Brand endorsers will have to pay a penalty of up to Rs 50 lakh if they promote a misleading advertisement, according to the Consumer Protection Bill passed by Parliament.

The new bill, which repeals the existing Consumer Protection Act, provides for the establishment of a central consumer protection authority as an apex body to protect the rights of consumers, intervene in cases of unfair trade practices and initiate class action. The authority can enforce the recall, refund and return of products. The bill, cleared by the Lok Sabha last week, was passed by the Rajya Sabha on Tuesday.

For the first time, the bill has a provision to deal with misleading advertisements. The law will cover advertisements which falsely describe a product or service or give a false guarantee or is likely to mislead consumers on the nature, substance, quantity or quality and deliberately conceal important information.

The earlier act did not have any specific provision on misleading advertisements.

If the consumer protection authority, which will have investigation powers, finds any advertisement false or misleading, it may order the trader or manufacturer or endorser or advertiser or publisher to discontinue or to modify it.

If the CCPA feels the necessity, it may impose on the manufacturer or the endorser a penalty which may extend to Rs 10 lakh. For every subsequent contravention by the manufacturer or the endorser, it may impose a penalty that may extend to Rs 50 lakh.

The bill says that no endorser shall be liable to pay the penalty if he or she has exercised due diligence to verify the veracity of the claims made in the advertisement.

Suresh Misra, a professor of consumer affairs at the Indian Institute of Public Administration (IIPA), Delhi, said the provision on misleading advertisement would serve as a deterrent.

“A lot of people are influenced by the endorsement of advertisements by celebrities. Now the endorsers have to be accountable. The provision of penalty will serve as a deterrent,” Misra said.

Any manufacturer or service provider behind a false advertisement can be imprisoned up to two years and fined up to Rs 10 lakh. Every subsequent offence can attract jail up to five years and a maximum fine of Rs 50 lakh.

The bill says complaints on unfair trade practices may be forwarded to the collector or the commissioner of the regional office or the central authority.

If a probe by the consumer protection authority establishes wrongdoing, it may order a recall, reimbursement and discontinuation of the practice.