This is an audio transcript of The Morning Brief podcast episode: Socially Acceptable: Influencers Get A Reality Check

BG Sound  

This is the morning brief from the economic times

Hey, so my name is Anshu Goyal Batra and my blog name is my multifaceted ID when it comes to paying taxes on border things or Phoebe start cost over 20k It might change little thing for quite many people around there and the brand would think a lot before approaching an influencer because I'm quite sure not many would be fine for paying something and even promoting.

Ratna Bhushan  

That end of season sale with the best discounts the toothpaste which makes your teeth whiter instantly, or that bar which serves you the most exotic cocktails. Smart lines constantly telling us, influencing us from every possible screen we're on about fashion, food, travel, lifestyle, and whatnot, on our phones and laptops, on Instagram, YouTube, blogs, Twitter, share chat, and everywhere else we look either subtly or upfront.

BG Sound  

Loves Bikaji loves Bugatti. 

Ratna Bhushan  

It's been the case for at least two years. But some things change last month, which have created quite a stir within the entire fraternity of influencers and officers and our agencies. The central Consumer Protection Authority, or the CCPA, under the Ministry of Consumer Affairs issued a set of sweeping new guidelines to curb misleading ads and endorsements in early June with immediate effect. 

BG Sound  

The central consumer protection authority under the Department of Consumer Affairs has notified guidelines for prevention of misleading advertisements and endorsements for misleading advertisements. Now these guidelines seek to ensure that consumers are not being fooled with the unsubstantiated claims, exaggerated promises, misinformation and claims.

Ratna Bhushan  

The guidelines say endorsers and influencers are now legally accountable for all the ads they endorse, and all their brand related social media posts and promotions. They need to give proof of due diligence about claims they've made in ADS. These million odd influencers also have to disclose material connection. Equity shareholding or profit sharing with brands they're linked with violations can attract court cases, penalties and outright bans. So far, the guidelines were under the watch of the Advertising Standards Council of India or the ASCII, which has no legal authority. Separately starting July 1, social media influencers need to pay 10% tax on freebies worth more than 20,000 rupees under a new income tax rule. These could include computers, cars, jewelry or foreign trips.So what is all this government scrutiny mean? And how is the influenza economy reacting? To unravel? What's behind all the glitz on the screens are invited Anusha Shetty, Chairperson of ad agency grey group and co founder of digital marketing company autumn grey. Also joining me is Gautam Madhavan who at 21 setup not influence an influencer marketing company, which works with some 50,000 influencers and mega companies like Dharma Productions and Sony Music. I also have with me Bharat Chugh advocate and legal expert who deals with the gamut of consumer facing and corporate cases. It's Thursday, July 28, I'm not no pollution from the economic times and you're listening to socially acceptable influencers get a reality check on the morning brief.

Anusha as an advertiser, are you seeking clarity on the guidelines? Many are saying that there are multiple grey areas? 

Anusha Shetty  

I'm sure all advertisers have questions. Anything new will obviously bring questions and that's when the clarity comes in. ASCII is also you know, kind of published the guidelines a little earlier and more or less the guidelines seem to be in the same space. I think we are kind of clear on this. But will we have questions at some point we may. 

Ratna Bhushan  

So Gautam, how our influences reacting to all these guidelines. 

Gautam Madhavan  

Influences are not in favor of this fish.But I am in favor of them because it is good for them in the long run, it's very good for the micro and nano influencers, because it gives them like more credibility in the market. If they follow these guidelines in the future. 

Ratna Bhushan  

Significant point they got them, the influencers are resisting some of these new rules. Why?

Gautam Madhavan  

See, they have been working without guidelines. And suddenly, like from an organizational perspective, for us, it might be not a big change, because we just need to implement one or two guidelines. But from an influencer perspective, technically, they're not organizations, they're freelancers. So for a freelancer, they seldom have a team, and they just go with the flow. So for this, I think this, this adds more layers to the current work. And, and they basically don't want to, like complicate the lives to for them now. So yes, that is the reason why they're not in the favor of this. 

Ratna Bhushan  

So then are such stringent legal guidelines necessary in the first place, 

Gautam Madhavan  

think it is necessary, the influences have been always the last leg of any marketing on a daily basis, we do say 12 to 14 campaigns, that's that's the run rate that we are at. So from various categories, it could be FMCG, it could be finance, it could be tech, it could be electronics, it could be platforms, it could be something else, it would be food. So yeah.

