False and Misleading Advertisement: LegalConsequences and their Solution in Indian Context

IntroductionAdvertising is any paid form of non-personal presentation and

promotion of ideas, goods, or services by an identified sponsor .

In today's fast-paced, high-tech age businesses use advertising to

make prospects aware of their products and services and to earn

profits through increasing their sales and sales turnover.

Advertising reflects contemporary society. The making of an ad

copy, its message, its illustrations, the product advertised, the

appeal-used all these have a social flavour. Advertising affects

society and gets affected by it. It is therefore, necessary to use

this weapon with caution to avoid a corrosive effect on social

values..

False advertising or deceptive advertising is the use of false or

misleading information in advertising.

As advertising has the potential to persuade people into commercial

transactions, advertisers avoid government regulations and laws to

persuade people.

False advertising, in the most blatant of contexts, is illegal in

most countries. However, advertisers still find ways to deceive

consumers in ways that are legal, or technically illegal but

unenforceable.

False Advertising

"Any advertising or promotion that misrepresents the nature, characteristics, qualities or

geographic origin of goods, services or commercial activities"

 What is a Deceptive Advertisement ?

To sell their products, advertisers try to make them look as good

as possible. This can involve the use of puffery and weasel words.

Puffing is the use of opinions and exaggerated statements. The

words "better", "best", "greatest", and "finest" are typically used

in puffery advertisements. The information is not intended to be

factual.

False approaches adopted by advertiser:

1 Pricing-based methods

1.1 Hidden fees and surcharges

1.2 "Going out of business" sales

1.3 Misuse of the word "free"

2 Other deceptive methods

2.1 Manipulation of measurement units and standards

2.2 Fillers and oversized packaging

2.3 Incomplete comparison

2.4 Inconsistent comparison

2.5 False coloring

2.6 Angel dusting

2.7 Bait-and-switch

2.8 Guarantee without a remedy specified

2.9 "No risk"

2.10 Acceptance by default

2.11 Undisclosed dishonest business practices

Hidden fees and surcharges

Service providers often tack on the fees and surcharges that are

not disclosed to the customer in the advertised price. One of the

most common is for activation of services such as mobile phone. In

most cases, the fees are hidden in fine print though in a few cases

they are so confused and obfuscated by ambiguous terminology that

they are essentially undisclosed. Hidden charges may include taxes,

registration fees, freight, pre-delivery inspection (PDI),

licenses, insurance or other costs associated with getting a

vehicle on the road.

"Going out of business" sales

In many cases, liquidators hired to sell merchandise from a closing

store will actually raise the prices on items that were already

marked-down on clearance. For items already marked down, this means

the liquidator increases the price and then "discounts" it from

there. Also common is for the sale prices at a retail chain's other

stores to be lower than the liquidator's prices at the closing

stores. Liquidators typically refuse to accept returns, so if a

customer notices being overcharged, there is no apparent recourse.

This is used by most advertisers trying to prove the acceptability

of their products.

Misuse of the word "free"

The usual meaning of "free" is "devoid of cost or obligation".

However, retailers often use the word for something which is merely

included in the overall price. One common example is a "buy one,

get one free" sale. The second item is not "free" under the normal

definition, since, to obtain it, the buyer is obliged to pay the

full cost of the first item.

Other deceptive methods

Manipulation of measurement units and standards

Sellers may manipulate standards to mean something different than

their widely understood meaning. One example is with personal

computer hard drives. While a megabyte (MB) has always meant 220

(1,048,576) bytes in computer science, disk manufacturers began

using the metric system (SI) prefix meaning of 106 (1,000,000) as

their hardware standard. By stating the sizes of hard drives in MB

as 1,000,000 bytes instead of 1,048,576 bytes, they overstate

capacity by nearly 5%. With gigabytes (GB) the error increases to

over 7% (1,073,741,824 instead of 1,000,000,000), and nearly 10%

for the larger and increasingly common terabyte (TB). Seagate

Technology and Western Digital were sued in a class-action suit for

this. Both companies agreed to settle the suit and reimburse

customers in kind, yet they still continue to advertise this way.

