How smooth soda with fragrant cardamom gives you the highs
Surrogate advertising masquerading as brand extension in India needs proper regulation
A few years ago, impressed with the ubiquitous advertising on Indian television and certain that sipping Carslberg Smooth Soda with the Seagram CD playing in the background would add endless cheer to the monotony of his existence, this correspondent went in search of these products. On- and off-line. Alas, in vain. Amazon even said that these products were not available at that moment. Considering the number of ads for these products the distribution strategy seemed a business school case study of failure.
Or perhaps a case study of successfully walking the thin line between surrogate advertising couched as a brand extension under lax implementation of laws. For those uninitiated into these two terms, here is a primer. Brand extension is defined by the OED as “the action or practice of using an established brand name or trademark on a new product or products, so as to attract sales” and surrogate advertising is defined in Indian laws1 as “advertisement for goods, product or service, whose advertising is otherwise prohibited or restricted by law, by circumventing such prohibition or restriction and portraying it to be an advertisement for other goods, product or service, the advertising of which is not prohibited or restricted by law.”
You don’t need to be an abstemious Gandhian to find something distasteful about surrogate advertising. It is just about following ethical guidelines and following laws designed to prohibit surrogate advertising. And also recognizing that the Indian consumer is not getting a fair deal from the government departments charged with regulating these affairs.
First, the professional ethics of advertising. The Advertising Standards Council of India (ASCI), which is an industry body for self-regulation, has recently issued its code for self-regulation of advertising content. Chapter 3 of the code expressly notes: “Advertisements for products whose advertising is prohibited or restricted by law or by this Code must not circumvent such restrictions by purporting to be advertisements for other products, the advertising of which is not prohibited or restricted by law, or by this Code.” The guidelines on brand extension provide tests2 to determine whether an ad is a surrogate or brand extension, and it is based on a sales turnover.
However, the presence of these guidelines has not stopped us from seeing these ads. What, then, is the law?
The Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 define surrogate advertising and have a provision for the prohibition of such advertisements for products that are otherwise prohibited or restricted by law. The Cigarettes and Other Tobacco Products Act addresses the issue and expressly prohibits advertising of tobacco products. The Cable Television Network Rules of 20093 were amended to include tobacco and alcohol, and specific prohibitions on surrogate advertising were put in place. The excise acts of various states that regulate the alcohol trade also prohibit advertising of alcohol. Some states have special laws prohibiting advertising of alcohol. Yet in December 2023, Delhi High Court had to reject the plea of a television channel that it acted within the law when it allowed All Seasons Soda to be advertised based on a Central Board of Film Certification certificate. Earlier the same channel had shown 100 Pipers Music CD ads and had also received a Ministry of Information & Broadcasting directive to run apologies for airing the ad since they found it contravening the Cable Network Rules.
The code that guides online digital services has mention of surrogate advertising for gaming but not for products that are considered medically harmful like alcohol and tobacco and whose advertising is severely regulated on other media.
Hence, the ads that promote alcohol and tobacco products continue on various media.
Is there any option to curb surrogate ads? A much easier via media is available for policy makers that can be implemented. It consists of two steps.
Alcohol and tobacco products need to be trademarked.
Alcohol and tobacco products will not be allowed brand extension trademarks.
Any brand that is visually or aurally similar to any alcohol and tobacco products cannot be trademarked under any brand or service category.
All visual advertising will require a trademark registration or application.
One can foresee that in India, we can certainly expect surrogate companies to come up whose business models would be to advertise similar sounding brands. TMT bars and hotels having the same name as a liquor or tobacco brand will be the next big advertiser, but these would be much easier to identify and penalize.
Save such a move we will be happily resigned to more of stakeholder consultations like the one held recently in Mumbai. It was organized by the Department of Consumer Affairs in collaboration with ASCI. Soon thereafter a press release noted that “there should be a clear distinction between the brand extension and the restricted product or service being advertised.”
Good luck trying to ensure that the advertisers make such a distinction. Most likely we will be gyrating to flavoured cardamom as we savour it with soda so smooth that no fizz is felt in almost impossible to find glasses and go looking near and far for music cds that Amazon perpetually tells us are “currently unavailable.”
1. Brand extension product or service should be registered with appropriate Government authority e.g., GST/FDA/FSSAI/TM etc.
A) For a brand that is present in the market for >2 years, the following criteria would apply:
I. Sales turnover of the product or service should exceed Rs. 5 crore per annum nationally, or Rs 1 crore per annum per state, where distribution has been established.
II. A valid certificate from an independent organisation such as NielsenIQ or category - specific industry association, or an independent and reputed CA firm would be required to prove the concerned criteria.
B) Brand extensions which have been launched in the market, but have not yet completed two years must meet any one of the following criteria:
I. Achieve a net sales turnover of Rs. 20 lakhs per month from launch. Such sales should not be to a subsidiary or sister concern.
II. Demonstrate fixed asset investments which are exclusive to the advertised brand extension of not less than Rs. 10 crore. Such assets could be land, machines, factory, software, etc., in case the product is being manufactured/ developed by the advertiser. No advertising related expense should be part of such investments.
III. In case the manufacturing/procurement of such brand extensions is being outsourced, then evidence may include board resolutions and purchase orders for long term (> 1 year) contracts with service providers/manufacturing entities, stating their capacities, and contracted volumes/Rupee value, which clearly demonstrate the possibility of achieving the turnover as laid out in criteria 2B (I).
IV. Give evidence of turnover greater than 10% of the turnover of the same brand in the restricted category (including sub brands in the restricted category).
All the above evidence should be certified by a reputed and independent CA firm.
Irrespective of the length of time the brand has been in the market, date of launch would be considered as date of the first invoice for sale for the said brand extension.
If a brand extension cannot meet the qualification criteria, for the purpose of the ASCI code it would not be considered a genuine brand extension, but rather a surrogate created to advertise a restricted category.
Provided that a product that uses a brand name or logo, which is also used for cigarettes, tobacco products, wine, alcohol, liquor or other intoxicants, may be advertised on cable service subject to the following conditions that (i) the story board or visual of the advertisement must depict only the product being advertised and not the prohibited products in any form or manner; (ii) the advertisement must not make any direct or indirect reference to the prohibited products; (iii) the advertisement must not contain any nuances or phrases promoting prohibited products; (iv) the advertisement must not use particular colours and layout or presentations associated with prohibited products; (v) the advertisement must not use situations typical for promotion of prohibited products when advertising the other products:
Provided further that—
(i) the advertiser shall submit an application with a copy of the proposed advertisement along with a certificate by a registered Chartered Accountant that the product carrying the same name as cigarettes, tobacco products, wine, alcohol, liquor or other intoxicants is distributed in reasonable quantity and is available in a substantial number of outlets where other products of the same category are available and the proposed expenditure on such advertising thereon shall not be disproportionate to the actual sales turnover of the product:
(ii) all such advertisements found to be genuine brand extensions by the Ministry of Information and Broadcasting shall be previewed and certified by the Central Board of Film Certification as suitable for unrestricted public exhibition and are in accordance with the provisions contained in sub clause (i) to (v) of the first proviso, prior to their telecast or transmission or retransmission.”