Surrogate advertising via CSR route under CCPA’s scrutiny

New Delhi: The Central Consumer Protection Authority (CCPA) is drafting rules to stop businesses from promoting items such as liquor and tobacco under the guise of corporate social responsibility (CSR) initiatives, two people aware of the matter said.

The consumer protection body plans to release draft guidelines to lay down clear parameters for what constitutes surrogate advertising and clamp down on brands exploiting CSR and sponsorships to indirectly promote goods that are banned for advertisements, they said.

Mint first reported on 14 March that the government is coming out with stricter guidelines to put a check on surrogate ads.

According to the draft seen by Mint, any promotional activity, including CSR campaigns, that suggests a connection to a prohibited product will fall under the ambit of surrogate advertising.

This includes usage of brand names, logos, colour schemes and layouts typically associated with a restricted product or service.

Penalties prescribed

The proposed norms prescribe penalties of up to ₹50 lakh for celebrities and social media influencers found promoting alcohol and tobacco through indirect means.

Liquor companies often sponsor sports events, cultural festivals and music concerts to subtly promote their brands through logos and other branding elements.

They also engage in environmental campaigns, such as tree plantation drives or water conservation, incorporating their branding into these initiatives.

Additionally, some liquor brands launch health and safety programmes focused on responsible drinking, while associating their product with the initiative. They also may fund community development projects like education or infrastructure, highlighting their brand alongside these social welfare activities.

The CCPA has invoked Clause 13 of the existing guidelines for the prevention of misleading advertisements and endorsements in the upcoming norms for surrogate ads.

“The draft rules for surrogate advertising are in the final stage of preparation, and once all formalities are completed, the rules will be released for public comments,” said the first person.

“The clauses in the proposed draft have been adopted in consultation with all stakeholders, including representatives of liquor makers and consumer groups, who have expressed their agreement,” this person added.

Not all brand extensions banned

It’s not that all brand extensions are banned. The draft rules allow for significant space for brand extensions, provided they are genuine.

“Advertisements for genuine brand extension products or services will not count as surrogate advertisements. To be considered genuine, the product or service must be registered with the relevant authority for that category,” the second person said.

Here, the relevant authority refers to the Food Safety and Standards Authority of India (FSSAI) and the Advertising Standards Council of India (ASCI), which oversee product extensions involving food or beverages.

Under the new rules, if a company sells a restricted product such as alcohol or tobacco but launches a new, unrelated product under the same brand name—say a soda or T-shirt—it can advertise the new product.

However, to do so legally, the company must show that this new product is genuinely available in the market, has a valid sales record, and a clear buying trend. This will ensure that the new product isn’t just a cover to promote the restricted one indirectly.

Queries emailed to the consumer affairs ministry remained unanswered till press time.

“Normally CSR activities are conducted by companies under their corporate name and not brand names, which then is not in violation of any existing rules. Exceptions would be when the company name is the same as its brand name and that would require additional markers and guidance in the rules to ensure the audience clearly understands what is really being advertised,” said Vinod Giri, Director General, Brewers Association of India (BAI).

“The underlying thought is not to limit investment and enterprise in genuine brand extensions, but prevent misuse by way of frivolous surrogates and misleading ads,” Giri said.

As per the law, every company which needs to comply with CSR provisions must spend 2% of the average net profits made during the preceding three years on CSR initiatives.