To help combat this problem, a number of standards and trade

organizations approved standards and recommendations in 2000 for a

new set of binary prefixes, proposed earlier by the International

Electrotechnical Commission (IEC), that would refer unambiguously

to powers of 1024. These new units are numerically identical to the

established computer science convention, easing transition. Other

operating systems either continue to use the older computer science

convention (Microsoft Windows), or have switched to the new units

(GNU/Linux), which are numerically identical to the older

convention. Thus disk hardware on these systems still reports the

actual capacity, which is lower than advertised.

Fillers and oversized packaging

Some products are sold with fillers, which increase the legal

weight of the product with something that costs the producer very

little compared to what the consumer thinks that he or she is

buying. Food is an example of this, where meat is injected with

broth or even brine (up to 15%), or TV dinners are filled with

gravy or other sauce instead of meat. Malt and cocoa butter have

been used as filler in peanut butter.

Incomplete comparison

"Better" means one item is superior to another in some way, while

"best" means it is superior to all others in some way. However,

advertisers frequently fail to list the way in each they are being

compared (price, size, quality, etc.) and, in the case of "better",

to what they are comparing (a competitor's product, an earlier

version of their own product, or nothing at all). So, without

defining how they are using the terms "better" or "best", the terms

become meaningless. An ad which claims "Our cold medicine is

better" could be just saying it is an improvement over taking

nothing at all.

Inconsistent comparison

In an inconsistent comparison, an item is compared with many

others, but only compared with each on the attributes where it

wins, leaving the false impression that it is the best of all

products, in all ways. One variation on this theme is web sites

which also list some competitor prices for any given search, but do

not list those competitors which beat their price (or the web site

might compare their own sale prices with the regular prices offered

by their competitors).

False coloring

When used to make people think food is riper, fresher, or otherwise

healthier than it really is, food coloring can be a form of

deception. When combined with added sugar or corn syrup, bright

colors give the subconscious impression of healthy, ripe fruit,

full of antioxidants and phytochemicals. One variation is packaging

which obscures the true color of the foods contained within, such

as red mesh bags containing yellow oranges or grapefruit, which

then appear to be a ripe orange or red. Regularly stirring

hamburger on sale at a deli can also make the meat on the surface

stay red, implying that it is fresh, while it would quickly oxidize

and brown, showing its true age, if left unstirred.

Angel dusting

Angel dusting is a process where an ingredient which would be

beneficial, in a reasonable quantity, is instead added in an

insignificant quantity which will have no consumer benefit, so they

can make the claim that it contains that ingredient, and mislead

the consumer into expecting that they will gain the benefit. For

example, a cereal may claim it contains "12 essential vitamins and

minerals," but the amounts of each may be only 1% or less of the

Reference Daily Intake, providing virtually no benefit to

nutrition.

Guarantee without a remedy specified

If a company does not say what they will do if the product fails to

meet expectations, then they are free to do very little. This is

due to a legal technicality that states that a contract cannot be

enforced unless it provides a basis not only for determining a

breach but also for giving a remedy in the event of a breach.

"No risk"

Advertisers frequently claim there is no risk to trying their

product, when clearly there is. For example, they may charge the

customer's credit card for the product, offering a full refund if

not satisfied. However, the risks of such an offer are numerous.

Customers may not get the product at all, they may be billed for

things they did not want, they may need to call the company to

authorize a return and be unable to do so, they may not be refunded

the shipping and handling costs, or they may be responsible for the

return shipping.

Acceptance by default

This refers to a contract or agreement where no response is

interpreted as a positive response in favor of the business. An

example of this is where a customer must explicitly "opt-out" of a

particular feature or service, or be charged for that feature or

service. Another example is where a subscription automatically

renews unless the customer explicitly requests it to stop. This is

even conducted when the customer may have specified a specific

length of subscription up front, that is then exceeded and renewed

without notification to the customer.

