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Celebrity Liability For The Endorsement Of Defective Products – Dodd-Frank, Consumer Protection Act


  1. Introduction

The concept of celebrity endorsement of products and services is
widely recognised and has taken on a steep incline in the last
decade. Celebrity endorsements have introduced novel aspects to
branding strategies adopted by companies worldwide. The role of the
endorser is to attract attention to the brand’s voice and
often, celebrity endorsements are used so intensively that it can
have a psychological effect on consumers and entice them into
buying products recommended by their favourite influencers. This
phenomenon is largely attributable to the celebrity’s
personality and stature being associated with the promoted product,
thereby increasing profits for both the business as well as the
celebrity. This marketing model has gained prominence in the last
few years with the growing prevalence of social media. A good
illustrative example is when Tu Face Idibia, a popular musician in
Nigeria, endorsed Airtel (a telecommunication service provider),
this singular action drummed up significant patronage for
Airtel’s products and services.1

However, since the infamy faced by Nestlé in India over
its Nestlé Maggi brand following the nationwide
branding of their noodles line of products, there has been a deeper
scrutiny regarding the existing liability for the celebrity
endorsers of such products. Companies appear to be taking undue
advantage of celebrities who are oblivious to the defects of the
goods that they promote. Consequentially, it is the consumer who
suffers in the instance where such celebrity-endorsed products do
not deliver on the promise or causes loss to them.

In a bid to address this issue, this article will consider the
defences available against the liability of celebrity endorsements
of defective goods. This article will briefly examine the Maggi
case
to determine the measures adopted in other jurisdictions
and then go on to consider the extent of the existing legislation
available to protect consumers under Nigerian Law. Finally, this
article will consider the steps that can be taken by endorsers to
exclude any potential liability they may face.

  1. A Mere Art Form?

One popular point of contention in celebrity liability for such
endorsements is that these endorsements can be considered as pure
art forms much like other advertisements on television. However,
this cannot honestly be argued to be the case. This is because the
intent behind advertisements and promotional activities is not only
to put forth an artistic expression, but is predominantly biased
towards driving the consumer base in the direction of the product/
service being endorsed. Hence, the social immunity that art-forms
enjoy is not always applicable to these promotional activities.

Furthermore, the endorsers have a personal ethical
responsibility to consumers. Endorsers increase the trust and
familiarity of the products that a consumer may not otherwise have
paid any attention to, thus, leading the customers and fans to
place a higher value on such endorsed products. Therefore, there is
an onus on these celebrities to pay particular attention to what
they endorse rather than assume that they are merely acting as a
carrier of information especially when their fan-following are
likely to be exposed to mental and physical health hazards from
consuming or making use of the products that they have
endorsed.

  1. The Maggi case and lessons from India

There have been several incidents where celebrity endorsement of
false claims in support of a brand has been a matter of concern. In
Nestle India Limited v. The Food Safety and Standards Authority
of India2
(the Maggi Case), the
petitioner, a company, was ordered to stop the manufacturing and
distribution of 9 types of noodles manufactured by the company.
Tests showed that these noodles contained excessive amounts of the
chemical monosodium glutamate (MSG) and lead.3 There was
also alleged mislabelling of the flavour enhancer ‘MSG’.
Nestlé has since then removed the claim of “No added
MSG”4, and the product returned to stores after a
court lifted the restriction. Criminal complaints were filed
against Bollywood stars like Bachchan, Madhuri Dixit and Preity
Zinta for endorsing Maggi.

In the present Indian legal framework, a celebrity can now be
held liable for inappropriate advertisements and promotional
activities of products that adversely affect the interest of
consumers, under the Food Safety and Standards Act,
2006,5 the Indian Penal Code, 18606 and under
the Consumer Protection Act (CPA).7 Under the CPA,
endorsers face steep fines for false or misleading claims, and
could be prohibited from appearing in such advertisements for up to
three years.8

Furthermore, the Advertising Standards Council of India (ASCI)
commenced a due diligence service to assess whether claims by
celebrities or endorsers in advertisements are ‘false or
misleading’. The self-regulatory body has set up a panel of
about two dozen executives from stakeholder organisations to keep a
check on such claims, in line with the Consumer Protection Act,
2019. The panel includes executives from legal, advertising, talent
management and financial services etc.9 Thus, it is
clear that from the Maggi incident, India has taken, and continues
to take, proactive measures in order to prevent such situations
from reoccurring. These measures by India will compel celebrities
to be more prudent when deciding which goods to endorse, and in
turn, ensure the safety of its people.

