Introduction
Influencer Advertisement, a form of social media marketing that entails endorsements and product placements by online creators, has seen remarkable growth since 2019. The market size has tripled, reaching a record of 24 billion U.S. dollars in 2024 based on the Statista report on Global influencer marketing value 2016-2024. This surge reflects the significant impact of internet personalities in boosting brand visibility, driving engagement and shaping the purchasing decisions of numerous users. Given this immense potential, it's unsurprising that investment in influencer collaborations is expected to continue accelerating.
With this transition, consumers increasingly turn to influencer-generated product reviews and related content as a crucial part of their online purchasing process. However, this content can vary in nature, ranging from authentic and unbiased to commercially driven. Consequently, distinguishing between genuine digital content and sponsored promotions has become increasingly challenging for consumers, blurring the lines between the two. Influencer marketing is experiencing rapid growth, but it's not without its hurdles. From influencers making deceptive claims in ads to infringing on intellectual property rights and disparaging products, there are various challenges.
Guidelines and Regulation of Influencer Advertisements in India
I. Misleading Advertisement Guidelines
Under the power granted to Consumer Protection Authority under Section 18 of Consumer Protection Act 2019 issued the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022. The guidelines are comprehensive in nature and have an objective to combat misleading and false advertisements for protection of consumer interest. These guidelines expand the scope of Consumer Protection Act 2019 that sets the general scope for prevention of misleading advertisements.
The Misleading Advertisement Guidelines have broadened the scope of misleading advertisement. They apply to all advertisements regardless of form, format or medium. According to The Misleading Advertisement Guidelines an endorser is “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” The Misleading Advertisement Guidelines also give emphasis on the due diligence.
Penalty
In case there is a non-compliance with the Misleading Advertisements Guidelines the penalty of up to INR 10 lakh can be imposed upon the manufacturers, advertisers, and endorsers for issuance of misleading advertisements as per the provisions that are mentioned under Section 21 of the Consumer Protection Act, 2019.
Furthermore, if there is a subsequent contravention the penalty may impose up to INR 50 lakh. Additionally, prohibition can be placed on the endorser of a misleading advertisement from making any endorsement for up to 1 year and for subsequent contravention, prohibition can extend up to 3 years.
II. Endorsement Know How’s
In January 2023, the Department of Consumer Affairs unveiled the 'Endorsement Know-hows,' outlining disclosure obligations for celebrities, influencers, and virtual influencers on social media. Then, in August 2023, the department issued supplementary guidelines, which specify additional disclosure or disclaimer requirements for qualified health sector professionals or health influencers, respectively. Additionally, it can be noted that key features of ASCI guidelines have been incorporated in the Endorsement Know-Hows. The main purpose of Endorsement knows- hows is for ensuring that audiences are not misled by influencers and there is a compliance with the the Consumer Protection Act, 2019 (Act) and the rules/guidelines made thereunder.
Who to disclose?
According to Endorsement Know How’s –
‘Individuals/groups who have access to an audience and the power to affect their audiences’ purchasing decisions or opinions about a product, service, brand or experience, because of the influencer ' s/celebrity ' s authority, knowledge, position, or relationship with their audience.’
Endorsers are further divided into three sub categories –
Celebrities
Famous personalities, including but not limited to the entertainment or sports industry who have the power to affect the decisions or opinions of their audience.
Influencer
Creators who advertise products and services with a strong influence on the purchasing decisions or opinions of their audience.
Virtual Influencer
Fictional computer generated ‘people’ or avatars who have realistic characteristics, features and personalities of humans, and behave in a similar manner as influencers.
Material Connection
Under the Know – Hows mandate the disclosures are made when there is material connection established between an endorser and an advertiser. The connection should affect the credibility or weight of the representation that is made by the endorser. This helps consumers in making informed decisions.
‘This material connection could be determined by benefits/incentives offered to the endorsers by the advertiser including (but not limited to)
(a) Monetary or other compensation;
(b) Free products with or without any conditions attached, including discounts and gifts;
(c) Contest and sweepstakes entries;
(d) Trips or hotel stays;
(e) Media barters;
(f) Coverage and awards; or
(g) Any family, personal or employment relationship.’
If an endorser purchases a product with their own funds and discusses them based solely on personal experience, without any material connection to the advertiser, disclosure is not necessary.
How to disclose
Hard to Miss
Disclosures should be placed in the endorsement message in such a manner that they are clear, prominent and extremely hard to miss. Disclosures should not be mixed with a group of hashtags or links.
Endorsement in a Picture
Endorsement in a live stream
Simple and Clear
Terms Allowed
Language
Platform Tools
Due Diligence by Endorser
Endorsers are recommended to use and experience the services. Celebrities /influencers are advised always to review and satisfy themselves that the advertiser is in a position to substantiate the claims made in the advertisement.
Non-Compliance
Endorsers are liable for strict action under the law if they fail to disclose any material connection or noncompliance of the Consumer Protection Act 2019 and Rules made thereunder In August 2023, the Department of Consumer Affairs (DoCA) introduced additional guidelines outlining incremental disclosure or disclaimer obligations for qualified professionals within the health sector or health influencers. These guidelines likely aim to enhance transparency and accountability in health-related communications, ensuring that individuals receive accurate information and are aware of any potential biases or conflicts of interest.
