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Protecting consumers against misleading claims

The consumer protection bill is likely to result in more, and not less, litigation

  • Published 15.08.19, 1:19 AM
  • Updated 15.08.19, 1:19 AM
  • a min read
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One clause that might affect business strategies is the use of celebrities to endorse the product and model in advertisements (iStock)

A new consumer protection bill has been recently passed by the Rajya Sabha which provides protection to consumers against producers and sellers, especially against misleading claims contained in advertisements. The bill is comprehensive, covering all the new selling methods of the digital age. Hence it covers online sales, teleshopping, direct selling and multi-level marketing. It includes all goods and services. A regulator will be set up for the purpose — the Central Consumer Protection Authority. The regulator may haul up businesses for inaccurate information about the nature of products or service. This new bill is supposed to shift the emphasis from caveat emptor to caveat venditor. The penalty for misleading information or false claims can lead to hefty penalties, ranging from Rs 10 lakh to Rs 50 lakh.

One clause that might affect business strategies is the use of celebrities to endorse the product and model in advertisements. There are usually two ways in which celebrities are roped in for advertisements. One is through a claim by the celebrity that the person concerned has used the product with satisfactory results. The other is where personal use is not explicitly mentioned but the celebrity merely models for the product and claims that the product is good or useful. The new bill has given the regulator the power to hold the celebrity liable along with the company for any misleading or false information. Penalties for this lapse can be quite stiff. It will also damage the reputation of the celebrity. Celebrities can surely choose what they are going to endorse or model for. However, it is well nigh impossible for them to have technical knowledge about all claims made by the producer or the seller. It is plausible that the bill would compel celebrities to be extremely hesitant when it comes to endorsements. They could even draw contracts that pass all liability of litigations to the producers and sellers. Already there are a large number of pending litigations filed by consumers seeking redressal of grievances. The consumer protection bill is likely to result in more, and not less, litigation. Exerting greater control is not always an effective deterrent to deviant behaviour.

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