Penalties for misleading advertisement

In one minute

The Consumer Protection Act, 2019 deals with misleading advertisements on two levels. The Central Consumer Protection Authority can order the advertisement to stop and can impose a money penalty on the maker and the endorser. A court can also punish the manufacturer or service provider with imprisonment and fine.

In exams, this topic is asked as a short note on misleading advertisements and their penalties. The usual trap is to mix the Authority's penalty under section 21 with the court's punishment under section 89.

Legal provision

• Section 2(28): a misleading advertisement is one that falsely describes a product or service or gives a false guarantee. It is also one that is likely to mislead consumers about nature, substance, quantity or quality, or that conveys a representation that would be an unfair trade practice. An advertisement that deliberately conceals important information is misleading too.
• Section 2(18): an endorsement is a message, statement, demonstration, or depiction of a name, likeness or seal that makes the consumer believe it reflects the opinion, finding or experience of the person endorsing.
• Section 21: the Central Authority may direct discontinuance or modification of the advertisement, impose a penalty, and bar an endorser.
• Section 89: a manufacturer or service provider who causes a false or misleading advertisement prejudicial to consumers is punishable with imprisonment up to two years and fine up to Rs 10 lakh. For each later offence, imprisonment up to five years and fine up to Rs 50 lakh.
• Section 92: a court takes cognizance of the section 89 offence only on a complaint by the Central Authority or an officer it authorises.
• Section 88: failing to comply with a direction of the Central Authority under section 20 or 21 is punishable with imprisonment up to six months, or fine up to Rs 20 lakh, or both.

Meaning and definition

A misleading advertisement is not limited to a plain lie. It includes an advertisement that is likely to mislead, one that makes a promise that would be an unfair trade practice, and one that hides important information on purpose. An endorser is the person whose name, face, message or seal is used to lend credit to the advertisement.

Detailed explanation

Step 1: The Central Authority's directions (section 21(1))

• After an investigation, the Authority must be satisfied that the advertisement is false or misleading and prejudicial to consumers, or against consumer rights.
• It may then order the trader, manufacturer, endorser, advertiser or publisher to discontinue the advertisement or to modify it in the manner and time specified.

Step 2: Penalty on manufacturer or endorser (section 21(2))

• The Authority may impose a penalty up to Rs 10 lakh on a manufacturer or endorser.
• For every later contravention, the penalty may be up to Rs 50 lakh.

Step 3: Bar on the endorser (section 21(3))

• The Authority may prohibit an endorser from endorsing any product or service for up to one year.
• For every later contravention, the bar may be up to three years.

Step 4: Penalty on publishers (section 21(4))

A person who publishes, or is a party to publishing, a misleading advertisement may be fined up to Rs 10 lakh.

Step 5: Defences (section 21(5) and (6))

• An endorser is not liable to a penalty or bar under section 21(2) and (3) if he exercised due diligence to verify the claims in the advertisement.
• A person is not liable to the penalty if he proves that he published or arranged the publication in the ordinary course of his business.
• That defence is lost if he had previous knowledge of the Authority's order for withdrawal or modification.

Step 6: How the penalty is fixed (section 21(7) and (8))

• The Authority has regard to the population and area affected, the frequency and duration of the offence, the vulnerability of the class likely to be affected, and the gross revenue from the sales made through the offence.
• The Authority must give the person an opportunity of being heard before passing the order.

Step 7: Criminal punishment (sections 89 and 92)

• A manufacturer or service provider who causes a false or misleading advertisement prejudicial to consumers' interest is punishable with imprisonment up to two years and fine up to Rs 10 lakh.
• For every later offence: imprisonment up to five years and fine up to Rs 50 lakh.
• A court takes cognizance only on a complaint by the Central Authority or an authorised officer (section 92).

Step 8: Disobeying the Authority (section 88)

If a person does not comply with a direction of the Central Authority, he is punishable with imprisonment up to six months, or fine up to Rs 20 lakh, or both.

1. 1. Misleading advertisementFalls within section 2(28).
2. 2. InvestigationThe Central Authority investigates and gives a hearing (section 21(8)).
3. 3. OrderDiscontinue or modify the advertisement (section 21(1)).
4. 4. Penalty or barUp to Rs 10 lakh, later up to Rs 50 lakh; endorser barred for up to one year, later up to three years (section 21(2), (3)).
5. 5. ProsecutionSection 89 punishment, on the Authority's complaint (section 92).

Don't confuse: section 21 penalty and section 89 punishment

Point	Section 21 penalty	Section 89 punishment
Who imposes	Central Authority, by order	Competent court
Nature	Money penalty and bar on the endorser	Imprisonment and fine
Amount	Up to Rs 10 lakh; later up to Rs 50 lakh	Fine up to Rs 10 lakh; later up to Rs 50 lakh, with imprisonment up to two and five years
Who is liable	Manufacturer, endorser, publisher	Manufacturer or service provider
Start	After investigation by the Authority	Only on the Authority's complaint (section 92)

Common mistakes

• Thinking that only a false statement is misleading. Concealing important information also qualifies.
• Thinking that an endorser is always liable. Due diligence is a defence.
• Mixing the Authority's penalty with the court's punishment.
• Forgetting that the Authority must hear the person before passing the order.
• Forgetting that a prosecution under section 89 needs the Authority's complaint.

Apply it

Leading case laws

This topic rests on the text of the Act. No judgment in this collection is relied on for it.

How to write this answer in the exam

Key points to remember

• Misleading advertisement is defined in section 2(28).
• Authority penalty: up to Rs 10 lakh; later up to Rs 50 lakh (section 21).
• Endorser bar: up to one year; later up to three years.
• Endorser's defence: due diligence (section 21(5)).
• Court punishment: up to two years and Rs 10 lakh; later up to five years and Rs 50 lakh (section 89).

Quick self-test

Related topics

• Restrictive and Unfair Trade Practices
• Civil & Criminal liability
• Central Consumer Protection Authority (CCPA): establishment, composition and powers