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Advertising in Metaverse & Legal framework around it

With the advancement of technology, the need for innovative advertising methods has begun to emerge in order to meet the demands of consumers and stand out among competitors. Nowadays, social media has become a key part of everyone’s lives, and businesses have begun to recognise this, resulting in the innovative concept of Metaverse Advertising.
Note: This article mentions statutes relating to Indian Jurisdiction
Legal Framework vis-à-vis Advertising
Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 were developed by the Central Consumer Protection Authority (CCPA). Misleading advertisements, bait advertisements, and imitation advertisements, among other things, are brought under the purview of these guidelines, and violations result in heavy fines. The guidelines require brand ambassadors, service providers, and endorsers to exercise appropriate due diligence in order to avoid making misleading claims when advertising products or services.
In addition to this, the Advertising Standards Council of India (ASCI) came out with The Code for Self-Regulation in Advertising. This Code essentially gains enforcement from the aforementioned Guidelines, and contains a number of criteria for advertisements. ASCI has noted that in today’s world, a dual strategy of online as well as offline advertising is the way forward.

Misleading Promotions
Misleading claims essentially, make the consumers believe that they are getting a more profitable deal than the one that the organisation actually is offering. To understand the concept, one can look at the recent Bored Ape Yacht Club Phishing Attack that happened in the Metaverse, where the users were asked to link their MetaMask wallets to the website, which then scammed the users., a non-profit website based in the United States, conducted an investigation into the Metaverse advertising scene, where it was discovered that brands are using Meta Guidelines in a way that tricks users into becoming a part of the interactive world these brands create on Metaverse, and essentially spending a lot of time and money interacting with the various avatars, AI-controlled bots, and whatnot on the Metavers. In web3, consideration is given not only to the two-dimensional aspect of things, but also to the entire three-dimensional aspect of things, including the audio-visual experiences that depict the brands and products, and the mind should be kept open to identify any misleading claims made by such influencers and brands.

Metaverse Influencers
Influencer advertising has already gained traction in the social media sphere, with brands beginning to collaborate with social media influencers to promote their products. A Metaverse version of the same has also recently emerged. These Metaverse influencers are essentially fictional bot avatars with realistic features and behaviour. These bots behave similarly to any other human-controlled avatar, but they are actually controlled by computers and are used to advertise brands in collaboration with influencers. For example, an influencer working with Nike recently received compliments on the Nike gear his avatar was wearing in the Metaverse. People interacting with this avatar would be subconsciously pushed to buy Nike gear, without even realising that a brand influencer was using the Metaverse for the same purpose.
To get around this problem, brand influencers on Metaverse should be required to disclose their paid partnerships with brands, just like they are on other social media platforms. A person interacting with the avatar of a paid promoter would be aware of this fact and could then consciously choose to buy or not buy whatever is being promoted.

Celebrities and Metaverse
Despite the fact that the Metaverse is a relatively new phenomenon in the virtual world, celebrities have begun to use it. Daler Mehndi, the legendary Indian singer, recently purchased land in the Metaverse and held a concert there. The ASCI also has Guidelines for Celebrities in Advertising, which basically require celebrities to do proper due diligence and take any necessary precautions when promoting any goods or services on the Metaverse. Such celebrities’ advertisements should be free of deception and should depict exactly what the brand they are endorsing has to offer, as well as their true and current opinion on the goods or services being advertised.

Virtual Digital Assets
Blockchain technology has enabled exponential growth in trade and commerce by facilitating the purchase, sale, and ownership of digital assets. This is what elevates Metaverse above the rest of the social media platforms. The ASCI has also issued Guidelines for the Advertising and Promotion of Virtual Digital Assets and Services, which deal with unregulated currency exchanged on the Metaverse. The guidelines require Metaverse advertisers dealing with Virtual Digital Assets (VDAs) to post a disclaimer warning users about the unregulated market of crypto and NFTs, and how a loss therein cannot be reversed through legal recourse.

Privacy Issues
Consent is also a top priority in the Metaverse. The meta-influencers can see your avatar in the Metaverse, but do they have your permission? The privacy laws in place in various countries must include Metaverse inclusivity, which essentially limits the unsolicited interaction of brand avatars on Metaverse with normal users without their consent. Cross-country interactions on Metaverse necessitate international data and privacy standards.

As a result, Metaverse advertising, as a relatively new platform, requires regulatory mechanisms to be in place in all jurisdictions around the world. When interacting with advertisements on Metaverse, phishing can be a major issue, which is made even more dangerous by the irreversibility of blockchain transactions. Certainly, proper guidelines will be put in place to govern the situation.

About Author:
Mudit Kaushik is currently a Partner at Verum Legal, Delhi. Mudit works directly with several startups, and large corporations and his practice focus on IP portfolio management, domain name disputes, IT laws, IP-related customs enforcement and white-collar crimes.

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