Instead of a regulator to monitor ads, why not tighten the many statutes that already provide for consumer protection?
At a meeting in Mumbai on 24th August, a bunch of NGOs under the aegis of the Consumer Coordination Council (the apex body of numerous affiliated consumer groups across India) resolved that there was a “need for a regulator to check misleading information in the advertisements that are causing serious damage, both financial and physical to the consumers.” They want this to be a body like the old MRTP Commission and be christened the Advertising Standards Regulatory Commission and Unfair Trade Practice Commission.
Will such a regulator really protect us consumers from being lured, misled, conned and looted by companies? I think not. Yet, several seminars and workshops held by consumer organisations over the past year have endorsed the need for an ‘independent regulator’ under the ministry of consumer affairs (MCA). Incidentally, these seminars were supported or organised by the MCA which is a big benefactor of most consumer protection NGOs.
False and misleading advertisements are rampant and are getting more outrageous (what do you make of ad campaigns for vaginal whitening and vaginal tightening creams in the past couple of months?); they come in many forms. Paid news, social media blogs and tweets masquerading as independent opinion are hard to detect or prove. Can a government regulator stop this? Impossible; but it is guaranteed to ensure red tape, corruption, delays, extortion, higher costs and selective enforcement—in other words, a sure poison for advertising creativity.
Take the example of the Food Safety & Standards Act (FSSAI) whose powers of enforcement and punishment were notified in 2011. FSSAI impressively shot off show-cause notices to some of India’s food brands such as Complan, Bournvita Little Champs, Maggie Noodles, Top Ramen and Horlicks Junior for making ‘tall claims’. But don’t raise your hopes about better food regulation. Well-known consumer activist Dr Arvind Shenoy tells us that empowering FSSAI has only led to a sharp increase in corruption. It is exactly the same with the Indian Medical Council and the Food and Drug Administration.
In fact, several statutes have provisions to protect consumers from false claims and misleading advertisements, but they are either full of loopholes or rendered useless by a corrupt bureaucracy or the lack of coordination between ministries and regulators. Statutes that have failed include: The Young Persons (Harmful Publications) Act, 1956, and the Indecent Representation of Women (Prohibition) Act, 1986. Self-styled vigilantes to harass film actors and models usually use the latter. Then there is the Drugs and Magic Remedies Objectionable Advertisement Act (DMROA), 1954, which needs to be empowered to monitor cosmetics advertisements and act against them. But, according to experts, it is full of loopholes. Millions of Indians are being duped by mushrooming chit funds and Ponzi schemes across India that have powerful political backers. These are covered by the Prize Chits & Money Circulation Schemes (Banning) Act, 1978. However, barring notable exceptions, the police do not register a case until it is too late.
The Consumer Protection Act (CPA) itself gives state and Central governments the power to file complaints on behalf of consumers. These would act like a class action and act as a strong deterrent to dubious companies, but the MCA hasn’t filed a single complaint because it has yet to frame clear rules to decide the circumstances in which such suo moto action would be appropriate. This is important, because the power would otherwise become a tool for vindictive action.
Clearly, the MCA needs to devote time and attention to plugging loopholes in several statutes and frame appropriate guidelines under the Consumer Protection Act. Instead, MCA’s entire focus is on gathering support to set up an independent regulator to monitor advertising. I have participated in at least three seminars this year; all of them called for an independent regulator to monitor advertising. Interestingly, a similar exercise was conducted around 2003-04 as well which also concluded with a similar pitch for an independent regulator.
Predictably, on 24th August, the Consumer Coordination Council’s (CCC) first resolution was “the need for a regulator to check misleading information in the advertisements that are causing serious damage, both financial and physical to the consumers.” Another resolution was that celebrities be held responsible for misleading advertisements.
This, again, is sheer nonsense. How can film stars or our sports icons with a small window of opportunity to earn product endorsements fees be saddled with the responsibility of judging a company’s product? Celebrity endorsements are pretty harmless for most cosmetics, sports goods, automobiles, branded products as well as food & beverages.
They are lethal when skilfully used to hard-sell toxic financial products which are complex and whose performance becomes clear long after their purchase. But when four independent financial regulators will not collaborate to frame common rules on the issue, can celebrities be held accountable? The Securities & Exchange Board of India (SEBI) took a considered decision to disallow celebrities from hawking investment products or endorsing initial public offerings (IPOs) in the first few years of its existence. But the insurance regulator and the Reserve Bank of India continue to ignore NGO requests to bar celebrity endorsement of financial products in their domain. The MCA won’t address this issue either, because it would involve treading on the powerful finance ministry’s turf. Also, all four financial regulators will be up in arms at the first sign of the MCA having a say on financial advertising.
Similarly, MCA is rather quiet on Ponzis and chit funds promising extraordinary returns for luring new investors into their chain-marketing structure. SpeakAsia and many others advertise in the mainstream media and on the Internet without attracting regulatory action. Here, too, MCA’s silence is probably dictated by the unwillingness to encroach on the turf of the ministry of corporate affairs, but it leaves consumers unprotected.
What then is the solution? Empowering an existing self-regulatory body is a better strategy. The Advertising Standards Council of India (ASCI), an industry body, is routinely invited to every seminar on misleading advertisements, mainly to conclude that it is not very effective. As a member of ASCI’s Consumer Complaints Council for the past two months, I find there is slight merit in this charge. ASCI diligently reviews each offensive advertisement in a fair and impartial manner and rules on complaints, but it can do little about habitual offenders. These include multinationals, media houses and educational institutions, who dutifully withdraw offending advertisements after an adverse ruling knowing fully well that they have already served their purpose. ASCI has no mandate to punish or demand a corrective advertisement/apology; consequently, these entities are back with another misleading advertisement after a few months. MCA can create an effective system by seeking a quarterly report from ASCI and asking habitual offenders to issue corrective advertisements which is a powerful deterrent and has been successfully used by consumer courts in Mumbai. Setting up another regulator, without addressing loopholes in existing laws or addressing the issue of turf battles with other ministries, will be another exercise in wasting taxpayers’ money and opens MCA to the charge that the IAS lobby is only trying to create yet another sinecure for retiring bureaucrats.
Sucheta Dalal is the managing editor of Moneylife. Subscribers get free help in resolving their problems with select providers of financial services. She can be reached at[email protected]