Music concerts, sports events: How top liquor brands drew ire over surrogate ads

The Central Consumer Protection Authority (CCPA) has issued notices to large liquor manufacturers such as Bacardi, known for its popular white rum, French wine maker Pernod Ricard, United Breweries, homegrown Radico Khaitan, and William Grant & Sons, which sells single malt Scotch whisky Glenfiddich, two people aware of the development said.

The CCPA, which comes under the ministry of consumer affairs, has written to the liquor makers about their sponsorship of cultural, music and sports events, as well as youth festivals and events in colleges, the people cited above said on the condition of anonymity. The consumer rights watchdog is also scanning their use of social media to engage consumers through lifestyle content, events, and promotions.

The authority, which plays a crucial role in enforcing consumer rights, has ordered these companies to explain why action should not be taken against them for breaching government regulations under the Consumer Protection Act, 2019.

Queries emailed to the consumer affairs ministry as well as the Bermuda-based Bacardi, Pernod Ricard, United Breweries, the Indian arm of Dutch brewer Heineken, Radico Khaitan, and William Grant & Sons remained unanswered till press time.

Despite strictures in the past, this practice remains in vogue, upsetting the authorities enough this time around to put them on notice. The move comes even as the government is firming up the draft guidelines aimed at curbing surrogate advertising.

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Surrogate advertising refers to a pattern of advertisement, wherein alcohol companies promote their products indirectly through events, music festivals, or non-alcoholic products such as bottled water or soda, music CDs, glassware. This type of advertising has long been a grey area in India’s regulatory framework.

According to London-based drinks consultancy International Wine and Spirit Research (IWSR), India’s $32-billion liquor industry is projected to add $7 billion by 2028.

Mint had earlier reported that alcohol manufacturers will have to prove that surrogate products have a market of their own.

"The Consumer Protection Act (CPA) has sufficient provisions to penalize violators, even in the absence of dedicated guidelines for surrogate advertising," the first of the two persons cited earlier said.

The ministry has issued notices under the provisions of ‘Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022.’

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The guidelines broadly prohibit surrogate advertisements for goods or services whose advertising is otherwise restricted or prohibited by law, preventing companies from circumventing such restrictions by presenting the advertisement as one for goods or services that are not prohibited.

Until the final guidelines are notified, notices and actions against violators will continue to be enforced under the existing rules, the persons cited earlier said.

The CCPA, empowered by the Consumer Protection Act, has the authority to impose penalties of up to ₹10 lakh on manufacturers, advertisers, and endorsers for misleading advertisements. For subsequent violations, it can levy penalties of up to ₹50 lakh.

The CCPA's notice has drawn a sharp reaction from bodies representing the brewery industry.

"Since the process of finalising guidelines on surrogate advertising is in its final stages and the new rules are expected soon, the recent surge in actions against companies based on earlier guidelines makes little sense. It would be better to hold off for a short while and then evaluate the advertisements based on the new guidelines," said Vinod Giri, director general of the Brewers Association of India.

"The notices are part of the CCPA’s procedural work. They apply to all, not just liquor makers. There is a rule in place that everyone must adhere to. Violations will attract penalties, as has been seen in other categories, such as with IAS coaching institutes and direct selling entities," the second person said.

This person said that some companies have responded, while others have yet to express their views. If they agree to withdraw their misleading advertisements, they may avoid facing stricter actions.

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“The ministry has sent notices to major liquor companies based on the guidelines for misleading advertisements issued in 2022. It's a positive step by the government to ask these companies for clarification regarding surrogate advertisements, which are part of misleading advertising," said Ashim Sanyal, chief operating officer of Consumer Voice, a consumer rights advocacy group.

The names of the companies that are following the rulebook and those that are not, were not revealed by either of the two persons cited earlier.

Mint reported in August that the CCPA served notices on 45 coaching institutes for allegedly violating consumer rights with misleading advertisements and unethical tactics. These actions were part of the CCPA's broader initiative to protect consumers, including students and aspirants, from deceptive practices that violate the Consumer Protection Act, 2019.

The CCPA has imposed penalties totalling ₹38.60 lakh against IAS coaching institutes for misleading advertisements.

The draft guidelines that are in the works are expected to mandate online availability of sales certificates for public viewing, allowing verification of substantial sales of the advertised products.

The new rules also aim to achieve a balance between industry interests and consumer protection by preventing the overt branding of alcoholic products – a measure to ensure that children and young people, who are potential customers, are not influenced by surrogate advertisements.

“As alcohol advertising regulations tighten, brands are turning to alternative methods to engage their target audience effectively. With increasing restrictions on surrogate and direct advertising, social networking platforms present a valuable opportunity for brands like us to create personalized and interactive connections with consumers," said Tushar Bhandari, whole time director, Associated Alcohols & Breweries, an Indore-based alcoholic beverages manufacturer.

“However, this shift demands a thoughtful approach to balance compliance with creativity, ensuring that the brand message remains consistent, engaging, and aligned with both legal requirements and audience preferences in a highly-regulated industry," Bhandari said.

Brewers Association of India's Giri said that the industry has often criticized the one-size-fits-all approach of media regulators for failing to differentiate between genuine brand extensions and frivolous ones, which denied responsible companies with alcoholic beverages in their portfolio the chance to diversify and de-risk their business.

“Also, the industry has welcomed the CCPA's initiative to develop guidelines that distinguish between legitimate brand extensions and irresponsible surrogate advertisements, allowing companies to expand responsibly while filtering out misleading practices," he said.