  1. A brief analysis of measures taken by the
    United

Between 1998 and 2002 ex-baseball player Steve Garvey made
various statements in US TV “infomercials” promoting
weight loss supplement products. The products in question were
“Fat Trapper” and “Exercise in a Bottle”
produced by Enforma Natural Products. Garvey was paid an estimated
$1,000,000 including repeat fees for his appearances in the
infomercials.10

Following consumer complaints, the US Federal Trade Commission
(FTC) sued Steve Garvey on the basis that his claims made for the
products in question during the infomercials were without
foundation and seriously misleading. Furthermore, they alleged that
as a celebrity endorser, he was a direct participant in the
deceptive advertising and therefore could be held liable for any
false statements made during the advertisement.11 The
courts ruled in favour of Garvey, stating that he could not be held
liable as a direct participant because he did not have actual
knowledge of any material misrepresentations and he was not
recklessly indifferent to the truth or falsity of any
representation. However, Enforma agreed to pay $10 million in
consumer redress to settle FTC charges against the company.

This case served to convey the seriousness with which the FTC
takes on the issue of liability of celebrities who endorse
defective products. Furthermore, the FTC made amendments to its
Guides Concerning the Use of Endorsements and Testimonials in
Advertising in 2009,12 giving consumers the right to
hold celebrities liable in cases of deceptive advertisements. The
guidelines now compel the celebrities to investigate the products
first and then make a testimonial.

  1. The scope of protection of consumers under Nigerian
    law

Based on the few case studies emanating from other jurisdictions
it is clear that other jurisdictions have taken strides to address
the issue of celebrity endorsement of defective goods by
introducing legislation and creating review panels to protect
consumers.

In Nigeria, the law which regulates the welfare of consumers is
the Federal Competition and Consumer Protection Act,
2019.13 The Act mandates the Commission to administer
the provisions of the Act as well as set up the Competition and
Consumer Protection Tribunal to adjudicate over conduct prohibited
by the Act and exercise jurisdiction in accordance with the Act.
This law aims to promote and maintain competitive markets in the
Nigerian economy, promote economic efficiency and protect and
promote the interests and welfare of consumers. The Act applies to
all undertakings and all commercial activities within, or having
effect within Nigeria.

The Act provides that a trade description is applied to a good
if it is contained in any “advertisement…or other
commercial communication on the basis of which a consumer may
request or order the goods
“.14 The Act further
provides that an undertaking shall not knowingly apply to any goods
a trade description that is likely to mislead consumers as to any
matter implied or expressed in that trade description.15
It provides that a consumer may seek to enforce any right under the
Act, a transaction or agreement, or otherwise resolve any dispute
with an undertaking that supplied the goods or services to the
consumer by-

(a) referring the matter directly to the undertaking that
supplied the goods or services:

(b) referring the matter to the applicable industry sector
regulator with jurisdiction, if the undertaking is subject to the
jurisdiction of the regulator; or

(c) filing a complaint directly with the
Commission.16

Brand promoters making representations to the public that turn
out to be at variance to what they represented, shall be held
liable for misrepresentation.17

Furthermore, under both the Nigerian Criminal and Penal Codes,
whoever induces another to do what they would not have willfully
done is said to have committed cheating if such inducement results
in the loss of pecuniary or proprietary rights.18

Thus, while there are laws in place to protect consumers, such
laws relating to misleading advertisements are in their infancy as
none define the extent of the celebrity’s liability in a case
where they endorse defective goods.

  1. Recommendations

The misrepresentation of consumable products should be taken
very seriously, and the present statutory provisions under Nigerian
laws are not sufficient to deter producers and advertisers from
employing public figures in misleading endorsements. The
skyrocketing popularity of celebrity endorsements together with the
prevalence of counterfeit goods in Nigeria only spells disaster for
many consumers. Thus, while the Federal Competition and Consumer
Protection Act has provisions in place to ensure the welfare of
consumers, there specifically needs to be provisions which address
the liability of celebrities such as the provisions stipulating the
penalties for same under the Indian Consumer Protection Act in
order to effectively prevent cases of misleading endorsements, and
thus, minimise any potential harm which could be occasioned to the
consumer.

Furthermore, such a statute would foster a sense of
responsibility among celebrities and make them more prudent when
accepting offers of brand endorsements. Although it is not always
possible for celebrities to understand the complex structures of a
product or to check the quality of the products personally, due
diligence on behalf of the celebrity will be required.

In addition, it would be advisable for celebrities negotiating
such contracts for brand endorsements to include an indemnity
clause. This may serve to limit or protect the celebrity from
liability if a third-party or third entity is harmed.

