INTRODUCTION
The contemporary advertising industry in India is going through tectonic shifts with the increasing use of the internet. Digitalization has brought forth several innovations, one of which is social media, which has revolutionized interpersonal interactions and communication. Influencer marketing was already gaining momentum and is expected to grow even further. According to a report called “The State Of Influencer Marketing in India,” the Indian market for influencer marketing is predicted to grow by 25% in 2024 to INR 2,344 crore and then by another 25% to INR 3,375 crore by 2026.[1] In India, a variety of regulations, including those about consumer protection, advertising, data privacy, and intellectual property rights, apply to influencer marketing to preserve ethical standards, safeguard consumer rights, and promote transparency, it is imperative to comprehend and adhere to these regulatory obligations.
DISCLOSURE REQUIREMENTS
In 2021, the self-regulatory Advertising Standards Council of India (ASCI) published “Guidelines for Influencer Advertising in Digital Media,” which applied to all posts. According to the guidelines, influencers must label the brands on the promotional content they share. Customers have the right to know whether material is sponsored by businesses, and influencer marketing will now be more obvious in compliance with the criteria. It specifies that the disclosure of these commercials must be unambiguous and presented in a way that makes it difficult for the target audience to ignore.
It also provides for such disclosure consistency on all social media platforms. When promoting a band through a video, if the video is less than or equal to 15 seconds, the disclosure label must be visible for at least 3 seconds; if the video is between 15 and 2 minutes long, the disclosure must be visible for at least one-third of the duration; and if the video is longer than 2 minutes, the disclosure must remain visible for the entire duration of the band’s promotion. In the case of live streams, the disclosures are to be mentioned, both at the beginning and end of the stream and in any form of audio content it must be spoken. ASCI also mentions brand responsibility and self-regulation to ensure that the guidelines are being complied with.[2]
CONTRACT AND AGREEMENTS
To guarantee transparent and seamless compliance, the influencer-brand contract and agreements are essential. These give a clear framework for the working relationship and specify the roles, responsibilities, compensation, and other expectations between the influencer and the business. They safeguard their interests and aid in establishing clear expectations and openness between the two sides. Timeline, scope of work detailing expectations, payment, confidentiality clause prohibiting influencers from sharing confidential information or running campaigns before the brand releases it publicly, content ownership, force majeure prohibiting influencers from acting in an impractical manner, and termination of such contract are all essential components of such a contract.
TAX IMPLICATIONS
Influencers generate substantial income through receipts based on views and engagement, consultancy services, collaborations, brand partnerships, endorsements, and sponsored content. The income of a person professionally doing social media will be treated as “Income from Business and Profession” under the Income Tax Act.[3] The services offered by bloggers are covered under Section 13 (12) of the IGST Act. The influencers are also subject to the same tax slabs as a common person. If an influencer is making gross receipts of 20 Lakhs (10 lakhs in special states) or more in a financial year then he is liable to take registration under the GST Act (10 lakhs in special states).[4]
When the gross turnover during a financial year is below 1 crore then the said influencer shall be taxed normally and maintain the books of accounts, but if the gross receipts are more than 1 crore in a financial year then the books of accounts shall be audited under the Income Tax Act,1961.[5]
REGULATORY AUTHORITIES AND ENFORCEMENT
Several government organizations, such as the Ministry of Information and Broadcasting (MIB), the Department of Telecommunications (DOT), and the Ministry of Electronics and Information Technology (MeitY), implement the laws, rules, and regulations about social media in India. The MeitY provides a framework for the responsibilities of the social media platforms in regulating the content whereas DOT plays an indirect role by maintaining cybersecurity and ensuring compliance with legal requirements. The ASCI has also set forth certain disclosure guidelines that are to be followed and the Competition Commission of India safeguards impartial practices and imposes penalties for incorrect or misleading endorsements.
The Ministry of Consumer Affairs, Food, and Public Distribution’s Department of Consumer Affairs released a guideline titled “Endorsement Know-hows!” on January 20, 2023.[6] The intention is to prevent influencers and celebrities from deceiving their followers while promoting goods or services. It demands that celebrities, influencers and virtual influencers prominently display disclosures about the ‘material connection’ between the advertiser and themselves in their endorsements. Penalties may result from failing to disclose any such substantial link or from breaking the Consumer Protection Act of 2019. According to the Consumer Protection Act, of 1986, followers have the right to sue an influencer for knowingly lying about a product in advertising if the influencer was not aware that it was a sponsored promotion. If found guilty, the influencer will have to pay as compensation up to Rs.10 lakh and repeated offenders can be fined up to Rs.50 lakhs. It also can prevent a person from endorsing any product for up to a period of 1 year and in case of repeated violation, a ban for up to 3 years.[7]
CONCLUSION
The laws governing influencer marketing are still in their infancy, as the practice is just now beginning to acquire traction. According to the ‘India Influencer Marketing Report’ the influencer marketing industry is expected to grow at a CAGR of 25% till 2025 making it a 2200cr industry[8]. Lawmakers are also beginning to understand how crucial it is to have distinct regulations governing influencers and endorsers in the field of digital marketing. Compliance with these legislations becomes extremely important for the influencers as they have a large number of audience and the information given to them must be accurate. There is also a need for the authorities to routinely review and keep an eye on social media content to identify mistakes and give marketers and influencers time to fix them. In India, influencer marketing involves several legal and ethical considerations that must be carefully handled, such as addressing any disputes, complying with local and international rules, protecting data privacy, and entering into contractual agreements.
Author(s) Name: Srijan Bansil (IMS Unison University, Dehradun)
Reference(s):
[1] ‘State of influencer marketing in India’ <https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/news/2024/04/ey-state-of-influencer-marketing-in-india-2-march-2024.pdf > accessed 5 July 2024
[2] The Advertising Standards Council of India, ‘Guidelines for Influencer Advertising in Digital Media’ (ASCI, 27 May 2021) < https://www.ascionline.in/wp-content/uploads/2022/09/press-release-influencer-guidelines-2021.pdf > accessed 6 July 2024
[3] Income Tax Act 1961, s 28
[4] Central Goods and Service Act 2017, s 22(1)
[5] Income Tax Act 1961, s 44AB
[6] PIB Delhi, ‘Centre releases endorsement guidelines for Celebs and Social Media Influencers’ (PIB Delhi, 20 January 2023) < https://www.pib.gov.in/PressReleasePage.aspx?PRID=1892527 > accessed on 11 August 2024
[7] Consumer Protection Act 2019, s 21
[8] GroupM, ‘Influencer Marketing will be INR 900cr Market in India by the end of 2021’ (GroupM, 17 September 2021) <https://www.groupm.com/newsroom/india-influencer-marketing-report/ > accessed on 7 July 2024
