Power(s) of self regulation: Looking through the prism of ASCI

Self-Regulating Organizations (“SROs”) can find their origin in legislation, draw a mandate from a principal regulator, or be incorporated as not-for-profit that is part of fee-based voluntary organizations. In contrast to the existing SROs for different industries such as insurance, capital markets, FMCG, drugs and medicines, the Advertising Standards Council of India (“ASCI”) was established voluntarily by professionals from the advertising and media industry back in 1985 and is legally registered as a not-for-profit company under the Companies Act, which sets it apart from other SROs in terms of legal structure and monitoring powers. 

This article aims to provide: (a) an understanding of the applicability of the Code for self regulation of advertising content in India (“Code”) released by the ASCI and (b) whether the ASCI has any penal powers in case there is a contravention of the Code.

The ASCI Code applies to advertisements read, heard or viewed in India even if they originate, or are published abroad, as long as they are directed to consumers in India or are exposed to a significant number of consumers in India.

The courts in India have also been presented with the question of the applicability of the Code and in the case of Teleshop Teleshopping vs. ASCI, it was contended that ASCI is a private limited company according to Section 25 of the Indian Companies Act, 1956. Further, it was stated that ASCI operates as a voluntary self-regulation council consisting of members from various sectors including advertising, media, and related professional services. The plaintiff (Teleshop Teleshopping) claimed that they are not affiliated nor are they members of the ASCI. The Bombay High Court observed that ASCI, being a private entity, lacks statutory authority as per Article 12 of the Indian Constitution. Therefore, it cannot impose restrictions on the non-member plaintiff's commercial advertisements under the guise of voluntary self-regulation. ASCI’s decision adversely affects the plaintiff's rights and exceeds its powers, violating the law, the Court said.

In the case of Primordial Systems Private Limited vs. ASCI, ASCI being a self regulatory organization, issued certain regulations and recommended certain modifications to Primordial Systems (complainant). Primordial Systems raised a complaint stating that it, being a non-member of the ASCI, are not bound by the regulations of ASCI. A Delhi District Court examined the issue of whether ASCI has jurisdiction to recommend modifications or removal of advertisements deemed misleading by its independent Consumer Complaints Council (CCC). The Court observed that although the Primordial system is not affiliated with ASCI, they are involved in advertising, which falls under ASCI's self-regulation Code. ASCI entertains complaints for breaches of this Code. Therefore, if ASCI makes a recommendation and the advertising agency or television channel refuses to air the complainant's advertisement in accordance with it, they are within their rights to do so. The Court held that ASCI’s regulations or recommendations are binding on both members and non- members.

The issue of whether ASCI can bind both its members and non-members has been a subject of debate for a couple of decades now. Despite the prolonged discourse, judicial pronouncements have failed to provide definitive clarity on this matter. A recent development in this ongoing discussion surfaced in the case of M/s Kent RO Systems Ltd vs. ASCI through its General Secretary & Ors., wherein the High Court of Delhi has considered the need to deliberate on the extension of ASCI's jurisdiction to non-members.

The legal landscape surrounding this issue has witnessed a series of cases over the years, beginning with Century Plyboards (India) Ltd. vs. ASCI in 2000, followed by Teleshop Teleshopping vs. ASCI in 2014, and Dish TV India Limited vs. ASCI in 2016. The Courts in these cases have held that the self-regulatory code published by ASCI does not bind  non-members. However, a contrasting viewpoint emerged in the case of Metro Tyres Ltd. vs. ASCI in 2017 and was echoed by the Supreme Court of Appeal of South Africa in the matter of Advertising Regulatory Board NPC Colgate-Palmolive (Pty) Ltd Colgate-Palmolive Company vs. Bliss Brands (Pty) Ltd. in 2022, wherein the Court has opined that the recommendations of a self-regulatory body would be binding even on non-members.

In the case of Procter and Gamble Home Products Private Limited vs. Hindustan Unilever Ltd, the Delhi High Court has discussed the jurisdiction of ASCI. The Court held that the ASCI has been established as a self-regulatory body in the field of advertising and not for dispute resolution or for resolution of claims made by the plaintiff in the suits against the defendant. Although the ASCI has a complaints committee, such a committee is only to “self-regulate." Even if the ASCI finds merit in a complaint, it can only recommend the advertiser to remove the advertisement but has no mechanism to compel removal of the advertisement or to grant any interim relief or to award damages.

In the case of Century Plyboards (India) vs. ASCI, it was emphasized that ASCI cannot assume the powers of a civil court. The machinery of ASCI has been specifically designed to “complement the legal controls” rather than surpass them. 

While SROs may have disciplinary measures in place, such as issuing warnings, suspensions, or revoking memberships, these actions are usually internal to the organization and do not carry the force of law. However, in some cases, SROs work in collaboration with regulatory authorities or government agencies to address non-compliance issues, leading to legal penalties or sanctions imposed by the relevant authorities.

With little to no clarity on the issue of whether the Code is applicable to members as well as non-members, companies find themselves grappling with uncertainty. Therefore, it is imperative to delve deeper into these grey areas and delineate them with precision.  

In Spain, the Jury of Autocontrol, the Spanish Self-Regulation Organization, obtained public recognition as an Alternative Dispute Resolution (ADR) body. All the decisions of the Advertising Jury are made public, are mandatory for the members of the Autocontrol and are considered voluntary for the rest. 

In Italy, the Code of Marketing Communication Self-Regulation 70th edition, effective from June 1, 2023, is binding for advertisers, agencies, advertising and marketing consultants, media of any kind, and for anyone who has accepted the Code directly or by membership of an association, or through an agreement to execute marketing communication as described in the code. 

Therefore, we understand that in countries such as Spain and Italy, voluntary bodies can only bind members or affiliated entities. However, decisions by the said bodies are seen to have an undeniable moral force throughout the sector, including among companies that are not members.

Further, SROs typically do not have direct penal powers in the sense of imposing legal sanctions or fines. Instead, their authority lies in establishing and enforcing industry standards, codes of conduct, and regulations within their respective sectors. However, we see that there are countries that give penal powers to SROs. In the case of the Philippines, the earliest Advertising Code of Ethics dates back to the Philippine Board of Advertising (PBA) established in 1974. In 1989, the PBA was renamed AdBoard (Advertising Board of the Philippines) and it was mandated by IRR of RA 7394 or the Consumer Protection Act to ensure that all advertising materials conform to its Code of Ethics. It was further laid down that non-compliance of the same could lead to penalties. 

Additionally, and uniquely for a self-regulatory organization in India, the ASCI has been recognised as a self-regulator under the Cable Television Networks (Amendment) Rules, 2021. It is imperative that clarity is provided on whether, after such recognition, ASCI remains a self-regulator or it is a co-regulator with a mandatory code which binds all concerned stakeholders involved in the advertising irrespective of membership or any agreement, with its members having an expressed undertaking to abide by the Code.

About the authors: Priya Mamgain is a Partner, Antra Ahuja is a Senior Associate and Sakina Kapadia is an Associate at Saga Legal.