Undisclosed dishonest business practices

Banks, for example, will sometimes reorder charges against an

account to maximize the number of overdrafts. The bank processes

the largest charge occurs first, causing the account to be

overdrawn, so that all subsequent smaller charges also overdraft,

resulting in multiple overdraft fees, even if, under the original

order, only one overdraft would have occurred.

When is advertising deceptive-

An advertisement is called deceptive when it misleads

people, alters the reality and affects buying behaviour.

According to federal Trade Commission (USA) deception

occurs when -

1. There is misrepresentation, omission, or a practice

that is likely to mislead.

2. The consumer is acting responsibly in given

circumstances

3. The practice is material and consumer injury is

possible because consumers are likely to have chosen

differently if there is no deception.

Deception exists when an advertisement is introduced into

the perceptual process of the audience in such a way that

the output of that perceptual process differs from the

reality of the situation. It includes a misrepresentation,

omission or a practice that is likely to mislead. These

may include the following:

1. Violates Consumers' Right to Information: Use of untrue

paid testimonials to convince buyers, quoting misleading

prices, disparaging a rival product in a misleading manner

are some examples of misleading. Advertisers of anti-

ageing creams, complexion improving creams, weight loss

programs, anti-dandruff shampoos, and manufacturers of

vitamins or dietary supplements are usually guilty of

making exaggerated product claims. Some of the examples of

advertisements in this category are:

" A fairness cream is advertised with the claim that its

user will get a fair complexion within a month.

" Parle G Original Gluco Biscuits puts a tall claim of

being 'the World's largest selling biscuits' on its

package on the basis of the results of a survey done in

the Year 2003 by A. C. Nielsen.

" Many colleges misrepresent in their prospectus that the

institution is affiliated to a particular university and

an accredited one. In one of the cases decided in 2004 the

complainant took admission believing representations made

in prospectus that college was recognized by the

government of Punjab and was also approved by the Central

Council of Indian Medicine for the whole course of five

and a half years . The complainant deposited Rs.1,00,000/-

as donation and Rs. 65,000 as admission fees. Four years

after 1996-97 no exams were being held. The Punjab

University, CCIM and Baba Farid University did not grant

any affiliation for want of requisite infrastructure. It

was held to be a case of unfair trade practice and

deficiency in service.

2. Violates Consumers' Right to Safety When an

advertisement for cooking oil says that using the said oil

frees the user from heart problems, then such an

advertisement is misrepresenting the facts. Companies

advertise products highlighting health cures and drugs of

questionable efficacy and health gadgets of unknown

values.

Many of the juice, sharbat, wafer manufacturing companies

do not mention the ingredients used in it. For example,

Haldiram offers many types of sharbats which are

artificially flavoured but the front side of the package

has big and attractive pictures of the fruit itself,

creating misunderstanding amongst the consumers.

3. Violates Consumers' Right to Choice: When material

facts which are likely to influence buying decisions are

not disclosed the advertisement becomes deceptive. In

several advertisements it is stated that 'conditions

apply' but these conditions are not stated. Not disclosing

material facts amounts to deception. For example, the

recent print ad for Videocon mentions a 1-ton split-AC

available for Rs. 15,990/, a very attractive offer. But

there is a small asterisk which mentions three things in

small font. They are:

" Conditions apply

" Prices valid in Delhi and NCR under exchange only

" Actual products may differ from those displayed in the

offer.

Such ads not only mislead consumers by concealing

important information from them. Advertisements for

general medicines available over the counter, never talk

of the side effects that may result from their frequent

use.

4. Puffery

It means the use of harmless superlatives. The advertisers

use them to boast of the merits of their products (best,

finest, number one, etc.). Even law permits trade puffing

or exaggeration. But subjective statements of opinion

about a product's quality are so untrue that it becomes an

outright spoof and which is not true. In 1997 MRTP

Commission asked Hindustan Lever company to stop its

campaign that its Pepsodent toothpaste was 102 per cent

better than the Colgate toothpaste. Hindustan Lever was

restrained from "referring to any Colgate Toothpaste in

any manner, either directly or indirectly, by means of any

allusion or hint in its TV commercials or newspaper

advertisements or hoardings, by comparison of its New

Pepsodent with any product of Colgate in general, and

Colgate Dental cream in particular .

