It took the outbreak of a pandemic to springboard the everyday Indian’s tryst with the digital medium. However, the pandemic (and the resultant lockdowns) and the rise of fraudulent acts online are strongly co-related as well. New technologies have come at a dizzying pace. It takes a fair bit of time for people to get confident in their understanding and use of new technology, and this window presents a Goldilocks zone for those looking to profit from people’s uncertainty and naïveté.
Proof of this can be seen from the dizzying rise in the number of consumer complaints in the last year alone. The Advertising Standards Council of India (ASCI) processed 5,532 ads in 2021 , an increase of 62% over 2020. Of the 5,532 ads processed, 48% belonged to the digital medium.
Existing laws – even those as recent as the Consumer Protection Act, 2019 – or stricter policing acts didn’t pack the needed punch, and a changed approach was required. Below is a short analysis of the initiatives taken by the government, judiciary and India Inc., respectively.
The industry leads by example – Influencers, NFTs and crypto under dedicated self-regulatory guidelines
Product sales skyrocket when endorsed by celebrities (or influencers, in the context of social media). And when influencers endorse products without due diligence, their fans pay for bogus products. In 2021, ASCI, a self-regulatory body, published the Guidelines for Influencer Advertising in Digital Media. These mandate clear disclosures by advertisers and influencers that the social media post is a result of sponsorship or a paid-partnership.
Of late, many have been bitten by the NFT purchase and crypto-trading bug. Cryptocurrency Indexes solicited business through promising advertisements. What they didn’t report adequately was that cryptocurrency is an unregulated space, with no legal recourse to aggrieved persons. ASCI took charge again and in February 2022, it released the Guidelines for Advertising Virtual Digital Assets and linked services (VDA guidelines), which ensure that crypto and NFT ads do not guarantee future rewards, describe crypto as a solution to money problems, or in any way downplay the risk associated therewith.
Though ASCI is a private, self-regulating body, it carries tremendous influence. Its members include the most reputed brand and advertisers of India Inc, who are conscious about complying with ASCI’s policies on various subjects. Thus, even if ASCI’s policies are not legally binding, one is hopeful that they will be followed by the industry.
The government’s response – New, legally binding guidelines
Recently, on June 9, 2022, the government brought in force the Guidelines for the Prevention of Misleading Advertisements, 2022. Discouraging misinformation as a whole, they lay special emphasis on influencer endorsements; bait-ads, surrogate advertising and brand-extensions, ads targeted at children. Enacted under the Consumer Protection Act, their violation attracts heavy fines of up to Rs1 million (US$12,135) and Rs5 million (US$60,675) for repeat offences.
The Misleading Ads Guidelines aren’t as instructive as the ASCI guidelines, and one may need to turn to the latter to clear grey areas (such as the content and placing of a disclaimer showing association between an influencer and a brand; or defining situations where brand-extension is and isn’t legitimate). What is of most important, however, is that they fix the problem faced by the ASCI guidelines, by having the force of law!
The judiciary’s initiative
The sheer number of cases of domain name frauds that the judiciary is addressing is noteworthy. Fraudsters register domain names by imitating well-known brands to offer fake dealerships, fake jobs etc. They dupe innocent customers, demand money as security deposits, and are untraceable thereafter, leaving brand owners to suffer infringement and disrepute, and victims running pillar to post seeking justice.
For a few years, courts passed orders to take-down domain names, direct banks to freeze accounts where money was transferred. This wasn’t adequate. Often, domain name registrars (DNRs) were found to be asking for inadequate details from registrants, thus, posing a big problem for the machinery to identify those behind the scams.
Realizing the need for a macro-solution, the Delhi High Court (amongst other courts) has taken the initiative of clubbing all DNR disputes under one umbrella (Dabur India Limited v. Ashok Kuma & Ors., CS COMM 135/2022 and a batch of many other cases), and is working on a new, inspired way of judicial policymaking. The court has called out non-compliance by DNRs of the Intermediary Guidelines, 2021, by failing to appoint grievance redressal officers, failing to take down web pages despite court orders (amongst others). Thus, DNRs have been made aware of their risk of losing safe harbour. Similarly, the court has directed the Ministry of Electronics and Information Technology (MeITY) to have consultations with all participants in the digital ecosystem (ICANN, NIXI, telecommunications department, police, DNRs, etc.) to identify the key problems and solutions to curb the menace of online frauds.
These cases are still pending adjudication, but in a short span of time, they have created intense pressure and have jolted the ecosystem. The coming months carry the promise of a fast-tracked and holistic solution.
Conclusion
A new approach is emerging, with different sections of the Indian machinery taking charge, keeping in mind their differing areas of influence. If it stands the test of time, this approach can serve as a model for problem solving.