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Nirav Modi Scam: When brands damage the brand ambassadors, they have little to no recourse

28-February-2018
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Nirav Modi Scam: When brands damage the brand ambassadors, they have little to no recourse

Brand ambassadors have no recourse but to distance themselves from brands and companies that get embroiled in large scale scams like the ones that have come to light in the recent past.

The Advertising Standards Council of India puts the onus on brand ambassadors to verify that the ads they appear in make the right claims. Additionally, contracts indemnified celebrity brand ambassadors against any wrongdoing by brands. But fraud of the kind that is being investigated currently is not in the purview of the brand ambassador contracts. "A development of this kind can only be tackled through the legal route since it does not have anything to do with the product itself," said Shweta Purandare, Secretary General, ASCI.

In a highly litigious society like the US, compensation claims are routine. India on the other hand is nowhere close. Early reports said that actor Priyanka Chopra was contemplating suing Nirav Modi for non-payment of dues. But as it turns out, she has only terminated her contract with the jewellery brand. Kangana Ranaut and Bipasha Basu have distanced themselves from Gitanjali Gems accusing the promoter Mehul Choksi of not settling dues.

In such a scenario, when a brand ambassador does not sue the company for non-payment of dues, it is harder for the celebrity to demand damages. In an ideal scenario, actors like Priyanka Chopra, Kangana Ranaut and Bipasha Basu can wish for brands to pay them for the damage caused to them. But that's hard to implement in the Nirav Modi and Gitanjali Gems cases. "Distancing themselves from the brands immediately is the best first response," said Saurabh Uboweja, International Brand Expert and CEO Brands of Desire.

"Celebrities cannot expect to sue the company for damages especially in a scenario like the current one where the banks themselves are struggling to retrieve their money from the company/person in question," added Uboweja. "Sadly, the bankruptcy laws in India are very weak and not systematic. Once a company has gone belly-up, there is no hope," he further said. Similarly, even outdoor agencies that have unpaid dues from both Nirav Modi and Gitanjali Gems may write off the dues and not take the companies to court over it, say highly placed sources in the industry.

But N Chandramouli, CEO TRA, believes that celebrities of the scale of Priyanka Chopra should have legal recourse. "If a brand is accused and found guilty there must be recovery charges," he said. An incident like this really damages the brand image of the celebrity. He added that celebrities who are a level lower than the kinds of Chopra can demand a public disclaimer from the brand that the celebrity was not involved in the fraudulent activities.

The new and improved Consumer Protection Bill of 2018 would make it harder for celebrities to shirk responsibility for a misleading ad. Celebrities will need to verify claims before they sign up with brands. Celebrities should get into some degree of research and analysis about the brands they endorse, felt Ronita Mitra, founder and chief strategist, Brand Eagle Consulting. But she noted that the current incident could not have been foreseen by celebrities. "In the case of Nirav Modi, the product quality was not the issue," Mitra observed. "It was the functioning of the organisation, which in this case was beyond the purview and visibility of a celebrity."

"They can't get into the entire technicalities of product formulation/raw material or even the financials of a brand, beyond a certain point. In case of a private limited company or an entrepreneur, a lot of the information may not visible or transparent," said Mitra.

In such cases, "they need to ensure that the legal contract ensures an exit for them. This is important from the perspective of the consumers and the reputation of the brand ambassador," Mitra added.

It will be interesting to watch out if celebrities do sue the companies for non-payment of dues. If they do seek damages for harm caused to their reputation, the celebrities may even set a precedent in India.

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