III. ASCI Guidelines
To safeguard against the misuse of consumer trust and protect the interests of stakeholders, the Advertising Standards Council of India (ASCI) has issued the Guidelines for Influencer Advertising in Digital Media on June 1, 2021. The main emphasis of these Influencer Guidelines revolves around ensuring clear disclosure within promotional content and emphasizing the significance of conducting thorough due diligence regarding the advertised product.
However, ASCI guidelines have their main focus on the prevention of misleading advertisements but don't have any guidelines for covering intellectual property implications that surround influencer marketing. Provisions addressing intellectual property rights should also be integrated into these advertisements. Given the rise in unauthorized utilization of brand names, it's crucial to safeguard the goodwill and interests of both brands and individuals engaged in social media marketing. In addition to this, the guidelines have lacunae in the cases where a follower's health is affected by a recommendation given by the influencer on a social media platform. ASCI amended the guidelines on August 17,2023. The amendment covers the additional compliances for the influencers that are operating in the space of financial services, insurance and banking.
It is crucial to note that ASCI is a self – regulatory body and not a governmental regulated body. Hence, the guidelines might have a persuasive value in the Courts but will not be binding.
Must have Clauses in the In Influencer Agreement
Organizations utilizing influencers for marketing purposes should ensure that these influencers consistently adhere to the stipulations outlined in the Guidelines, the Misleading Advertisements Guidelines, and any additional guidance or regulations pertinent to this matter.
Following are important clauses that must be included in the influencer agreement :
Clauses | Description |
|---|---|
Description of Influencer Performance | The agreement should outline the key aspects that the influencer needs to include in their content related to the product or service. It should also specify the social media platforms where the advertisements will be posted. Additionally, if the business has specific timing requirements for the advertisements, these should be clearly stated in the agreement.
However, it's important for the business to be mindful not to overly dictate the content created by the influencer. The influencer should be granted creative autonomy to develop and execute the advertisement production. |
IP Ownership | The agreement should explicitly outline the intellectual property rights of both the business and the influencer. Through the influencer agreement, the business may grant the influencer exclusive rights to use their intellectual property (such as trademarks, copyrights, etc.) solely for the purpose of social media advertisements. Additionally, if the business intends to utilize the influencer's intellectual property as part of the advertisement campaign on their social media posts, the influencer may also assign intellectual property rights to the business exclusively for such posts. |
Restrictive Covenants | Advertising leaves a lasting impression on the audience, and companies are keen to avoid association with content containing vulgarity, profanity, violence, etc., to safeguard their brand's reputation. Hence, it's crucial to include specific restrictive clauses in the agreement that prohibit influencers from creating content that falls under these categories when promoting the business's products or services. |
Payment | In a social media advertisement campaign, payments to the influencer can be structured in various ways. The influencer agreement should clearly outline the payment terms, including the agreed-upon payment schedule, timeline, and any conditions that have been mutually agreed upon between the business and the influencer. |
Approval of the Content | Businesses prioritize their brand's reputation and the manner in which their products/services are promoted. Hence, it's advisable for companies to include a clause in the agreement stipulating that influencers must seek final approval from the business before posting content advertising their products/services. This ensures that the content meets the business's standards and minimizes the potential for disputes later on. However, it's essential for businesses to balance this with respecting the creative freedom of the influencer when drafting such clauses. |
Compliance with relevant guidelines | Including compliance requirements outlined in the ASCI Guidelines, Misleading Advertisement guidelines or any other guidelines that has been issued in the influencer agreement is essential. This ensures transparency and reduces the likelihood of disputes in the future. |
Confidentiality | In instances where an influencer is engaged in a product or service launch, the influencer's knowledge about the offering may be limited. Premature disclosure of such details could harm the business economically. Therefore, in scenarios involving product or service launches, or any other situation where confidentiality is crucial, it's imperative for the parties to include a confidentiality clause in the agreement. This clause mandates that the influencer maintains the confidentiality of product or service details. |
Exclusivity | Including an exclusivity clause in the influencer agreement is prudent to prevent the endorsement of competitors' products/services, which could significantly damage the business's reputation. However, influencers should exercise caution, particularly when dealing with FMCG companies. The exclusivity clause should have a reasonable term and should only apply to the specific product or service being advertised, rather than encompassing all of the competitors' offerings. This ensures that the agreement strikes a fair balance between protecting the business's interests and allowing influencers to maintain flexibility in their partnerships. |
Continuity of Persona | The inclusion of a "Continuity of persona" clause in the contract is crucial, especially considering instances where social media influencers may make controversial comments or posts that could negatively impact the brand's reputation. This clause ensures that the influencer maintains a consistent and appropriate online persona that aligns with the values and image of the brand throughout the duration of the agreement. By including this clause, both parties can mitigate the risk of damaging the brand's goodwill due to inappropriate behavior or content from the influencer. |
Conclusion
Influencer marketing has emerged as a powerful tool for brands globally, with influencers capable of shaping consumer behavior through short content, sometimes as brief as 15 or 30 seconds. It's crucial for brands to monitor how influencers operate and profit commercially. In the Marico Limited v Abhijit Bhansali ((2020(81) PTC 244(Bom) case, the Bombay High Court acknowledged social media influencers as a growing group with significant credibility and a large following. The court emphasized the importance of holding influencers accountable due to their ability to sway audiences and the trust they enjoy from the public.
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