The new Companies Bill 2008 proposes sending celebrities to jail for up to three years if they induce consumers to buy a product with misleading claims. The Bill also wants the company to pay Rs 50 lakh as penalty for cheating consumers. Currently, such companies face a Rs 1-lakh fine. The Bill was tabled in Parliament in October.
Though the existing law —Companies Act 1956 —has a similar provision in Section 68, punishment is limited to a fine. The new law creates a bigger deterrent by adding a jail term and increasing the penalty several-fold.
“We welcome this regulatory structure that could take into account companies misleading the public,” said Madhukar Kamath, chairman of Advertising Standards Council of India, an industry body. Prathap Suthan, national creative director of ad agency Cheil Worldwide, believes it’s a “great proposition” which would act as an “effective filter” to weed out potential fraudsters, while protecting consumers, ad agencies and celebrities from getting duped.