Ratna Bhushan  

Similar guidelines by ASCII have been in place for a while, but have never been legally binding. The debate over disclosures and accountability has been brewing for over a year. Now, as the morning brief had highlighted in an episode last year. Bharat what changes now with the government stepping in, 

Bharat Chugh  

So a lot changes, you know, as, as we are aware, the ASCII guidelines were not legally enforceable. So there were no consequences for any non compliance by the endorsers. But now there are very, very serious consequences, not just for the manufacturers and the suppliers, but also for the endorsers. And now there are very, very clear duties on the endorsers to, for instance, disclose any material connection that they have with the company or the manufacturer, who's selling the product. For instance, if they are shareholders or directors, or they have an equity in the company, which has made the product they have to very clearly disclose that they have to disclose if this is a paid endorsement, they have to disclose if there is any other underlying interest. So broadly, anything that affects the weight and credibility or what they say, and their endorsement, any connection, any underlying interest that impairs that or affects that has to be disclosed now. And the endorsers also have been obligated now to undertake due diligence into the product or the service that they are endorsing. So they have to verify and test and satisfy themselves as to the veracity of the claim that the advertisement is making, they'll have to ensure that what they say in an endorsement reflects their own genuine opinion about the product. For instance, they can't say they've used the product if they haven't, also, they cannot say that the product is good or effective, if they use the product, for instance, about 20 years back. So they will have to ensure whatever that they say, reflects their genuine opinion and their reasonably current opinion. And in absence of this due diligence, and if they do not disclose the material connection that I just spoke about earlier, they face direct liability. Now, in addition to the liability that the manufacturer or the supplier may face. So this is something that has changed. Now, of course, there are some questions which are unanswered in terms of how do you make that disclosure? To what details do you need to go? What is the extent of due diligence that you have to do as an endorser before endorsing a product? Some of those questions are unanswered, but I think as we go along, those details will be fleshed out we'll have more in terms of judicial decisions, laying out with precision, the scope and ambit of this due diligence, for instance, but for now, suffice it to say that there are certain very, very clear duties on endorses, which are also legally enforceable. 

Ratna Bhushan  

So Anusha are these guidelines enforceable? Or will it be business as usual for the majority of influencers? You know, there are so many brands across social and mainstream media making claims every day. 

Anusha Shetty  

Like you said, there are many people specifically in the influencer game from a micro influencer to a macro influencer lots of people and it will take time. The agenda is to make every advertiser conscious and responsible for their actions. So it's important for everybody whether an advertiser or a brand or even an influencer or a brand ambassador to be conscious and responsible for what they do. At the end of the day, why is this happening? The idea is to protect the consumer. We don't want the consumer to feel misled. That's the larger goal. And that's where all these guidelines and governing bodies are going.

Ratna Bhushan  

Gautam, would you like to add to that you work with 1000s of influencers. 

Gautam Madhavan  

If you look at the large numbers, nobody's following the ASCII guidelines for now. So agencies like us, like wide influence whenever we do a brand campaign, we make sure our creators or influencers or celebs, make sure they put a hashtag add hashtag sponsored to follow the ASCII guidelines. Now we work with platforms and actually like share chat, YouTube, Instagram. So we already have guidelines in terms of hey, these are the things that you should be careful about, and like we should, we should try and enforce it together. So it is basically a space where we work with the creators of the platform together to make this legally happen. And it is not going to be like an overnight journey, it is going to take time.

Ratna Bhushan  

ASCII has called out a dozen aliased endorsers for violating its code. Amitabh Bachchan recently wrote on his instagram and tumblr accounts that several office posts have been given notices about what he promotes, and that there are strict rules now by the government on what can be endorsed. As it is becoming illegal. It's a tough life he wrote.

So Anusha How are the endorsers and influencers reacting to these new guidelines? Are they worried about possible legal fallouts? 

Anusha Shetty  

Large brands do want to work within the whole scope of being ethical and transparent. In the influencer game, particularly, they're already aware agencies like ours are already bringing this to their notice. So the influencer game is very different, right? It's meant to be ad hoc, it's meant to be one off. It's meant to be a specific project and the influencer, it's the relationship. The Brand Ambassador relationship is a long term relationship. Contracts are already signed, or you know, new terms are being signed. That's the space that the brands may vary a bit, because it really depends on how the ambassadors react to change like this. My belief is, large celebrities and endorses will understand that this is good for the consumer, and they will realign themselves into the space. And they will drive the change for the micro influencers and the rest of the industry. It will take time, but it will happen. 

Ratna Bhushan  

Which brings me to the statistic ASCII put out a report which says the period between January to May this year saw some 23% violations by prominent names. And these people represent some really large brands. I'm not even talking about the smaller brands here. 

