Are celebrity brand ambassadors liable if builder turns rogue?

Akshat Jain bought an apartment in Noida. One of the key reason to trust the builder was the fact that a great cricketer was endorsing this project. However, his dreams of a sweet home had a crash landing when the developer defaulted, and reports of conflict emerged between the developer and the cricketer over the non-payment of endorsement fee.

It is more than a decade and even after the intervention of the Supreme Court that roped in the state-run NBCC to complete the project, the buyer is still waiting for his home where he dreamt of sharing the society complex with the cricketer.

The story of Kohinoor Patnaik, a banker in Gurgaon, is no different. She booked an apartment where one of the dynast politicians known for her celebrity lifestyle had also booked an apartment. In that “By Invitation Only” launch, the politician was also present during the event and had endorsed it.  She could only get her apartment after a long wait of eight years amid the builder facing action due to delays and other irregularities. The dream of a celebrity neighbour remained just a dream.

There is no denying that the presence and/or brand endorsement of celebrities that the average Indians look up to lend credence to the housing project. Brand strategists also maintain that Indians are psychologically wired to believe that the presence of celebrity brand ambassadors add to their own social standing. Developers make good use of celebrity endorsement to sell the high value product like the house.

Facts speak for themselves

• Mahender Singh Dhoni is now the brand ambassador of Hyderabad-based Smadhura Group
• Casagrand has roped in Sourav Ganguly as the brand ambassador
• Rahul Dravid is the face of Piramal Realty
• Anil Kapoor is brand ambassador of Dosti Realty
• Shahid and Mira Kapoor are endorsing Shapoorji Pallonji VANAHA project in Pune
• Gera Developments takes on board Amitabh Bachchan as brand ambassador
• Intercontinental Infrastructure signs actor Sharad Kelkar as brand ambassador for its project at Chakan, Pune 

There are many other celebrities who are either endorsing brands for housing projects or lending their signatures to make the prospective homebuyers feel privileged, and more importantly, safe. The question nevertheless before the buyers like Akshat Jain and Sharmila Patnaik is, whether the experience will be any different this time around.  

The questions that are to be probed 

1. Whether the celebrity brand ambassadors associated with the housing projects would be anything more than a matter of pride for the home buyers?
2. Whether or not these celebrities would just shrug off their responsibility in case of any delay or default?
3. Does the public image of these celebrities suffer when their brand promises go haywire?
4. Does their own credential or market value as brand ambassadors suffer when the housing project is nowhere near the promises made?
5. Is there any legal liability of brand ambassadors when they endorsed a housing project without themselves being convinced about its genuineness?  

Unfortunately, when a housing project gets into a legal quagmire for delays or default, these celebrities are nowhere in the picture. Have they themselves suffered any financial losses out of these dubious endorsements?

“Not really,” says Sumedha Verma, a matchmaker for such celebrity endorsements. According to her, the public memory is very short, and these celebrities just stop endorsing the real estate projects for some time till the dust settles.

“The brand endorsement fee from other industries never takes a hit even when these celebrities are dragged into litigation or social media trial for the wrong endorsements. They are too big to suffer any financial losses. The only difference I have seen in real estate endorsements in the past and now is that the celebs have become more careful about their endorsement fee. They no longer sign the brands on the future commitments of real estate asset; it is all a cash deal now,” says Sumedha.

In one such high-profile case, cricketer-turned-parliamentarian Gautam Gambhir was discharged of cheating charges by a Delhi Court. However, the Confederation of All India Traders (CAIT) had earlier sought heavy fine and jail term for brand ambassadors and celebrities and called endorsements purely a commercial transaction. The CAIT had said that the celebrities act as sales agent and, therefore, share equal liability for misleading advertisements.

Legal opinion is divided on the issue. Advocate Devesh Ratan maintains that the earlier law with the Consumer Protection Act 1986 did not have any specific provision of liability of endorsers. Despite that, one could make an endorser a party to the consumer complaint, alleging that such endorser was part of, or was responsible for promoting and propagating a false and misleading advertisement, thereby aiding the seller in unfair trade practices.

Now, the Consumer Protection Act 2019 specifically deals with endorsements in Section 2(18), which defines an endorsement as any kind of message, statement or depiction which makes the consumer believe that it reflects the opinion of, finding or experience of the endorser.

“Section 21(2) provides that an endorser may be penalised upto Rs 1 lakh in respect of a false or misleading advertisement. Further, under Section 21(3), the endorser can even be prohibited from making further endorsement. However, Section 21(5) provides a safe harbour to the endorsers, which provides that an endorser will not be liable if he has exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product / service endorsed by him,” says Devesh.

Venket Rao, legal advisor with NBCC and the UP RERA, believes that the brand ambassador has no extended product liability and no contractual agreement. Hence, it is the manufacturer who is liable and not the advertiser. One can’t sue an ad agency for promoting the product either. There are standard agreements between brand and the ambassador; with respect to disclosures of the product. Celeb endorsers can’t be expected to go for verification of the product.

“Being satisfied with the product is itself subjective. Quality of the product and pinning brand ambassador is too farfetched. How can one take adequate measures to satisfy with the product before endorsing? Quality is one aspect, but satisfaction of the product comes only when the product is ready for use. Brand ambassadors can’t get into financial and construction audit. A third party that has been signed to endorse for a year or two can’t certify; he is an outsider and not even an auditor. By such assumptions, RERA is also liable for sanctioning the project,” says Rao.

Thus, legally an endorser can always claim that he exercised due diligence while endorsing a product. This is a grey area because the extent and level of “due diligence” is not defined. If one looks at the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, it provides that an endorsement is with due diligence if it reflects the genuine, reasonably current opinion of the endorser, based on adequate information about, or experience with the endorsed goods/service and it must not be deceptive.

In a nutshell, the due diligence required to be exercised by an endorser is very subjective, and must be seen on a case-to-case basis. It’s difficult to put all endorsements in a straight-jacket formula. More importantly, since these celebrities just allow the brands the licensing rights to use their image and are not part of the business, they cannot be held liable under the IPC 420 that is all about cheating.

(The writer is CEO, Track2Realty)