In February 2019, BBC’s Panorama investigated the use of digital influencers in the advertising industry and the impact this new form of advertising is having on consumers.  Leveraging what is dubbed the “Wild West” of misleading and unregulated advertising, the modern-day megastars of YouTube, Snapchat, and Instagram promote everything from diet pills to online gambling.

Brands have embraced the use of influencers and many young people seeking fame and fortune promote themselves heavily in the hope of being spotted by big business to promote their products.

Legislation failing to keep up with innovation is nothing new.  The Data Protection Act 2018, passed on the back of the EU General Data Protection Regulations, replaced legislation which had not been updated for 20 years.  In less than half that time, the way data was used by business changed exponentially, thanks to social media (Facebook and Twitter became available to the public in 2006) and the ubiquity of the Smartphone.  Companies are therefore caught between a rock and a hard place when it comes to playing by the rules in the digital age; they must compete by doing what the competition does (but better) and navigate murky laws and moral boundaries which are constantly shifting beneath marketing manager’s feet.

 

How social media influencers can help companies sell their products

Any expert in sales will tell you the number one rule of selling has nothing to do with mastering a fancy close or building a formidable pipeline.  Of course, these aspects of the sales process are important, but people buy from people they like.  And to like someone, you must trust them.

Trust in advertising has never been lower.  In a 2017 survey on the global state of consumer trust in advertising, 83% of people found online ads disruptive and lumped them in the same category as fake news.  According to the report:

“Print ads still reign for the most trusted form of advertising (shame they can’t save newspapers), with 82 percent of people saying they’re the most trustworthy for making purchasing decisions, with TV coming a close second at 80 percent.”

When it comes to digital advertising, search advertisements are deemed the most trustworthy, with 61% saying they positively influence buying decisions.

Investing in social media influencers is a powerful tool for marketers because by letting followers into their everyday lives, the influencers have already built trust.  And this trust is not simply with a few hundred or even a thousand people.  Top influencers have millions of followers around the globe.  Talent agencies have sprung up to connect brands to social media stars who can reach a massive audience simply by wearing or using an organisation’s product in everyday life.  The influencer advertising industry is said to be worth around £4 billion worldwide and is growing rapidly.

 

Regulators take action

In early 2019 the Competition and Markets Authority (CMA) warned social media influencers that if they failed to follow guidelines and make it clear when they were being paid to promote a product or brand, they could face prosecution and risked heavy fines or even imprisonment.

The warning followed an investigation by the CMA.  The Advertising Standards Authority (ASA) launched its own investigation into influencer marketing at the same time and in January 2019, it issued hundreds of warnings relating to the breaking of paid partnership rules.

 

The current rules relating to influencer advertising

The ASA has provided guidance for influencers on what they must do to ensure followers are clear about whether or not they are viewing a paid post which qualifies as an advert.

The CAP Code, enforced by the ASA, applies to most forms of influencer marketing, as does consumer protection legislation, such as the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) which is enforced by the CMA.

A post will qualify as an advertisement if the brand:

  • Pays the influencer (this could be in money or ‘freebies’, and
  • Has editorial control over the content, including final approval.

If content has been paid for and the brand has some form of editorial control, it must be clearly labelled as such by using hashtags such as #ad or #sponsored.  These must be displayed clearly at the beginning of the post, not buried in amongst a plethora of other hashtags at the end.

Even if the brand makes a gift to the influencer without a requirement that a specific post must be made featuring the contents of the gift, the fact that the product is in fact a corporate gift must be declared if it appears within the influencer’s social media content.   The influencer could use #freebie to ensure followers/viewers are not misled.

Influencers must also be vigilant in declaring a commercial relationship and/or sponsored content on every individual post.  Simply stating that a commercial relationship is in place in their profile is not enough to reach compliance.

 

In summary

The law surrounding advertising and social media influencers remains in its infancy, and both influencers and brands need to tread carefully, seeking expert advice to ensure compliance.  One key factor which causes confusion is that of jurisdiction.  If a British company works with an influencer based abroad, the ASA may not have jurisdiction to investigate.  However, this does not mean the enforcement authority in the influencer’s home country cannot launch an investigation into possible compliance breaches.

To find out more about online advertising and influencer marketing compliance issues, you can instruct me directly.

 

Tanveer Qureshi is a Legal 500 barrister, specialising in ASA compliance, business to business fraud, health and safety, food standards, civil litigation, and corporate crime.  If you require legal representation, please contact on 020 3870 3187.

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Tanveer is a specialist in criminal and regulatory law. He has been recognised by the Times Newspaper as a legal star of the future and ranked in Legal 500 as a recommended barrister. Tanveer writes regularly on topics ranging from financial crime to regulation and terrorism law.