Introduction

Businesses depend on advertising as it helps them gain new customers while developing brand recognition. The development of competitive markets in Nepal has made misleading advertisements a major problem for consumers and brands.

Deceptive marketing practices damage both customer trust and the fundamental value of brand reputation and market reliability. The paper examines the legal systems that manage deceptive advertising within Nepal while assessing possible solutions for brand protection.

Meaning of Misleading Advertisement

Misleading advertisement is defined in the explanation to section 10 of the Competition Promotion and Market Protection Act, 2063 and it includes- promoting the market by making misleading or false advertisements about the warranty, benefits, characteristics, or durability of any goods or services.

Overall, it is an advertisement that contains false, misleading, or deceptive information or is likely to deceive consumers regarding the nature, quality, quantity, price, or other characteristics of goods or services, or the terms and conditions of their sale or provision.

Key Elements of Misleading Advertisement

Section 10 of the Competition Promotion and Market Protection Act, 2063 states as follows:

A business is considered to be engaging in misleading advertising if it:

• Publishes false or deceptive claims about the quality, quantity, or price of a product or service.
• Uses misleading promotions regarding warranties, benefits, or durability.
• Advertise in a way that unfairly harms the market position of competing products or services.
• Sells or distributes goods at a price higher than advertised.

Relevant Laws Governing Misleading Advertisement In Nepal

Few regulations govern misleading advertisements in Nepal. Some of them are as follows:

1. Advertisement (Regulation) Act 2076

The Advertisement (Regulation) Act 2076 maintains its position as the leading law that regulates advertising practices throughout Nepal. The regulatory system seeks to control deceptive ads for consumer protection and fair market competition.

Nepali advertising laws have undergone remarkable transformation starting from the initial establishment of the Advertisement Control Act in 1974 to adapt to contemporary media formats and evolving consumer preferences. The present regulations cover multiple advertising channels spanning print, broadcast, digital, and outdoor media.

The key focus of this act consists of:

• regulation of different forms of advertisement.
• authenticity and responsibility of the advertising agency and advertisement provider.
• The regulations limit what kind of content can be advertised.

2. Consumer Protection Act 2075

As per section 16(2)(b) of the act, the release of false and misleading advertisements is prohibited, it is deemed as an offense under section 38(f) and is punishable with prison up to 2-5 years or a fine of 4-6 lakh or both under section 40(3)(b)

Section 24 (d) deals with the functions, duties, and powers of the Consumers Protection Council. It agrees to inform or get the consumers informed regarding the price, quality, quantity, purity, and unfair trade activities of the goods or services.

3. Competition Promotion and Market Protection Act 2063

Section 10: Prohibition on misleading advertisement

No individual or business engaged in producing or distributing goods or services shall use misleading advertisements to manipulate competition. As a result, it focuses to:

• Prevents anti-competitive advertising practices
• Regulates comparative advertising
• Ensures fair market competition

How Misleading Advertisement Affects Brands

Brand reputation along with financial stability suffers critical damage when advertisers present false information about their products. The false promotional techniques that businesses employ often trick their customers at first but their trust in the brand erodes after the discovery of manipulations. This erosion of trust can lead to long-term harm, as word-of-mouth spreads and potential customers turn away.

Key Impacts of Misleading Advertisements on Brands:

• Loss of Consumer Trust: Customers expect honesty from brands. If they feel deceived, they are unlikely to return and may even discourage others from engaging with the business.
• Legal Consequences: Brands involved in misleading advertisements face legal actions, penalties, and fines under the Consumer Protection Act, 2018, and other relevant laws.
• Brand Devaluation: Once a brand is associated with deceptive practices, it becomes difficult to restore its image. Competitors may take advantage of the negative publicity.
• Financial Losses: Refunds, legal fees, and compensations can lead to significant financial burdens. Moreover, the loss of loyal customers impacts long-term revenue.
• Competitive Disadvantage: A brand that engages in misleading advertising may face backlash from competitors who uphold ethical marketing standards, leading to further market isolation.

To avoid these consequences, businesses should focus on transparent, ethical marketing practices, ensuring that advertisements accurately represent their products and services.

Key Laws for Brand Protection in Nepal

1. Patent, Design, and Trademark Act 2022

• Governs trademark registration and protection.
• Prevents unauthorized use of registered trademarks.
• Allows businesses to take legal action against counterfeiters.

2. Copyright Act 2059

• Protects creative works such as logos, brand content, and advertising materials.
• Prevents unauthorized reproduction and plagiarism, with penalties.

3. Electronic Transactions Act 2063

• ​​​With specific guidelines from the Nepal Telecommunications Authority, the act addresses digital brand protection, including domain name disputes and cyber fraud.

Regulatory Bodies Overseeing Advertising and Brand Protection

• Department of Commerce, Supply, and Consumer Protection: Handles consumer complaints related to misleading advertisements. Penalties include fines, mandatory corrections, and potential legal action against advertisers.
• Department of Industry: Manages trademark registration and brand protection.
• Nepal Telecommunications Authority: Provides specific guidelines to regulate online advertisements 
• Advertisement Board: Under the Ministry of Communications and Information Technology the board regulates advertising standards and ensures compliance.

Conclusion

Brand infringement and deceptive advertisements represent major hurdles that block successful business operations within Nepal. A robust legal framework combined with active regulatory bodies allows businesses to protect both ethical marketing practices and brand security. Specific compliance with advertising laws together with trademark registration and fair trade promotion will establish a trustworthy transparent business environment in Nepal.

Disclaimer

We hereby inform all the readers that this article is for information purposes only and should not be considered legal advice.

For further information or legal consultation, please contact us at info@apexlaw.com.np.