Mahadev App Investigation & The Extent Of Liability Of Celebrity Endorsements



Celebrity endorsements have long been an integral part of the marketing strategy for various different businesses. The concept is simple, to effectively use the celebrity’s image and popularity in order influence the public at large to consume the product being advertised.


As we know, betting, gambling or any game of chance is prohibited under the law in India which essentially means that endorsing a game of chance (including surrogate advertisement) is prohibited. However, celebrities are often found to be endorsing online gaming platforms on the basis of representations from the advertiser that the gaming platform being endorsed does not constitute a “game of chance”. Companies operating illegal betting websites are often found to operate different websites under same or similar trade names for other purposes like news broadcasting, permitted online gaming (games of skill) etc., effectively with the intent of surrogate advertising of the game of chance.


In various judgements, Rummy, Poker, Fantasy Football and Horse Racing  have been deemed as games of skill. A ‘game of skill’ is one where success depends principally upon superior knowledge, experience, adroitness and capabilities of the player. Whereas in a ‘game of chance’ stakes fall within the ambit of the respective laws of the state and is largely prohibited. When a game includes both elements of “skill” and “chance”, courts have opined that the element “skill” or “chance”, whichever is more dominant shall determine the character of the game. Under Indian laws, game of skill is not a prohibited activity, and such games may be advertised.


Mahadev Online Betting App is one such gaming app which allows its users to gamble on various games such as poker, card games, chance games, badminton, tennis, football, and cricket. The platform also offers card games like “Teen Patti”, poker, “Dragon Tiger”, and virtual cricket games, among others. People can also bet on elections in the country. The officials of the Directorate of Enforcement, in their investigation found that while users made profits initially, they began losing huge sums in the long run.


The aforementioned gaming app has come under Enforcement Directorate’s (ED) scanner for allegedly supporting online platforms that enable illegal betting websites and for it’s alleged involvement in large scale money laundering. According to the probe by ED, celebrities were paid by the promoters of Mahadev App for endorsing their gaming platform and such payment comes under the category of proceeds of the crime. These gaming platforms have been endorsed and promoted by the celebrities on various social media platforms and in advertisements.


As per ED, summons issued to celebrities under the Mahadev App scam case are in the nature of an inquiry against the proceeds of crime. “Proceeds of Crime” means any property obtained by any person as a result of a criminal activity. Various questions arise for consideration in this case – Will the remuneration received by celebrities for performing at an event or endorsing a product without knowing the legitimacy of the source of payment amount to proceeds of crime? Will the celebrity be liable for such endorsement even if it was done under the bonafide belief of endorsing a “game of skill”? What was the level of due diligence expected from celebrities in a case like this? The answers to all these questions will unfold as the inquiry proceeds.


Recently, there has been a particular rise in popularity of online gaming and betting applications which has directly led to increase in celebrity endorsements in the said sector. Moreover, as the Indian gaming market is expected to grow at the Compound Annual Growth Rate of around 30%, it is highly likely that there will be a proportional increase in celebrity endorsements in this sector. Celebrity endorsements or advertisements in general, as they directly affect the consumers/users, are regulated by the Consumer Protection Act, 2019.


The Central Consumer Protection Authority (CCPA) in 2022, had issued Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements for Prevention of False or Misleading Advertisements. The CCPA has the authority to impose penalty for false or misleading advertisements which may range from INR 10,00,000 to INR 50,00,000 fine or prohibition of the endorser from endorsing any goods or services for a period of one year to three years or both. These penalties can be imposed on both the endorser and the advertiser. The laws clarify that no endorsements use shall be penalized if he/ she has exercised due diligence to verify the veracity of the claims made in the advertisements regarding the products or services being endorsed by them. Although, celebrities may be misguided or facts may be misrepresented to them about the products or services being endorsed only to procure their services in the place, but one must appreciate that it is in the interest of the concerned celebrity in the long run to conduct due diligence before endorsing a particular product. No amount of financial gain can replace the reputation that any celebrity puts at stake while endorsing a product.


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