LAW Courses
LAW Courses

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More


KEY TAKEAWAYS

  •    Amitabh Bachchan terminates his endorsement agreement with Kamala Pasand and issues notice to the brand to take down the advertisements featuring him.
  •     Section 5 of Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply And Distribution) Act, 2003 prohibits direct as well as indirect endorsement of tobacco products.
  •     Surrogate advertisements are those advertisements which, in the disguise of regular products, endorse regulated products such as tobacco. Such advertisements are primarily used to promote the brand image because the original product cannot be advertised, due to regulation or otherwise, on mass media.

INTRODUCTION

An agreement is a promise which is made between two entities for the creation of mutual obligations. Such obligations which are created through a contract are recognised by law. Advertisement firms as well as business corporations often enter into advertisement agreements with public figures, particularly famous actors and actresses, for promoting their products in exchange for some consideration. Promotion and endorsement by celebrities helps the corporations in inclining the market trend in favour of their products. People prefer purchasing products which are endorsed by their favourite celebrities as it helps them in feeling a sense of proximity with their favourite public figures. Advertisements by celebrities serves as a tool of changing lifestyle patterns. The Bombay High Court in the case of Percept D'Mark (India) Pvt. Ltd. vs Zaheer Khan and Anr. 2004 (2) BomCR 47, observed that it "is a matter of common knowledge that celebrity endorsement of a product has a great commercial value" and "'Celebrity endorsement' has thus become a marketable commodity which has a commercial value and is saleable". Thus, the Court had held that the celebrity endorsement may be considered a commodity and can be used to enter into a contract.

However, in the recent past, we have seen that public figures have become increasingly conscious of the products they promote and its impact on society, particularly the vulnerable sections of the society, particularly women and children. In several instances, public figures have entered into advertisement agreements and have exited or quashed their agreements upon realising that the product is harmful to the society. However, even though such actions build up goodwill for the public figures among the general public, exiting such contracts involves several legal complications and often results in legal disputes. In several instances, the advertisement companies or corporation refuse to withdraw the advertisement featuring the public figure even after he has withdrawn his consent or has exited the contract.

ENDORSEMENT CONTRACT AND ITS ESSENTIALS

Section 2(e) od the Indian Contract states “Every promise and every set of promises, forming the consideration for each other, is an Agreement”. Brand endorsement contracts were defined in the case of Cst, Delhi v. Ms. Shriya Saran, where the tribunal stated, “[B]rand endorsement is a form of brand promotion or advertising campaign that involves a well-known person using his or her fame to help promote a product or a service”.

An endorsement contract is an agreement which permits the advertiser to use the name, image and public goodwill or reputation of the public figure for promoting their products. The endorsement agreement deals with the terms and conditions of the endorsement campaign and the requirements of consent. It deals with the rights and duties of both the endorser and advertiser and creates mutually binding obligations. Such endorsement contract is admissible as evidence in a court of law in the event of any legal dispute between the endorser and the advertiser. The endorsement agreement also contains the guarantee and warranty period. Thus, the primary objective and purpose of an endorsement agreement is to prevent any foreseeable legal dispute. However, despite an endorsement agreement, in some instances the endorser and the advertiser find themselves in a legal dispute.An endorsement agreement must contain the following essentials:

Parties and the term

The endorsement agreement must specify the parties to the agreement and must also specify the period for which these parties would be legally bound to their obligations created by the contract. The agreement should specify if it would be subjected to auto renewal or a cooling off period, etc. 

Procedure for dispute resolution

The endorsement contract may also prescribe the procedure to be followed by the parties in the event of any dispute. The agreement may bind the parties to resort to arbitration or mediation for resolving a legal dispute rather than going for litigation. 

Indemnity

Section 124 of the Indian Contract Act defines indemnity contract as a "contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a 'contract of indemnity'." 

The endorsement agreement may contain an indemnity clause specifying that where one party suffers a loss due to the negligent behaviour or false representation of the other party, then the party suffering the losses shall be entitled to recover such losses from the negligent party. 

Termination

The endorsement agreement may also specify the circumstances under which the contact may be terminated. Usually, a contract is terminated when the purpose of the contract is fulfilled or its term is over. However, it may also be terminated where one party fails to fulfil its obligations. In some cases, the agreement permits the endorser or celebrity to terminate the agreement if the celebrity believes that the endorsement is damaging his public image. 

