Home Business Hands off hot topics, e-commerce firms tell endorsers

Hands off hot topics, e-commerce firms tell endorsers


When an e-commerce company was looking to hire local brand ambassadors for Diwali promotions in north and central India, the contracts had a curious clause: The ambassadors would be prohibited from making any political statements that could hurt people’s sentiments and bring disrepute to the company. The celebrities would also be liable for any revenue loss due to such statements, said a lawyer who was involved in the negotiations.

Many e-commerce companies have begun to impose stricter conditions on celebrities and influencers endorsing their brands to prevent potential harm from their comments on sensitive matters, people aware of the matter said.

Contracts often feature a clause that if the actions of the celebrity adversely impact the company, it will have the power to claim damages from the brand ambassador.

Legal experts say the damages provision is intended to act as deterrent. In the past, there have been instances wherein political comments made by actors impacted the brands they were endorsing.

“Consumers have a tendency to relate the brand to the celebrity endorsing the brand and any unintentional missteps can cause huge goodwill loss,” said Swati Sharma, head of Intellectual Property practice at Cyril Amarchand Mangaldas. “Companies are conducting thorough due diligence on celebrity tie-ups as celebrity behaviour, allegiance, success and conduct often reflects on their brand endorsements,” said Sharma.

To be sure, even companies from other sectors do insist on such clauses; however, the trend is more prevalent in e-commerce, say experts. This is because e-commerce employs a number of social influencers and upstart celebrities who are not familiar with the nuances of public messaging. Also, e-commerce companies have faced severe blowbacks in the past with disgruntled users running social media campaigns to uninstall their apps.

India’s top 19 e-commerce startups spent 7,215.83 crore on advertising, promotions and marketing in FY22, an Inc42 analysis said, adding such expenditure is seeing a double-digit growth.

Still, it may be difficult for the companies to invoke such clause. This is because to claim damages, the company will have to show the actual financial impact due to the actions of the celebrity like how much sales dropped or how many users shifted to other platforms due to the comments made, say legal experts.

“It is not surprising that companies want to insert indemnity clause to protect their commercial interest. However, any damage claimed will have to be justified on cause-effect theory, which will not be easy to establish,” said Ruby Singh Ahuja, senior partner, Karanjawala & Co.

In countries like the US, such clauses are common as the contracts impose a range of good behaviour obligations on celebrities, say experts.

“When advising the company client, we strongly advise the need for such clauses as that keeps ‘bad behaviour’ in check, and when advising the celebrity, we sensitise them of the need and unavoidability of such clauses,” said Ashlesha Gowariker, senior partner, Desai & Diwanji. “As the Indian market grows, and as celebrities become commodities for the company client, such clauses are becoming increasingly used in contracts.”

Apart from damages, companies are using two other kinds of clauses to ensure they are safeguarded — an indemnity clause which requires the celebrity to indemnify the company for any losses he or she may cause; and a ‘moral clause’ which provides the right to terminate the contract if the celebrity indulges in any immoral or unethical behaviour.

Brands facing criticism and calls for boycotts on social media for perceived offences are also asking creatives and marketers to avoid subjects such as religion and politics that have the potential to offend.

At the same time, agencies are looking more closely at the history of the actors taking part in ads and any controversies they may have been involved with.

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Updated: 07 Nov 2023, 11:42 PM IST

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