5. Use of sex appeals

Sex appeal is used explicitly to sell all kinds of things.

It is used to gain consumer attention. It is used where it

is not even appropriate to the product or service being

advertised. Women are shown as decorative objects or as

sexually provocative figures for advertisements for

products and services where women are not required. The

corporate sector should be encouraged to eliminate the

violation of women's rights online and the internet

service providers to undertake efforts to minimize

pornography, trafficking and all forms of gender based

violence.

6. Advertising of harmful products

Advertising is not restricted to products that are good

for people. According to law in India advertisements for

cigarettes, liquor, paan masala, products that are harmful

to the public continue to find a place despite the ban

imposed by the government in private channels, cable, and

through the use of surrogates. Examples include Mc

Dowell's Soda, and Wills lifestyle stores which are seen

as surrogate advertising for Mc Dowell's Whiskey and Wills

cigarettes respectively. The issues involved are:

- Whether such products should be advertised or not?

- If they should be advertised, and they will need to be

advertised so long as their production is not banned, in

what media should they be advertised?

- Further, if they are permitted to be advertised, whether

the warning signs on the packages of these products really

serve any purpose?

Legal Aspects of Advertising

Unfortunately despite several laws meant to protect

consumers against such unfair trade practices, false and

misleading advertisements continue to exploit the

consumer. A number of institutions are involved in

regulating advertising. These are:

1. Self regulation by the industry

2. Regulation by the Government

In India the government assumes the role of regulating the

business activity by bringing a number of laws,

regulations and codes. The following laws have been

enacted by the government, which contain provisions that

regulate advertising in India.

These laws can be divided into two categories.

I. Laws having horizontal application on advertising

II. The Consumer Protection Act, 1986.

III. The Emblems and Names (Prevention of Improper Use)

Act, 1950

IV. Trade and Merchandise Marks Act, 1958.

V. Cable Television Networks (Regulation) Act, 1995

VI. Indecent Representation of Women (Prohibition) Act,

1986.

VII. Monopolies and Restrictive Trade Practices Act, 1969.

VIII. Motor Vehicles Act, 1988

IX. Laws having vertical application on advertising

X. Section 58 Companies Act, 1956

XI. Drugs and Cosmetics Act, 1940.

XII. Drugs and Magic Remedies (Objectionable

Advertisements) Act, 1954.

XIII. Pre-natal Diagnostic Techniques (Regulation and

Prevention of Misuse) Act, 1994.

XIV. Prevention of Food Adulteration Act, 1954/ Food

Safety and Standards Act, 2005.

XV. Prize Chits and Money Circulation Schemes (Banning)

Act, 1978.

XVI. Prize Competition Act, 1955

XVII. The Infant Milk Substitute, Feeding Bottles and

Infant Foods (Regulation of Production, Supply and

Distribution) Act, 1992 and Amendment Act, 2002.

XVIII. Transplantation of Human Organs Act, 1994

XIX. The Young Persons (Harmful Publications) Act, 1956

XX. The following Regulatory authorities have power to

regulate advertising in their respective domain.

o Insurance Regulatory Development Authority

o Telecom Regulatory Authority of India

o Securities and Exchange Board of India

o Reserve Bank of India

o Medical Council of India

Some of the important features of various laws concerning advertising are:

1. The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

prohibits advertisements for products and services claiming to cure certain

medical conditions. As per the law, no advertisement should promise magical

cure for any ailments or disease and the rules specify the diseases and

ailments that cannot be advertised promising cure or remedies. However, the

enforcement of the Act by the state authorities is poor because one finds a

number of advertisements in the print media.

2. The Monopolies and Restrictive Trade Practice act, 1969: It had been the

most effective Act in the eighties and nineties to regulate undesirable

advertising. In the year 1984, the government brought, through an

amendment, "unfair trade practices" under the purview of the MRTP

Commission and the Office of the Director General (Investigation and

Registration). However, this Act is being replaced by the Competition Act,

2002 but the cases pending under the MRTP Commission are still being heard.