Moral clause

Endorsement agreements often contain a moral clause which prohibits the endorser from engaging in any sort of misconduct such as scandals or controversies which may damage his or her reputation. This is because the advertiser banks on the goodwill of the endorser and if the endorser's public reputation is damaged then the advertiser suffers losses. 

Duties of the endorser

The agreement must also specify the duties which the endorser is bound to perform. These duties may include the responsibility to not indulge in any derogatory behaviour as the name of the endorser is attached to the brand name. Furthermore, it may also include attending all the promotional functions of the brand, not participating in the events organised by the rival products, not entering into any other endorsement agreement, etc. 

However, it must be noted that the brand can prohibit the celebrity from entering into another endorsement agreement of a rival product only until the current endorsement agreement is operative. In the case ofZaheer Khan vs Percept D' Mark (India) PrivateAIR 2004 Bom 362, the Court held that once “the contract comes to an end either by efflux of time or otherwise on lawful termination, the restrictive covenant in the nature of restraint of trade cannot operate”. A clause to the effect of restraining the celebrity even after the current agreement ceases to operate would be void under Section 27 of the Indian Contract Act.

Consideration and confidentiality

The contract must clearly specify the consideration to be paid to the endorser. Section 25 of the Indian Contract Act states - "Agreements without consideration is void unless it is in writing and registered, or is a promise to compensate for something, or is a promise to pay debt time-barred by the limitation law". Thus, an agreement without consideration would not be legally enforceable.

The endorsement contract may also restrain the parties from disclosing the details of the agreement including the consideration paid.

AMITABH BACHCHAN - KAMALA PASAND CONTROVERSY

Recently, actor Amitabh Bachchan terminated his advertisement contract with Kamala Pasand. However, Kamala Pasand, a pan masala brand, continued to air the ads featuring Amitabh Bachchan. Subsequently, Mr. Bachchan had to send legal notice to the pan masala brand. 

The reasons stated by Mr Bachchan for terminating the contract with Kamala Pasand were two-fold. Firstly, the national anti-tobacco organization had written to him to not endorse the pan masala brand as this would help in encouraging youngsters to not use tobacco products. Secondly, at the time of entering into the advertisement contract, Mr Bachchan was unaware of the fact that it was a surrogate advertisement. Resultantly, when he came to know of the advertisement being a surrogate advertisement, he decided to terminate the contract and returned the promotional amount received from Kamala Pasand.

In this case, Mr Bachchan may have felt that the endorsement is tarnishing his goodwill and public reputation and hence decided to proceed with the termination of the contract. A similar incident occurred a few years back when a show cause notice was issued by the Delhi Government to Pierce Brosnan for appearing in a surrogate ad for a pan masala brand. The actor claimed that he was uninformed about the hazardous nature of the products that he was endorsing. Subsequently, the brand agreed to pull down all ads featuring the actor. A similar reaction can be expected from Kamala Pasand in the present case.

SURROGATE ADVERTISEMENTS AND LAWS PROHIBITING DIRECT ADVERTISEMENT OF LIQUOR AND TOBACCO

Surrogate advertisements are those advertisements which, in the disguise of regular products, endorse regulated products such as tobacco. Such advertisements are primarily used to promote the brand image because the original product cannot be advertised, due to regulation or otherwise, on mass media. Advertisement of products such as alcohol, tobacco, etc are prohibited on mass media and hence corporations’ resort to surrogate advertisements to promote their products. Since launching new products is a brand extension, it cannot be termed illegal or contradictory to law. 

Section 5 of Cigarettes and Other Tobacco Products(Prohibition of Advertisement And Regulation Of Trade And Commerce, Production, Supply And Distribution) Act, 2003 prohibits direct as well as indirect endorsement of tobacco products. Furthermore, Rule 2 of Cigarettes and Other Tobacco Products (Prohibition of Advertisement And Regulation Of Trade And Commerce, Production, Supply And Distribution) Rules, clearly state that using brand name for the promotion or endorsement of a tobacco product would constitute indirect advertisement.Thus, we see that since surrogate advertisements are a form of indirect advertisement, they could be termed illegal under Section 5 of this Act. 

