Repeated ad violations by Mamaearth parent may adversely impact brand trust, say experts

There will inevitably be repercussions for an advertiser who violates advertising standards and comes under public scrutiny repeatedly. Even though it is quite impossible to measure how Honasa Consumer's violation of Advertising Standards Council of India (ASCI) regulations (this year) has affected its reputation in the marketplace, industry experts have rendered the judgment— “actions indicate that the company has engaged in misleading or unethical advertising, which leads to damaging consumer trust and loyalty.” Though the majority of these ads, over 94 percent, were not produced by the advertiser directly/in-house but through influencer marketing activities it actively engages in.

In a recent report by the ASCI, a total of 187 advertisements of Honasa Consumer were flagged by the industry body. These ads included many of its brands – Mamaearth, Dr. Sheth’s Skin and Hair Clinic, Aqualogica, The Derma Co., Ayuga, among others. The company then told Storyboard18 that "almost 94% of these flagged cases were around influencer content, whose dynamics have been rapidly evolving and it has enhanced the internal protocols to comply with standards", adding that it has been its constant endeavour to educate itself and its partners on the guidelines defined by ASCI and be completely compliant with them. It also mentioned enhancing its internal protocols to ensure minimising the same. “We are committed to complying with industry standards and maintaining the trust of our customers, which is of paramount importance to us,” it said.

But this is not the first time the company’s ads have been flagged off. As published in last year’s Annual Complaints Report, 115 ads were processed against the advertiser in that year—out of these, 109 required modifications. Of the total ads processed, 105 were influencer violations. And a year before that, there were around 5 ads violations.

This year, ASCI processed complaints against 187 ads against the advertiser, of which 175 were for violation of ASCI’s Influencer Guidelines. So, the primary reason for these violations was a lack of proper disclosures by influencers it chose to work with. These constitute a violation of the ASCI Code as well as the guidelines notified under the Consumer Protection Act, which require a prominent and upfront disclosure.

While it is true that influencer violations have been the major cause of the company’s violations over the last two years, it should be clear that, in law, these influencer posts are essentially company advertisements, and the company bears the ultimate responsibility for these posts, highlighted Manisha Kapoor, CEO and Secretary-General, ASCI.

Any influencer activity that is commissioned, approved or authorised by a brand is considered to be advertising. All such violations are brought to the attention of the influencers as well as the brand, and they are given the opportunity to correct them.

“Trust is the currency of the digital world. Repeated violations of this nature certainly adversely impact brand trust. Besides, these can also be brought under legal scrutiny, and there can be fines imposed on the advertiser, the agency, and the endorsers. These consequences can erode consumer trust in brands as well as influencers,” Kapoor said.

"The immediate impact of such an activity often includes negative publicity, which can spread rapidly through media and social networks, leading to reputational damage. Consumers may feel deceived, resulting in a decline in brand credibility and sales,” added Smita Khanna, COO, Newton Consulting India. Additionally, competitors might capitalise on this misstep, further affecting the company's market position.

In a nutshell, over time, experts noted that repeated violations can result in regulatory scrutiny and potential legal consequences, adding financial strain.

However, as long as the company quickly acknowledges, understands, and fixes the issues, Nisha Sampath, Managing Partner, Bright Angles Consulting, thinks ASCI cases may not directly impinge on consumer equity. Although, it should be a matter of concern for the entire team, including top management and they should put processes in place to take care of it.

“Honasa Consumer has seen unprecedented rapid growth, and now the systems and processes need to follow the same pace. What will make a difference in a founder-led company, is the founder’s commitment to their vision. While it expands, I would expect the Alaghs to stay true to their original commitment to build trust in consumers. If they infuse this in their values and culture as they expand their footprint, the numerous brands that they are creating will be aligned,” she suggested.

It is to be noted that, not only it is the beauty and personal care (BPC) category that consistently ranks high in ad violations in the ASCI’s Complaints Reports (contributing to 13% of total ad violations), but it is also quite a pattern among many of the digital-first brands. The high online demand for these products, the relentless use of influencers, a highly competitive market, and the presence of several new players are all contributing factors in making this a constantly violative category.

“This is primarily a problem affecting new-age start-ups and D2C brands. You rarely see it happening with established FMCG companies. Due to the huge investments at stake in conventional ATL advertising, these companies cannot afford to slip up. Hence, they follow stringent protocols when releasing new communication. Whereas, the new-age brands especially those operating primarily through digital mediums, often feel that they need to be agile and hence they may dispense with such formalities,” shared Sampath.

Additionally, they deal a lot with influencers, and these are emergent areas when it comes to claims being made. Industry bodies are still evolving the guidelines to deal with the new advertising scenario.

Hence, apart from a robust process to monitor influencers, Kapoor suggested that brands need to ensure that their contracts (with influencers) require disclosure labels to be mentioned, and blacklisting influencers who do not adhere to these instructions. In fact, ASCI has launched a short e-learning course for influencers, which can train them on disclosure requirements.

Further, the organisations should conduct a thorough internal review of its advertising processes and content to identify and rectify compliance gaps.

“Companies cannot absolve themselves by blaming fashion or skincare influencers for promoting their brand. They must ensure that all claims made by influencers are backed by the company's research proving product efficacy. Many times, companies pass the buck to their creative agencies if their brand communication goes awry,” highlighted Khanna.

Especially in the case of ‘house of brands’ such as Honasa Consumer, where multiple brands operate under a single parent company and each brand typically maintains its own identity and marketing strategy, this diversity can lead to challenges in maintaining consistent adherence to advertising standards across all brands. Thus, according to Khanna, it is important for organisations to create a framework that includes centralised oversight, standardisation of processes, check and balance measures, an advertising audit system, and primary research based on substantial fieldwork rather than using data designed to confuse and mislead consumers.