Surrogate advertising of intoxicating products: Self-regulatory nature of ASCI Code and challenge of covert ads

The concept of surrogate advertising of banned or prohibited intoxicating products in India is not new and weighs amid the conflicting concepts of economic well-being of the State and the prescribed health and safety standards for consumers. The extant legislations in India and emanating judicial pronouncements have been consistently evolving to address concerns of open violation of advertising mandates imposed by the regulatory bodies and statues. The misuse of statutory exceptions and relaxations under the opaque shield of events, award ceremonies, and music festivals among other such commercially reckoned events are under the constant radar and supervision of the regulatory authorities.

The lucrative Indian market and the rampant promotion of prohibited products by renowned celebrities have raised concerns of potential customers, including children and youth, being negatively influenced by such circumvention of the law.

These concerns are slated to be addressed and sternly dealt by the Central government, which is planning to curb the practice of surrogate advertising and deal with the intricate issues surrounding the said act with an overarching objective of safeguarding public health and consumer rights.

The Indian government is anticipated to address and curtail the circumvention process indulged in advertising prohibited products with a new set of sweeping rules aimed at imposing a blanket ban on the practice of surrogate advertising.

The anticipated rules are poised to impose hefty fines and liability on both the brands and the celebrities endorsing prohibited products through surrogate advertisements, further covering under its ambit the scope of sponsorship and ads viewed as brand extensions.

Hence, it is imperative to acquaint oneself of the legalities surrounding surrogate advertising in India and the loopholes within the existing legal regime that unknowingly aid brewery giants and commercial entities dealing with the business of intoxicated and prohibited products.

To address and curb the growing concerns of false and misleading advertisement across diverse industry players, in addition to the already normative position of ASCI code, the government of India had supplemented the ASCI code with the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (‘the 2022 Guidelines’) framed by the Central Consumer Protection Authority (CCPA) under the Consumer Protection Act, 2019 (Act) vide gazetted notification dated June 9, 2022.

The 2022 Guidelines are applicable on all advertisements regardless of from, format or medium, thus expanding the ambit of the implemented law in addition to the prevailing ASCI code. While rules imposing a complete ban on the practice of surrogate advertising are awaited, let’s steer through the existing provisions and judicial trends which address the said issue.

Surrogate advertising is explicitly defined under Section 2(h) of the 2022 Guidelines issued by the CCPA under the Consumer Protection Act, 2019. It refers to advertisements for goods or services whose promotion is legally prohibited or restricted, presented as advertisements for other goods or services that are not similarly restricted. Section 6 of the guidelines explicitly prohibits such advertising and outlines criteria for determining its occurrence, including any suggestion of connection to prohibited products and the use of associated branding elements.

Moreover, while the guidelines impose strict regulations against surrogate advertising, they do allow for leniency. Merely using a brand name that applies to both prohibited and non-prohibited products does not qualify as surrogate advertising, provided the overall advertisement is not objectionable. The ASCI Code further supports this framework, asserting that advertisements for prohibited products must not circumvent legal restrictions by portraying themselves as ads for permissible goods.

Judicial scrutiny in India regarding surrogate advertising has focused on the promotion of banned products, particularly alcohol and tobacco. Courts have consistently ruled that duplicating a brand's image to promote another prohibited item qualifies as surrogate advertising. For instance, in TV Today Network Ltd. vs. Union of India, the Hon’ble Delhi High Court directed the petitioner to run an apology advertisement for using an alternate bottle for its club soda advertisement. Similarly, in United Breweries Ltd. vs. Mumbai Grahak Panchayat, the Hon’ble National Consumer Dispute Redressal Commission identified a misleading advertisement that indirectly promoted liquor on the coaches of western railways trains, underscoring its violation of the ASCI code and unfair trade practices.

The Hon’ble Allahabad High Court in Struggle Against Pain vs State of U.P and Ors. while deciding upon the issue of competence of State legislature to enact the Uttar Pradesh Intoxicating Liquor (Objectionable Advertisements) Act, 1976, to prohibit advertisements of liquor by cinematographic exhibitions, walls, buildings and hoardings in public places, observed that "apparent advertisement for one product but dominating advertisement for another product, by suggestions, but keeping it latent amounts to the act of surrogate advertising."

The Hon’ble Court further addressed the issue of point of sale of alcohols and its consumption and observed that in a shop where liquor is being sold, the indicating words "Here is a liquor shop" and similar other signboards etc., by itself would not be in the clutches of prohibition under the State Act of 1976, but anything more than that which solicits use or offer for sale intoxicating liquor is prohibited.

The Hon’ble Court also observed that sponsoring of activities like cultural, sports, music etc. by itself cannot be said to be illegal, unlawful or otherwise prohibited but sponsoring of such events with an objective to use a well-known liquor brand, would fall within the category of surrogate advertisements.

