Digital and social media consumption has significantly increased in this day and age, which has led to a substantial transition from offline to online shopping. Consumers now generally rely on influencer product and service reviews or related content before making any online purchases. Such content could be, either organic and genuine, or commercially motivated. This has resulted in the blurring of lines between genuine digital content and paid promotional content, and consumers are often unable to differentiate between the two.

Historically, influencer advertising in the digital space has been largely unregulated with influencers having limited accountability, resulting in instances where ingenuous consumers are misled into making decisions without realising the commercial intent behind an influencer posting digital content, with little legal recourse.

Laws dedicated to consumer protection in India have struggled to keep pace with this rapid evolution and expansion of means of such influencer advertising through the digital medium, and to hold influencers liable for their pervasive, and sometimes deceptive, behaviour patterns.

First attempt at regulation

To prevent abuse and exploitation of consumer trust, and with an aim to preserve stakeholder interest, the Guidelines for Influencer Advertising in Digital Media (“Guidelines”) have been formulated by the Advertising Standards Council of India (“ASCI”). While ASCI is a self-regulatory body and these Guidelines are not binding per se for influencer advertisements in the digital medium, this attempt at self-regulation is a step in the right direction.

Highlights of the Guidelines

ASCI initially released a draft of the Guidelines in February 2021 for public comments/ feedback. The final Guidelines were later released on May 27, 2021, requiring compliance on and after June 14, 2021, and have been updated thereafter from time to time.

The Guidelines lay down a fairly wide definition of an ‘influencer’ which has far reaching implications for a large segment of individuals. As per the Guidelines, an ‘influencer’ is someone who has access to an audience and the power to affect such audience’s purchasing decisions or opinions about a product, service, brand, or experience, because of their authority, knowledge, position, or relationship with their audience. Further, a broad definition of ‘digital media’, encompassing all plausible forms of digital content and platforms for delivery of such content, has also been laid down in the Guidelines. In other words, the Guidelines have a considerable scope with respect to regulation of influencer advertising via the digital medium.

The Guidelines provide for a disclosure label (such as “Ad”, “Sponsored”, “Collaboration”, etc.), that all advertisements published by social media influencers, or their representatives, must carry, that clearly identifies such content as an advertisement. A disclosure is required if a ‘material connection’ exists between the advertiser and the influencer. A ‘material connection’ refers to any connection between the advertiser and the influencer that has the ability to affect the credibility of the representation made by the influencer, and includes (but is not limited to) monetary compensation being charged by the influencer, free or discounted products, other perks (such as trips or hotel stays, coverage, awards etc.) received by the influencer.

Amongst other requirements, the disclosure must be upfront, prominent, and not be buried in any other section where it is likely to be overlooked. For an advertisement in the nature of a photo/ video post, the disclosure should be superimposed over such photo/ video to ensure its visibility to any average consumer, with the duration of the disclosure depending on the duration of the video. Additionally, distinct disclosure requirements for livestreams, audio advertisements, etc. have also been spelled out. The Guidelines provide that the language of the disclosure should be in English, or the language of the advertisement. Virtual influencers must additionally disclose to consumers that they are not interacting with a real human being.

It is also imperative to note that the Guidelines extend the responsibility of disclosure of material connection to advertisers, for whose product or service the advertisement is created. Consequently, advertisers should ensure that the influencer is compliant with the code and guidelines issued by ASCI, and wherever required, call upon the influencer to delete or edit non-compliant advertisements. We note that the ASCI from time-to-time issues lists of non-compliant influencers and brands (which may include advertisers) on its website, for failure to comply with disclosure requirements under the Guidelines, which should be closely monitored and actioned upon by brands, advertisers, and influencers.

The Guidelines require influencers to conduct their own due diligence, and satisfy themselves that the advertiser is in a position to substantiate the claims made in the advertisement.

Recent Developments

The Department of Consumer Affairs (“DoCA”) in January 2023 released ‘Endorsement Know-hows’, which provides details of disclosure requirements applicable to celebrities, influencers, and virtual influencers on social media platforms. In August 2023, DoCA released an additional set of guidelines, which provide for incremental disclosure or disclaimer requirements for qualified health sector professionals or health influencers, respectively.

Further, ASCI has amended the Guidelines via press release dated August 17, 2023 (“Amendment”). The Amendment provides for additional compliance by influencers operating in the banking, financial services, and insurance space, such as requirement of qualifications and credentials if influencers wish to offer investment related or financial advice.

CCPA giving impetus to ASCI Guidelines

Subsequent to the Guidelines, the Central Consumer Protection Authority (“CCPA”) via its powers under the Consumer Protection Act, 2019 (“CPA”), released the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (“Misleading Advertisements Guidelines”). While the CPA already contains general provisions for prevention of misleading advertisements, the Misleading Advertisements Guidelines expand the scope of the existing provisions by setting out detailed parameters of advertisements that are permissible or prohibited.

The Misleading Advertisements Guidelines have an incremental impact on the advertising ecosystem as they apply to all advertisements regardless of form, format or medium. Advertisers, advertising agencies or endorsers who provide services for such advertisements, are also covered within the ambit of the Misleading Advertisements Guidelines. While the Misleading Advertisements Guidelines define ‘endorser’ as “an individual or a group or an institution making endorsement of any goods, product or service in an advertisement whose opinion, belief, finding or experience being the message which such advertisement appears to reflect”, there may be a very thin line between an influencer and an endorser on some occasions and should ideally be assessed on a case-to-case basis.

Amongst others, the requirement of due diligence for endorsement of any advertisements has also been separately emphasized under the Misleading Advertisements Guidelines.

In case of non-compliance with the Misleading Advertisements Guidelines, the CCPA may impose a penalty of up to INR 10 lakh on manufacturers, advertisers, and endorsers for issuance of misleading advertisements, as has been provided under Section 21 of the Consumer Protection Act, 2019. For any subsequent contraventions, CCPA may impose a penalty of upto INR 50 lakh. Further CCPA can also prohibit the endorser of a misleading advertisement from making any endorsement for upto 1 year and for subsequent contravention, prohibition can extend upto 3 years.

Long road ahead

While India is among the foremost nations to introduce strict compliance requirements for influencer advertising in the digital space, given that both the ASCI Guidelines and the Misleading Advertisements Guidelines are quite recent, an assessment and jurisprudence of their impact, implementation, and enforcement will only be clearer with time.

In the meantime, it is recommended that organizations engaging influencers for marketing their products or services, should ensure that such influencers abide by the requirements at all times prescribed under the Guidelines, the Misleading Advertisements Guidelines, and any other guidance/ regulations issued in this regard. For this, organizations may undertake certain best practices which may include:

• inclusion of safeguards and provisions in contracts with influencers, which protect them from any potential liabilities that may arise due to non-compliance by influencers;
• dissemination of information and awareness to influencers regarding advertising laws applicable on influencers, and the significance of complying with such laws, including the potential legal consequences of non-compliance; and
• conducting due diligence prior to engaging influencers.