  1. Conclusion

In conclusion, it is clear that the laws relating to misleading
advertisements in Nigeria are in their infancy as none define the
extent of the celebrity’s liability in a case where they
endorse defective goods. While there are obvious economic
advantages in the advertising landscape that a celebrity can offer,
it is advisable that such celebrity adopt precautionary measures to
avoid legal liability by ensuring that liability exclusion clauses
are included in any contract for the endorsement of a product.

An exclusion or limitation clause in a contract is a condition,
which aims to preclude one of the parties from accountability or
circumscribes the citizen’s liability to exact listed terms,
conditions, or circumstances. These could be inserted into a
contract to keep private citizens/customers protected from lawsuits
for damages, loss, negligence, or non-performance of a contractual
or legal obligation.

For an exclusion or limitation clause to be effective, it must
pass at least these tests:

  • it must have been incorporated into the agreement;

  • its wording must cover the liability in question;

  • it must not be prohibited by statute or other
    law19

The incorporation of an exclusion/limitation clause in an
endorsement contract will serve to protect the reputation and
integrity of a celebrity, and consequently deter any potential
damage to their persona resulting from the endorsement of a
defective good. The essence of this clause will further serve as a
vital tool and exemption in allocating the risk of contracts
between the parties to ensure that the celebrity is not held liable
for any defect suffered by the customer over the use of the product
or services endorsed and advertised by the celebrity.

Footnotes

1 Ayomide O. Tayo, “Artistes grab new endorsement
deals” available at
https://www.pulse.ng/entertainment/celebrities/2face-idibia-patoranking-artistes-grab-new-endorsement-deal/j04msf5

accessed on 5th April 2022.

2 M/S Nestle India Limited v. The Food Safety and
Standards Authority of India, W.P. (L) No. 1688 of
2015.

3 Entertainment desk, “Nestle India to support Maggi
celebrity endorsers” available at
https://tribune.com.pk/story/898890/nestle-india-to-support-maggi-celebrity-endorsers

accessed on 29th March 2022.

4 ET Bureau, ” Nestle India to contest fine in
Noodle case” available at
https://economictimes.indiatimes.com/industry/cons-products/fmcg/nestle-india-to-contest-fine-in-maggi-noodles-case/articleshow/71073426.cms?from=mdr

accessed on 17th March 2022.

5 Section 53, The Food Safety And Standards Act, 2006
available at
https://www.indiacode.nic.in/bitstream/123456789/7800/1/200634_food_safety_and_standards_act%2C_2006.pdf

accessed on 7th April 2022.

6 Section 272 and 273, Indian Penal Code, 1860 (Act no.
45 of Year 1860) available at
https://www.advocatekhoj.com/library/bareacts/indianpenalcode/index.php?Title=Indian%20Penal%20Code,%201860

accessed on 7th April 2022.

7 Section 21, Consumer Protection Act, 2019 (Act no. 35
of 2019) available at https://egazette.nic.in/WriteReadData/2019/210422.pdf
accessed on 7th April 2022.

8 Ibid, Section 21(3).

9 Ratna Bhushan, “Consumer protection initiative:
Endorsers’ claims to go through a due diligence process”
available at
https://economictimes.indiatimes.com/industry/services/advertising/consumer-protection-initiative-endorsers-claims-to-go-through-a-due-diligence-process/articleshow/90109767.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

accessed on 29th March 2022.

10 Osborne Clarke, “US District court ruling on
celebrity endorsement liability” available at
https://marketinglaw.osborneclarke.com/marketing-techniques/us-district-court-ruling-on-celebrity-endorsement-liability/

accessed on 29th March 2022.

11 Ramesh Vaidyanathan, “Maggi noodles controversy:
are celebrities liable for alleged lapses of the manufacturer
?” available at
https://economictimes.indiatimes.com/blogs/et-commentary/maggi-noodles-controversy-are-celebrities-liable-for-alleged-lapses-of-the-manufacturer/

accessed on 2nd March 2022.

12 “Guides Concerning the Use of Endorsement and
Testimonials in Advertising” available at
https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-publishes-final-guides-governing-endorsements-testimonials/091005revisedendorsementguides.pdf

accessed on 2nd March 2022.

13 Federal Competition and Consumer Protection Act,
2018.

14 Section 116(1)(c).

15 Section 116(2).

16 Section 146.

17 Section 140

18 See Section 320 1(b) of Penal Code and Section 421 of
the Criminal Code.

19 Beverly Whittaker and Beverly Flynn “Limiting
liability in commercial contracts” available at
https://www.stevens-bolton.com/site/insights/briefing-notes/limiting-liability-in-commercial-contracts

accessed on 10th August 2022.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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