[The Viewpoint] Metaverse: A free pass to deception?

In today’s world, creative advertising is certainly a priority for all brands. More so, since consumers are not impressed with just the traditional methods of advertising anymore. All in all, ad fatigue has well and truly kicked in.

In 2022, brands are looking to engage with existing and new customers through the Metaverse. Currently, there are several Metaverse platforms, each having a distinct look and feel, capabilities and possibilities. All these platforms are eventually anticipated to collaborate and form one big digital space. Consequently, brands, big or small, are putting their creative hats on and coming up with disruptive ideas ranging from social media challenges to campaigns.

The flipside

While meta-advertising is indeed providing a refreshing take, and is anticipated to grow manifold, brands must not forget one crucial aspect - only the marketplace is virtual. The brand, its interactions and the consumers are all very real. As a result, while the promotional campaign could be virtual, the claims ought to be real and authentic. One must be mindful of the fact that misleading advertisements are frowned upon, regardless of the medium.

The Indian government has echoed this sentiment through its recent move of notifying the Central Consumer Protection Authority (‘Guidelines’ for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022). The Guidelines are applicable to advertisements published on all mediums - be it print, television or online.

This article provides a snapshot of how meta-advertisers can comply with the current legal regime, to avoid coming under the radar of severe ramifications and bad repute.

The law governing advertisements

The Central Consumer Protection Authority (CCPA) panel, under its authority to oversee consumer protection, came up with the Guidelines with effect from June 9, 2022. The Guidelines comprehensively cover not only bait advertising, surrogate advertising, puffery and brand endorsers' liability, but also imitation advertising. They call for proper due diligence by brand ambassadors, endorsers, manufacturers and service providers, and stipulate heavy fines and even jail terms for misleading claims. In case of violation of these Guidelines, penalties range from ₹10 lakh - ₹50 lakh.

The Guidelines also give teeth to the enforcement of several parameters contained in the Code for Self-Regulation in Advertising issued by the Advertising Standards Council of India (ASCI). The advertising watchdog has emphasized time and again that the way forward involves a bi-modal strategy – focusing on both offline and online business streams.

Misleading promotional activity

In practice, a misleading claim could involve any such ad or intent of a stakeholder that fools the consumer into believing that they could get a better deal than what is offered in reality. For instance, in the Bored Ape Yacht Club Phishing Attack on Metaverse, the scam rooted from a misleading advertisement that required users to connect their MetaMask wallets to use it on the site.

In fact, according to an investigation conducted by the non-profit US advertising watchdog Truthinadvertising.org (TINA.org), brands and their influencers are taking advantage of improper Meta Guidelines to trick millions of consumers into unwittingly take part in branded worlds (also known as advergames), interacting with covert avatar influencers and AI-controlled promotional bots, and spending a significant amount of time and money on them.

Consider the following Roblox search results for activities inspired by the Netflix series Stranger Things. Which of these experiences, if any, are sponsored, is not at all evident.

Hence, in web 3.0, brands need to consider not just two-dimensional, but also three-dimensional, auditory and/or performance claims that might be made by a particular advertisement and must ensure the accuracy of the claims along with substantiation.

Meta-fluencers

Influencer marketing is one notch above word-of-mouth marketing. It could be important in engaging consumers in meta communities, and the Metaverse is already driving some impressive results for big brands like Nike, Vans, Hyundai and Forever 21, etc.

In the context of the digital world, virtual influencers are defined as fictional computer-generated ‘people’ or ‘avatars’ who have realistic characteristics, features, and personalities of humans and behave in a similar manner as influencers. These influencers' avatars look and act like any other avatar you might run into on meta land, but are controlled by paid brand influencers and placed to promote brands throughout the metaverse.

This basically means that without ever knowing, there are potentially millions of players seeing, communicating, and interacting with brand endorsers.

In another instance, an undisclosed Nike avatar influencer was complimented on his Nike gear by another player while in Nikeland, oblivious of the fact that the avatar is a virtual paid promoter, luring the player into buying the impressive gear.

This indeed raises concern and calls for appropriate disclosures. Social media users are accustomed to seeing influencers adding disclaimers in their posts when collaborating with a sponsor or endorsing a good or service. Similarly, influencers in the Metaverse must also be subject to such disclosures; virtual influencers must disclaim that they are not real people.

Celebrity endorsement

While the Metaverse is a fairly new concept, there are a handful of celebrities and influencers who are already setting up their brands in the virtual world. The famous Indian singer Daler Mehndi has become the first man to buy land in the Metaverse, named Balle Balle Land, and has already hosted a musical concert there.

Similarly, in the MUNCH campaign, where four leading cricket franchises were taken on board to create an experiential digital world, fans were given a chance to enter the Metaverse and interact with their favourite cricketers, meet the avatars of players, speak with them and even click pictures together.

Any celebrity endorser, regardless of the advertising medium, must be mindful that promotional material that carries a social influence or representation needs proactive measures in the form of due diligence, accountability and good governance.

