manufacturer or seller, or deliberately conceals important information; section 21 empowers the Central Authority to order that such an advertisement be discontinued or modified and to impose penalties on the manufacturer, the endorser and the publisher; and section 89 makes a false or misleading advertisement prejudicial to the interest of consumers an offence.

The definition: section 2(28)

A misleading advertisement, in relation to any product or service, means an advertisement which:

falsely describes the product or service;

gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of the product or service;

conveys an express or implied representation which, if made by the manufacturer or seller or service provider, would constitute an unfair trade practice; or

deliberately conceals important information.

The fourth limb is the one to remember: concealment is as much an offence as assertion.

What the Central Authority may do: section 21

Sub-section (1): stop or change the advertisement. Where the Central Authority is satisfied after investigation that an advertisement is false or misleading and prejudicial to the interest of any consumer, or is in contravention of consumer rights, it may by order direct the trader, manufacturer, endorser, advertiser or publisher to discontinue the advertisement or to modify it, in the manner and within the time specified.

Sub-section (2): a penalty on the manufacturer or the endorser. It may impose a penalty which may extend to ten lakh rupees, and for every subsequent contravention a penalty which may extend to fifty lakh rupees.

Sub-section (3): a ban on the endorser. Where it deems it necessary, it may prohibit the endorser of a false or misleading advertisement from making an endorsement of any product or service for a period which may extend to one year, and for every subsequent contravention for a period which may extend to three years.

Sub-section (4): a penalty on the publisher. Where it is satisfied after investigation that a person publishes, or is a party to the publication of, a misleading advertisement, it may impose a penalty which may extend to ten lakh rupees.

Sub-section (5): the endorser's defence. No endorser is liable to a penalty under sub-sections (2) and (3) if he has exercised due diligence to verify the veracity of the claims made in the advertisement about the product or service he endorses.