Celebrities may face jail, hefty fines for endorsing misleading ads under new bill

A new consumer protection bill tabled in the Lok Sabha on Friday seeks to enforce stringent provisions to protect consumers by regulating online sales, providing for higher manufacturer liabilities, even restricting tall claims, including some made through celebrity brand endorsers.

The Consumer Protection Bill 2018 seeks a complete overhaul in consumer rights, especially in areas of e-commerce, direct-to-consumer selling and advertisements. It also lays the ground for the creation of a new regulator, a central consumer protection authority.

When passed, the law will replace the archaic Consumer Protection Act 1986, and apply not only to physical products but also services.

The bill, which is expected to be cleared without too much opposition, also clearly articulates grounds for class-action suits. The complaint of one consumer about a faulty product or service – such as a botched-up holiday or a defective battery -- can be treated as representative, the law says.

The new consumer protection authority will have power to monitor and enforce the new regulatory regime that the bill seeks to implement.

“This fills an institutional void in the regulatory regime extant. Currently, the task of prevention of or acting against unfair trade practices is not vested in any authority,” the bill said.

Misleading ads in various media touting exaggerated claims are common because of a lack of clear legal provisions.

The bill seeks to specific what constitutes false and unfulfilled claims.

It provides for up to two years’ jail term and Rs 10 lakh fine for manufacturers making false claims in ads. This could go up to 5 years Rs 50 lakh for repeat offenders.

Endorsers making such claims face a penalty of up to Rs 10 lakh and a ban of a year (from endorsements) while repeat offenders will attract fines of up to Rs 50 lakh.

Endorsers who can prove they applied “due diligence” or appeared in an ad in “normal course of business” without knowledge of fraudulent intentions may use it as a “defence”, according to the bill.

“The burden of proof of such defence,” the bill however, states, “shall lie on the person raising such defence.”

The bill says that growth in e-commerce, international trade and newer services as well as innovative delivery chains have increased the choice before consumers but also made them vulnerable.

“The modern market place contains a plethora of products and services. The emergence of global supply chains, rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services and have provided new options and opportunities for consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices,” the bill states.

Unfair trade practices often take advantage of limitations in the current law. “In an earlier era, issues like misleading ads and cheating were dealt with under the Monopolistic and Restrictive Trade Practices (MRTP) Act. But since the Competition Act, 2002, replaced the MRTP Act, it left out effective regulations to deal with unfair trade practices. This new bill hopefully will address these shortcomings,” said Pradeep Mehta of CUTS International, a consumer rights activist group.

The bill also provides for framing of rules – subsequent to passage of the bill – for product recalls and on the responsibility of a firm for both safety and efficacy of its products.

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