Further, the endorsement in an advertisement should not be deceptive, and should reflect the genuine, reasonably current opinion of the individual making such representation and be based on adequate information about or experience with the identified products/services. ASCI also has Guidelines for Celebrities in Advertising in place, emphasising on such diligence by an endorser.

Personality rights

Another issue that stems from having famous endorser avatars on board is the personality and privacy right concern. Just like in the real world, it is imperative to have due consent, authorization and agreements in place before onboarding any celebrity endorser for commercial purposes, even though it may be for a digital avatar.

Virtual digital assets (VDAs)

The ability to purchase, own, and resell digital assets, a feature made possible by the advent of blockchain technology, is one of the things that presently distinguishes the Metaverse from other social networking platforms.

While dealing in unregulated virtual currency is inevitable in meta world, the Guidelines for advertising of VDAs, as formulated by the ASCI, are crystal clear. According to the Guidelines, any advertisements for VDA goods, exchanges, or display must include the warning “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”

Labelling and packaging

The Metaverse is fundamentally a three-dimensional internet that enables people to move between the real and virtual world. Consider a customer browsing beers in a virtual store, picking up cans, looking at labels, flipping the can over to learn about the origin, and then making a purchase to have it delivered to their house in the real world.

Even three-dimensional virtual products must comply with all the applicable labelling regulations. For instance, Rule 10 of the Legal Metrology Act, 2009, requires e-commerce entities to display certain declarations as printed on the label of a packaged commodity, on the digital and electronic network.

Companies should make an effort to replicate the compliant labels found on physical products on virtual representations of products in the Metaverse until more information is available on how these regulations will apply to virtual displays.

Surrogate advertising in the Metaverse

Have you ever noticed something about the commercials for alcohol and tobacco? They never really promote themselves as those things. This is where surrogate advertising comes into play. For instance, you must have noticed famous brands covertly promoting mouthwash, water and even friendship, and yet are able to connect consumers with the prohibited product they are trying to sell.

A ban on such surrogate advertisements has been imposed via the Guidelines issued by Consumer Affairs Ministry.

Brands have made considerable use of social media and digital channels for advertising, despite limits on alcoholic beverage advertisements on mainstream routes. With the statutory ban, it would be interesting to see how the prohibited brands play around the restrictions in the digital space.

Underage advertising

Compliance in the Metaverse regarding prohibited advertising to minors can be a little challenging owing to the lack of an accurate mechanism to filter demographic data.

Particularly in the case of VDAs, junk food, etc, brands, distributors, and retailers will need to discover sources to determine with certainty that the Metaverse platforms or events where they are advertising do not appeal to an underage group. For instance, entering the Heineken store in the Metaverse, requires an age permit first. Virtual bouncers have been placed to ensure this.

Any advertisement addressing, targeting or using children shall have to comply with a host of conditions set out in the Guidelines notified by the government, as well as the ASCI.

Privacy concerns

Brands may be able to see a 3D avatar representation of your identity in the Metaverse. Does the avatar, however, signify express consent? Can marketers target adverts based on a person's appearance in virtual reality?

While these questions remain unresolved, it is imperative to address considerations such as whether or not such data can be shared by influencers, how new privacy laws impact the overall data privacy analysis etc. Engaging with influencers internationally means considering country-wise data privacy compliances and obligations. Terms of use on third party platforms may include restrictions on how certain data can be put out or monetised.

Bottom line: Disclaim! Disclaim! Disclaim!

Given the obvious excitement that brands share about connecting with their audience in new and engaging ways, they must keep in mind that consumers cannot be deceived in any way, regardless of the medium.

The ASCI’s well-established guidelines, along with the CCPA’s statutory backing controlling deceptive advertising will certainly be applicable in the Metaverse. Brands operating in the Metaverse will need to take the context of the new medium into consideration to determine whether a disclosure is clear and prominent to make sure that no consumer is deceived.

While the mechanisms of disclosure could probably differ in the Metaverse, the intent of clear disclosure to encourage transparency must certainly be adopted. For starters, one must ensure to disclose/ensure:

• Label ads, endorsements, and potentially brand-building events as advertisements;

• Disclaim virtual avatar influencers as non-human;

• Give an honest and consistent representation of the products/service in the 3-D space;

• Include appropriate and clear disclaimers wherever necessary;

• Prohibited products not to be promoted;

• Compliance with the packaging and labelling requirements;

• Do not use any unauthorised proprietary content of a third party and respect data privacy;

• Safeguard minors from unwarranted promotional activity.

False and misleading claims or irresponsible endorsements have consequences, with more serious civil and criminal consequences for celebrities and endorsers, especially in today's culturally sensitive environment where consumers are extremely vigilant of their rights.

Consequently, regardless of the interactions taking place inside brick and mortar, through television, radio and now the Metaverse, brands need to be mindful of their advertising strategies not only from a promotional aspect, but also from the perspective of being honest and transparent.

Mohit Goel is a Partner in the Dispute Resolution team and Mehr Bajaj is an Associate at Sim and San Attorneys at Law.