The legality of Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade And Commerce, Production, Supply And Distribution) Act, 2003 was challenged in the case of Mahesh Bhatt v. Union of India2008 SCC OnLine Del 159, where the petitioner pleaded that such a statute prohibiting advertisement of certain products is a violation of Article 19(1)(a) of the Constitution which guarantees the freedom of speech and expression. The Court, in this case, categorically stated that commercial advertisements have Constitutional protection under Article 19(1)(a) only as far as they are made for public interest. Such protection cannot be extended to tobacco advertisements which are hazardous to health and society. Furthermore, the Court held that commercial transaction would include “indirect or surrogate advertisements which promote and encourage use of tobacco products”. The Court stated that it is apt to include indirect advertisements including the surrogate advertisements within the domain of Section 5 as “To leave out indirect advertisements would in fact make the legislation toothless and capable of avoidance at will.”

Furthermore, Rule 7(2)(viii) of the Cable Television Networks (Regulation) Act,1995 prevents direct or indirect advertisement of tobacco, cigarette and other toxic products. However, this rule permits the promotion of the brand name provided no direct or indirect reference is made to the prohibited products. Thus, surrogate advertisements are permitted under this rule.

Several judgments have also been passed with regards to the prevalence of surrogate advertisements in mass media. Former Union Health Minister Mr Anbumani Ramadoss had filed a Public Interest Litigation before the Supreme Court contending that the name of the Indian Premier League team Royal Challengers Bangalore was a form of surrogate advertisement representing the name of the liquor brand “Royal Challenge”. However, the Supreme Court dismissed the PIL stating that the name of the team was “Royal Challengers” and not “Royal Challenge” and only those who are habitual drinkers might be attracted by this miniscule similarity. 

The Information and Broadcasting (I&B) Ministry has also, in several instances, directed the broadcasters to take down surrogate advertisements. 

CONSUMER PROTECTION ACT ON MISLEADING ENDORSEMENTS

The recent Consumer Protection legislation has also aimed at making the public figures more responsible for the products advertised by them. The Consumer Protection Act, 2019 provides that the celebrities may be held liable for false and misleading advertisements. Hence, the celebrities endorsing a particular product have to be certain with regards to the quality and standards of the product before making any claims with regards to the product on the advertisement. 

The Central Consumer Protection Authority, which has been established under the Consumer Protection Act, 2019, is empowered, under Section 21 of the Act, to cast a ban on the celebrities engaging in false and misleading advertisements. Such a ban may extend up to 1 year in the case of a single offense and up to 3 years in case of repeated offenses. 

Thus, we see that not only are the public figures now not only concerned about their public image while endorsing a product but also about the legal and financial implications of the endorsement.

CONCLUSION

The Government had prohibited the direct advertisements of these harmful products after taking cognizance of the fact that advertisements on mass media influence and shape the society in a significant way. The surrogacy advertisements are used as a loophole to escape liability. Such advertisements defeat the very purpose of the Government's prohibition of the mass advertisement of these products. Not only should the government take action against those engaging in these unscrupulous activities, but the public figures, following the example of Amitabh Bachchan, must also refrain from working in such commercials. The public figures must understand their obligation towards the society and must not hide behind the veil of entertainment while endorsing hazardous products.

Even if Kamala Pasand takes down the advertisements featuring the actor, it undoubtedly violated the provisions of the Cigarettes and Other Tobacco Products (Prohibition Of Advertisement And Regulation Of Trade And Commerce, Production, Supply And Distribution) Act, 2003 and hence must be penalized for the same. It would act as a deterrent for other corporations who engage in surrogate advertisements and even hire public figures, in some case without informing them of the true hazardous nature of the product, to endorse and promote their products in mass media. These advertisements have an adverse impact on the mindset of the society and particularly the youth, who closely follow the mass media and the celebrities. Through these advertisements, the primary aim of the tobacco and liquor brands is to portray these products as socially acceptable and thereby misguide and mislead the youth of the country. Thus, these advertisements may also fall within the scope of false advertisements as provided under the Consumer Protection Act, 2019. 

The Government must amend the existing laws to remove the discrepancies existing with regards to the prohibition of surrogate advertisements. Self-regulation must be adopted by the television, social media and other advertisement platforms to prevent the display of surrogate advertisement. Since surrogate advertisements in India are largely for tobacco and liquor products, the interests of the entire society at large are involved in prohibiting these advertisements.
 


"Loved reading this piece by Gautam Badlani?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"






Tags :


Category Others, Other Articles by - Gautam Badlani 



Comments


update
Post a Suggestion for LCI Team
Post a Legal Query