Anusha Shetty  

That's to see the some of these contracts may already be in play, nobody wants to break a rule change takes time job is to bring to their notice that there is a deviation and and the change will come into the lot of these contracts are already in place. And these guidelines are new, it will take time for people to transform into the place they need to be. 

Ratna Bhushan  

Many are saying that putting the entire responsibility on the celebrity or the influencer is unfair, since it is the company and the agency, which is actually making the ad.Bharat I'd like to ask you legally, which of the two sides is better placed? Is it the celebrity or the company? 

Bharat Chugh  

So I think the responsibility should should lie with both and it does live with both under the present law. You know, for instance, the manufacturers or the service providers who come out with anything that may be characterized as a or misleading advertisement, they are also liable under the law and in fact, the liabilities on them are much graver. For instance, apart from being asked to discontinue the goods or services or rectify their ads, they can be asked to pay heavy penalties. And there is also a stipulation for a punishment or an imprisonment for up to two years on the manufacturer or the service provider for and misleading advertisements. So the penalties are much greater on the companies having said that the celebrities or the endorsers are liable to and should be liable to in my opinion because an endorser gets paid for the endorsement and the company is also leveraging on the persuasion or the influence of the celebrity. And I believe with great power and with great influence comes great responsibility. And I say Celebrities should also be held accountable for what they say and for the endorsements that they make. And it cannot be a defense for endorser to say that they said whatever was there in a script and they shouldn't be should not be held accountable. So, given given the impact given the given the persuasion or given the influence that they have on people, I think there should be some accountability and in the present system, both are held accountable. 

Ratna Bhushan  

But in cases where the celebrities are found to be violating the guidelines, what kind of legal tangles to the face, 

Bharat Chugh  

So, they can be asked to immediately discontinue the advertisement or modify the advertisement that's one, but the real consequences that if they are found to be engaging in any or misleading advertisement, or having lent their voice to it, after an investigation, a penalty of up to 10 lakhs may be imposed on them for the first violation that they covered. And if there are any subsequent violations to by the same influencer, the penalty may be for as much as 50 lakhs and so, this is the penalty aspect. Any violations of the guidelines may also lead to a ban or a prohibition on the endorser. So, they can be banned from endorsing any goods or services for a period of up to one year. And again, if this is an endorser, who's repeatedly violated the guidelines, there can be a band for up to three years. So, these are some of the consequences and in fact, not just that, if there is any endorser or an influencer, who has not complied with any of the above directions, for instance, of payment of fine or violates the ban, or somebody who does not discontinue the or misleading advertisement, they can also in that situation suffer imprisonment for up to six months and have a criminal prosecution to. So, these are the broad consequences. Of course, in extreme cases, where the advertisement is so, and misleading and the gravity of the cases such even the criminal law may kick in. And in a given case and influencer may also be prosecuted for the offence of cheating under the Indian Penal Code. If by their actions, it can be substantiated or made out that the influencer has induced somebody to part with their property. And there was a dishonest or fraudulent intention underlying then in those extreme cases, even the criminal law can kick in. 

Ratna Bhushan  

So, Anusha, you said a lot of contracts are already in play. So what about the new ones? Are companies redoing them with more stringent clauses about disclosures and due diligence, 

Anusha Shetty  

As we speak, I can tell you lots of them are discussing this. Are they worried, of course they're worried. But every buddy is discussing how to handle a situation like this and how they can move to a place where they can work within the guidelines yet do a great job with their brands. Are they all done? Say no anxious feeling around this whole space there is it is important that the world understands that this is being done for the consumer. And we need to kind of align ourselves to the guidelines. Even as a citizen I need to be responsible and conscious to things around me it could be the environment, it could be anything. Similarly, in a space of endorsements, the need to be conscious and responsible is important. There are frustrations, for sure, but it is being discussed. 

Ratna Bhushan  

Crucial point there. But how are social media platforms reacting to the guidelines, 

Anusha Shetty  

The platforms have made it easier for the influencers. And for the brands to create this authenticity and transparency. The very fact that the platforms have made it easy for both brands and influencers to be transparent means that they are part of the guidelines, and they are part of this whole change. Let me draw a pattern. In the past. If you look at certain digital articles, for example, which were sponsored content, the content had to end with a line in this is sponsored content. Now this is a manual lack of putting it together, but the platform's have created features, which allow us to kind of disclose variances. Take an Instagram, for example, the minute I put a content there, and if it's an endorsement, then you know, it's very easy for me to call out that this is sponsored content. 

Ratna Bhushan  

The CCPA guidelines say that the celebrities and influencers need to provide proof of due diligence legally, what does this mean Bharat? 