Moreover, a Competition Commission has been set up under the Competition

Act to deal with monopolies and restrictive trade practices. The MRTP Act

has been very effective in hauling a number of advertisers to stop

advertisements which are prejudicial to consumer interest through its

'cease and desist orders'.

3. The Consumer Protection Act, 1986: The Consumer Protection Act, 1986,

applies to advertisements for all products in the market place. A consumer

may file a complaint related to false and misleading advertisements, which

are included under the definition of unfair trade practice (Section 2 (r)

The law mentions seven classes of unfair trade practices in six subsections

of this section of the law. The consumer courts can however, take the

following actions under section 14 of the Consumer Protection Act, 1986:

" Issue interim orders stopping such advertisements pending disposal

" To pass cease and desist orders.

" Award compensation for loss or suffering, punitive damages and cost of

litigation to the affected party.

" Direct the advertiser to issue corrective advertisement

4. Cable Television Networks (Regulation) Act, 1995: This law lays down the

procedure for registration of a cable television network and also regulates

the programmes and advertisements transmitted on cable network in India.

The registering authority is the Head Post Master of a Head Post Office of

the area within whose territorial jurisdiction the office of the cable

operator is situated.

5. Drugs and Cosmetics Act, 1940

This law regulates the production, manufacture and sale of all drugs and

cosmetics in the country. The Act prescribes a fine of up to Rs. 500 for

any person using any report or extract of report of a test or analysis made

by the Central Drugs Laboratory or a government analyst for advertising of

a drug or cosmetic.

6. Section 292 and Section 293 of the Indian Penal Code, 1860, prohibits

the dissemination of any obscene matter. The Indian Post Office Act, 1898,

imposes a similar prohibition on the transmission of obscene matter through

the post. The Customs Act, 1962, allows the detention and seizure of any

obscene matter sought to be imported into the country.

7. The Children's Act, 1960, prohibits the disclosure of names and address

and other particulars of any child involved in any proceedings.

8. The Indecent Representation of Women (Prohibition) Act, 1986 forbids the

depiction of women in an indecent or derogatory manner in the mass media.

No person shall publish, or cause to be published, or arrange or take part

in the publication or exhibition of, any advertisement which contains

indecent representation of women in any form.

9. The Emblems and Names (Prevention of Improper Use) Act, 1950, prohibits

the use by any private party of certain names, emblems, etc.

10. Motor Vehicles Act, 1988: This law affects outdoor advertisements, like

bill boards, posters, neon signs, etc. The Act, grants powers to remove

such advertisements which may distract drivers and have the potential of

causing road accidents.

A number of regulatory agencies have also formulated advertising codes to

ensure that advertisers do not mislead consumers.

Self regulation by the advertising industry

With the increasing criticism of advertising, advertisers have devised self

regulation to ensure true and accurate messages. Moreover, with the advent

of new communication and information technologies, the national policy

makers have also become less willing and less able to intervene. Since

print and audio-visual media exercise the essential freedom of speech and

they are financed by advertising revenues, media has always resisted curbs

thereby constraining the capacity of national governments to influence

media. Further, the business also realizes that the long term profitability

of the organisation depends upon acting responsibly.

Agencies involved in self regulation

A number of agencies are involved. These can be classified into the

following:

" Advertising trade associations

o Advertising Standards Council of India (ASCI)

o Advertising Association of India (AAAI)

o Press Council of India

o Prasar Bharti

" Individual media and media groups

o Code for commercial advertising on Doordarshan

o All India Radio Code for commercial advertising

ASCI's code of Self Regulation says: "Advertisements should be truthful and

fair to consumers and competitors within the bounds of generally accepted

standards of public decency and propriety. Not used indiscriminately for

the promotion of products, hazardous or harmful to society or to

individuals particularly minors, to a degree unacceptable to society at

large".

Unfortunately despite several laws meant to protect consumers against such

unfair trade practices, false and misleading advertisements continue to

exploit the consumer. Outdated laws, poor enforcement of them are some of

the lacunas in order to control advertising. The need of the hour is better

laws in keeping with the times, better enforcement, corrective

advertisements, better self-regulation by industry independent regulator to

regulate health and children -related advertisements.

