Jacob Schindler

Nestlé faces a major brand crisis in India after the country’s food safety regulator labelled the popular Maggi line of instant noodles “unsafe and hazardous” and ordered the product pulled off shelves. Although it is challenging the ban in the high court, the Swiss company is said to be preparing to destroy $50 million worth of inventory after the Food Safety and Standards Authority of India (FSSAI) banned the noodles for containing unacceptable quantities of lead. Authorities also accused the company of misleadingly labelling the noodles as containing “No Added MSG”. In an interesting twist, unconfirmed reports say three Indian celebrities who have served as brand ambassadors for Maggi have been named in legal actions against the company, raising the question of whether endorsers can be held liable for misleading claims in advertisements.

There are multiple overlapping legal cases surrounding the scandal, and conflicting reports as to which lawsuits, if any, have named the brand ambassadors as defendants. But while we cannot report with certainty the specific details of the charges, all three figures are already being tried in the court of public opinion, and that could have implications for celebrity endorsement deals throughout India and beyond.

According to one report, a Mumbai NGO called the Watchdog Foundation filed a criminal action against Nestlé after the Maggi safety concerns became public. The lawsuit named nine directors of Nestlé India as well as three past and present brand ambassadors for Maggi – Amitabh Bachchan, Madhuri Dixit and Preity Zinta. All three are Bollywood stars and household names in India. While Bachchan claimed not to have received any such notice from the government, consumer affairs ministry secretary G Gurucharan told the Times of India that celebrity endorsers “would be liable for action if the advertisements are found to be misleading”.

Article 53 of India’s Food Safety and Standards Act, 2006 states that any person who is party to the publication of an advertisement that “falsely describes any food or is likely to mislead as to the nature or substance or quality of any food” may be fined up to 10 lakh rupees ($15,600).

That sum likely pales in comparison to the value of the endorsement deals in question, but the three stars will no doubt be concerned about damage to their reputations. Both AMITABH BACHCHAN and MADHURI DIXIT appear to be registered as trademarks in India, and according to Shailendra Bhandare of Khaitan & Co, the value of those personality rights may be affected: “Any future endorsements they make may create a doubt in the consumer’s mind as to whether these claims are true or not. To that extent, the goodwill and reputation of the name trademarks is likely to get diluted if these claims are indeed ‘false and misleading’”.  

Bhandare notes that the furore could have an effect on celebrity endorsements of products, with brand ambassadors thinking twice before endorsing any claims: “To tread with caution, brand ambassadors should foresee these issues and do their due diligence, at least by having a representation in the endorsement contract that the claim made by the company is approved and found to be true by appropriate government authorities.”  

Whether this is a fair burden to place on brand ambassadors is up for debate. “In my view, it’s a bit harsh”, says Bhandare. After all, he points out, the company gets government approval for a food product before marketing the product through the ambassador. If an item has been sanctioned by regulators, why should the would-be endorser assume that it might be unsafe?

Such issues are likely a new fact of life for star spokespersons. And it presents something of a no-win situation: the more involved they are in the ad creation process, the likelier they are to be judged liable for the claims they make onscreen.

At the very least, celebrities will likely want guarantees that an advertisement is not misleading, and that if it is found to be, the brand will bear the responsibility. Bachchan alluded to having such an agreement with Nestlé, telling the Times of India: “I even put a clause in my contract where I said that I hope you people defend me, legally, if something happens."

As for the damage to the Maggi and Nestlé brands, we will probably have to wait until the dust settles to judge. Though it is complying with the ban, the company has steadfastly maintained that its product is safe to eat, and has lodged a judicial review in the Bombay High Court seeking to clarify the government’s testing methods. Meanwhile, regulators in Singapore have concluded that the noodles pose no health hazards, while the US FDA is set to conduct its own inquiry. With an 80% share of the instant noodles market in India to protect, the company has a lot at stake.

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