Bharat Chugh  

So what the guidelines say on this is that the influencer can say in his or her defense that I've exercised due diligence if the their opinion or their endorsement number one reflects their genuine opinion of the product, and they're reasonably current opinion of the product And if their endorsement or their due diligence or they're endorsing a product is based on adequate information about the product or experience with the product. So if they've used the product themselves, then that may be one defense and if they are saying what they are saying bases their own experiences with the product, then that may be a defense. Then it may be said that the influencer has exercised due diligence what they are saying has weight and credibility because they have experience with the product. But not in all cases and experience may be there or the influencer may have used the product themselves. In some cases, if the influencer has adequate information about the product has done the background research has tested the veracity of what the manufacturer is saying by asking some probing questions on the specifications, the ingredients, the qualities and the characteristics of the product that they're endorsing. And they've made that attempt to get adequate information and to be reasonably informed before they endorse. These are the things that may help an influencer, take the defense of due diligence. Now, what should be the scope of this scrutiny? How deep should this probe be? Is something that the guidelines do not answer and this is a bit of a gray area, to what extent the influencer needs to go when investigating the product themselves. And this would be especially relevant in terms of technical products where the influencer may not have the wherewithal or the capacity or the understanding, to really, you know, to take a deep dive and understand the product really well. So there are some questions and answered. But I think as we go along, and we have court's ruling on these issues, we will have more clarity in terms of what is expected from an influencer. 

Ratna Bhushan  

So Gautam, how much has the regulatory environment changed since you started mad influence four years back? 

Gautam Madhavan  

Influencer Marketing, even today is kind of not so organized. And it's gonna take a little more time in terms of in terms of working from a regulation perspective with these influencers. But in the last one year, we have seen a lot of changes. And I think yeah, I mean, it will formalize in a much better way, brands are taking it seriously. It's going to become in the next three years 20 to 2000 Crore industry, influencer marketing itself. 

Ratna Bhushan  

Tax experts I spoke to say the new rule brings transparency to the creator and influencer driven models and is in a way recognition by the government, that the profession is a bonafide contributor to the economy. And Anusha from an agency standpoint, what's changed in the last one or two years, 

Anusha Shetty  

Even five, six years ago, there was no clear regulatory guideline for us. Everybody was trying exploring the platform, there was not much for us. But I noticed a lot of brands, who did a lot of self regulatory guidelines for themselves on how they would behave, how they would talk. But as time passed, and as people understood how the digital and social media platforms started to work, which is when we saw the participation of the regulatory bodies participating, it's all happened in the last two years, I saw a lot of brands making the early move to kind of self regulate themselves, specifically companies in the alcohol industry, for example, a lot of guidelines and the and they did that for themselves. They didn't need somebody to tell them dearly. But as time passed, and people start to understand the space we saw a lot more participation, contribution coming in, in the form of guidelines.

Ratna Bhushan  

Categories, like cryptocurrencies and NF T's are gray areas. In fact, crypto violations have been rampant. ASCII says influencers were responsible for 92% of crypto ad violations between January and June this year. So from that point of view, do you think there's a lot of work to be done?

Anusha Shetty  

Definitely, these newer industries and categories will go through a lot more change. I see a lot happening here. It's really new, even the digital industry and a social media marketing industry which existed for so many years. We saw early social media were beginning in 2009. In India. It's taken us so many years to even understand this space and and put together some guidelines, you will see the same happening with the crypto industry.

Ratna Bhushan  

The Indian influence a creator market is worth $120 million, according to a collapse to report thanks to tip data and budget smartphones, the influencers are all over the place. As for the famous endorser selling us everything from cosmetics, to cars, to insurance to education, the new guideline bring in first time parameters, including legal liabilities and equity disclosures. A lot will depend on interpretation and enforcement. But the months ahead are certainly not going to be the same for millions of influencers and endorses thank you for joining us Anusha , Bharat and Gautam. For now we're signing off. I'm Ratna Bhushan and you've been listening to socially acceptable influencers get a reality check on the morning brief. This episode was produced by Sumit Pande from the economic times and Swati Joshi from aawaz. Sound Editor Rajas Naik from the economic times and Saundarya Jayachandran from our was executive producers Anupria Bahadur and Arijit Barman from the economic times. We hope you enjoy listening to the episode, do share the episode on your social media networks. The morning brief airs every Tuesday, Thursday and Friday. Do tune into et play our latest platform for all audio content, including the morning brief. All external sound clips used in this episode belong to the respective owners. Credits are mentioned in the description. Thank you for listening and have a nice day ahead.

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