Need for Consumer Action

1. As empowered consumers we should not be gullible to risky

advertisements. Children are easily swayed by the false claim of the

advertisers and fall in the trap of the greedy advertisers. Therefore one

should not blindly follow the advertisements and use logic and reasoning

before purchasing anything.

2. MRTP Act had the powers of taking suo motu action whereas the Consumer

Protection Act or ASCI, does not have such powers. Only if a consumer or

industry complaints to the Consumer Courts or to ASCI then the action can

be taken. By the time the action is taken by these bodies to either

withdraw or modify the offending advertisement the advertisement has

already conveyed the false message. Therefore, it is time to make some

amendment in the Act and to give powers to the consumer courts for suo motu

action so that they can take up cases of false advertisements on their own.

3. Several consumers and consumer organizations such as, Consumer Voice are

fighting against the misleading advertisements. Magazines such as, Consumer

Voice, Insight publish advertisements running a column on misleading

advertisements. They also request consumers to share their opinions

regarding various advertisements so that any advertisement which is

deceptive and false can be brought to the notice of the regulators.

4. Further many colleges and schools have started Consumer Clubs where

discussions are being carried on unethical advertisements. Kamala Nehru

College is the first college in Delhi University for taking this

initiative. If consumers feel that an advertisement is not true they can

write to Advertising Standard Council of India also.

5. Regarding misleading advertisements related to banks, consumers can

complaint to the Reserve Bank of India (RBI). Grievances regarding false

advertisements by telecom companies can be made to Telecom Regulatory

Authority of India and insurance related matters to IRDA.

The brighter side of all this is that as consumer awareness grows,

marketers and advertisers are fast learning that in these days when the

consumer is king, nothing but the best would do. As JWT agency quotes,

"Advertising is a non-moral force, like electricity, which not only

illuminates but electrocutes. Its worth to civilization depends upon how it

is used.

Advertising Dos and Don'ts

The following "Dos and Don'ts" will help businesses comply with the

Competition Act.

Dos

Do avoid fine print disclaimers. They often fail to change the

general impression conveyed by an advertisement. If you do use

them, make sure the overall impression created by the ad and

the disclaimer is not misleading.

Do fully and clearly disclose all material information in the

advertisement.

Do avoid using terms or phrases in an advertisement that are

not meaningful and clear to the ordinary person.

Do charge the lowest of two or more prices appearing on a

product.

Do ensure that you have reasonable quantities of a product

advertised at a bargain price.

Do, when conducting a contest, disclose all material details

required by the Act before potential participants are

committed to it.

Do ensure that your sales force is familiar with these "Dos

and Don'ts." Advertisers may be held responsible for

representations made by employees.

Don'ts

Don't confuse "regular price" or "ordinary price" with

"manufacturer's suggested list price" or a like term. They are

often not the same.

Don't use "regular price" in an advertisement unless the

product has been offered in good faith for sale at that price

for a substantial period of time, or a substantial volume of

the product has been sold at that price within a reasonable

period of time.

Don't use the words "sale" or "special" in relation to the

price of a product unless a significant price reduction has

occurred.

Don't run a "sale" for a long period or repeat it every week.

Don't increase the price of a product or service to cover the

cost of a free product or service.

Don't use illustrations that are different from the product

being sold.

Don't make a performance claim unless you can prove it, even

if you think it is accurate. Testimonials usually do not

amount to adequate proof.

Don't sell a product above your advertised price.

Don't unduly delay the distribution of prizes when conducting

a contest.

Don't make any materially misleading product warranty or

guarantee, or promise to replace, maintain or repair an

article.

Don't use the results of product performance tests and/or

testimonials in your advertising unless you are authorized to

use them; or if you are authorized to use them, don't distort

test results or the scope of testimonials.

Don't forget that no one actually needs to be deceived or

misled for a court to find that an advertisement is

misleading.

THANK YOU