The Advertising Standards Council of India (ASCI) is a voluntary self-regulation council established in 1985 and registered as a not-for-profit company under Section 25 of the Indian Companies Act, 2013 comprising of members from the advertising, media and other professional and allied services industry and trade. The purpose of its incorporation was the self-regulation of advertisements and to ensure that advertisements conform to the Code of self-regulation, to control the content of advertisements and not to hamper the sale of products which may be found offensive, for whatever reason, by certain section of people.

However, an issue of whether the said code is mandatory or advisory arose due the very fact that the code itself mentions that its rules are not the only ones to affect advertising industry and that there are similarly situated statutory provisions, both in the common law and in the statutes, which determines the form or the content of an advertisement.

It further clarified that the Code is not in competition with other laws, rules, and the machinery through which they are enforced. The Code was designed to complement legal controls, not to usurp or replace them.

However, owing to the rampant growth of technological era and related misuse of advertisements by industry players, the ASCI Code was recognised by the Ministry of Information and Broadcasting, government of India by inserting Rule 7(9) in the Cable Television Networks Rules, 1994 framed under the Cable Television Networks (Regulation) Act, 1995, henceforth providing a statutory flavour to the self-regulatory character of the Code.

In furtherance to the said recognition, the Hon’ble Supreme Court of India in its judgement dated January 12, 2017 titled as ‘Common Cause (A Regd. Society) vs. Union of India of India and Ors.’ further affirmed and recognised the self-regulatory mechanism put in place for advertising content by ASCI concerning road safety advertisements. Apart from the aforementioned rule, the ASCI Code has also received due recognition and assertion from the Department of Consumer Affairs (DoCA) as the same had partnered with ASCI to address all complaints pertaining to misleading advertisements received on its Grievances against Misleading Advertisements (GAMA) portal.

The judicial stance on the self-regulatory nature of the ASCI has evolved over time. In Century Plyboards vs ASCI [1999(3) MH.L.J], the Hon’ble  Bombay High Court ruled that ASCI's directions apply only to its members, emphasizing that any restriction on citizens' rights under Articles 14 and 19 of the Constitution must come from the State, not a private entity like ASCI.

Similarly, in M/s Teleshop Teleshopping vs ASCI (Civil Suit No. 497 of 2014), the Hon’ble Bombay High Court affirmed that ASCI, being a private body, cannot restrict advertisements from non-members. The Hon’ble Delhi High Court echoed this view in Dish TV India Ltd vs ASCI [CS (OS) 104 of 2016], stating that the ASCI code cannot be imposed on non-members.

However, a shift occurred in Metro Tyres Ltd vs ASCI [2017 SCC OnLine Del 7504], where the Hon’ble Delhi High Court recognized ASCI's competence in adjudicating advertising disputes, noting that while ASCI's code should be respected, it does not preclude aggrieved parties from seeking remedies in civil court. The Hon’ble Court further went on to observe that, "such industry/ sector specific self-regulatory bodies should be encouraged. Functioning thereof curtails litigation and allows an opportunity to constituents of the same industry/ sector to have their inter se disputes and differences settled amicably."

In Dabur India Ltd vs ASCI [2023 SCC On Line Del 64], the Hon’ble High Court of Delhi acknowledged the ASCI code's legal sanctity under Rule 7(9) of the Cable Television Networks Rules, 1994. The ongoing case of M/s Kent Ro Systems Ltd vs ASCI and Ors. [CS(OS) 44/2024] continues to examine ASCI's jurisdiction over non-members, reflecting the courts' recognition of ASCI's self-regulatory role in overseeing advertising content.  

At this juncture, it is apparent that the Hon'ble courts are giving due recognition to ASCI's self-regulatory mechanism for overseeing advertisement content and have provided statutory endorsement to the code. Furthermore, the opinions formed by the council, in line with the prescribed procedures, are now considered pivotal in evaluating cases of false or misleading advertisements.

The rampant indulgence of industry giants in promoting and advertising prohibited products under the disguise of covert and sneaky advertisement has been brought under the stern vigilance of law enforcing authorities, which are expected to tighten the noose around market giants who tend to openly target a particular demographic through seemingly unrelated products, shoved under the pretext of brand extensions and marketing strategy.

Therefore, with the broadened scope of government vigilance, the 2022 guidelines and judicial precedents evolved over time, it is a preferred and viable route for the advertisers, advertising agency, media and all related industry players to ensure compliance with the applicable law of the land and emanating normative position (ASCI Code), to avoid any infliction of penalty or adverse impacts on brand images and implement effective risk mitigation techniques that aligns with the existing regulations and compliances.

Industry giants that fall under the ambit of strictly regulated sectors of advertisement of intoxicating drinks/ products are legally obligated and statutorily mandated to abide by the ASCI Code and its frequently updated regulations, in addition to the applicable laws of the land. This calls for revised and innovative marketing strategies to strike a balance between legal obligations and consumer interests.

About the authors: Pranshu Singh is a Senior Associate Designate and Upmanyu Ganguly is an Associate at Hammurabi & Solomon Partners.

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