By Lucy Rana and Deepika Shrivastav
Influencers on social media are a new concept in advertising that takes the concept of ‘word of mouth’ to a commercial level. When ‘word of mouth’ recommendations/reviews of a product are broadcast over a social media platform simultaneously to hundreds or thousands, or even more people, then ‘social media influencers’ are born. Influencers now impact our consumer decisions more than we realize- like it or not, if we’re honest, we will admit that we have all been ‘influenced’ by someone into buying a consumer product at least once in our life.
The growth in technology and easy access to high-speed and affordable internet services has opened new doors for brands to advertise their products. Brands are now rethinking traditional advertising practices and moving towards marketing strategies, like ‘influencer marketing,’ which are more in-tune with our current social media obsessed times.
‘Influencer marketing’ is a form of marketing conducted over various social media platforms that entails endorsements made by people, organizations, and/or groups seen as influential or experts in a particular field. The global influencer marketing platform market size was valued at USD 7.68 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 30.3% from 2021 to 2028.
INFLUENCER MARKETING- NEED FOR REGULATION
Several brands have been seen exploiting this newer grey area in the marketing dynamics by wanting the influencers to portray their products in a manner that creates an impression that the product being spoken about is just an honest recommendation. It is therefore imperative that regulations are put in place so that consumers’ interests are protected and they are able to differentiate between whether the product being advertised to them by their favourite influencer is an outcome of an organic recommendation, or is in fact a commercially promoted/sponsored product.
In a bid to safeguard consumer interests and to make influencer marketing more transparent to all parties involved, various jurisdictions have set up regulatory bodies and passed guidelines and regulations to govern the influencer marketing industry and its practices.
A brief analysis of the codes of practice followed by some of the jurisdictions is provided below:
|Relevant Legislations/Guidelines||Requirement regarding clearly identifiable disclosure||Hashtags/labels advised to be used||Responsibility of compliance||Sanctions/Penalties|
|The Federal Trade Commission (FTC)||Disclosures 101 for Social Media Influencers||Yes||‘Ad’, ‘Advert, ‘Paid partnership’, ‘Sponsored’||Advertiser/Brand as well as the Influencer||Non-compliance may attract enforcement actions or civil lawsuits such as orders to cease and desist, with fines up to $43,792 per violation, Injunctions by federal district courts. Violations of some Commission rules also could result in civil penalties of up to $40,654 per violation etc. Further, violations of court orders could result in civil or criminal contempt proceedings.|
|The Advertising Standards Authority (ASA), The Committee of Advertising Practice (CAP)
The Competition and Markets Authority (CMA)
|UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code)||Yes||‘Ad’, ‘Advert, ‘Paid partnership’||Advertiser/Brand as well as the Influencer||Non-compliance may attract withdrawal of membership from trading bodies, adverse publicity spotlighting mal-conduct on the ASA’s official website etc.|
|Belgium – Belgian Advertising Council,
Jury of Ethical Advertising
France – Observatory of French Advertising
Self-Regulatory Organization (ARPP)
Spain – Advertising Code of Conduct published by AUTOCONTROL and The Spanish Advertisers Association (AEA)
The National Competition Commission Authority (CNMC)
|Belgium – Recommendations of the Advertising Council concerning Online Influencers, Belgian Code of Economic Law
France – ARPP Code, ICC Code on Advertising and Commercial Communications
Spain – Code of Conduct on the Use of Influencers in Advertising
Each country has its own specific guidelines/rules
|Yes||‘Ad’, ‘Advertisement’ ‘paid partnership’ etc. to be used in languages peculiar to each country||Varies from country to country. However, mostly both Advertiser/Brand as well as the Influencer are responsible||Contravention of law may attract cease and desist/take-down notices, imposition of fines etc. Criminal sanctions for unfair market practices may be applicable in grave cases and cases of repeated offences.|
|AUS||The Australian Association of National Advertisers (AANA), The Australian Competition and Consumer Commission (ACCC)||AANA’s Code of Ethics
Best Practices Guidelines
|Yes||‘Ad’, ‘Advert’, ‘Advertising’, ‘Branded Content’, ‘Paid Partnership’, ‘Paid Promotion||Advertiser/Brand only||Contravention of the applicable guidelines and code of ethics may attract pecuniary penalties.|
|IND||The Advertising Standards Council of India (ASCI),Central Consumer Protection Authority (CCPA)||Influencers Advertising on Digital Media Platforms||Yes||‘Ad’, ‘Advertisement’, ‘sponsored’, ‘collaboration’, ‘free gift’ etc.||Advertiser/Brand as well as the Influencer||Contravention of guidelines may attract impositions of penalties such as a fine to the tune of INR 10, 00, 000 and an imprisonment term for two (2) years.
In cases of a subsequent violations, the fine as well as the term of imprisonment may be further increased to INR 50, 00, 000 and five (5) years respectively.
The Federal Trade Commission (FTC), the consumer protection body in the United States, is responsible for handling issues pertaining to influencer marketing in the country. In order to address the rising concerns with regard to influencer marketing, in 2019, the FTC issued a set of guidelines ‘Disclosures 101 for Social Media Influencers’ which discusses in detail the rules to adhere to when engaging in influencer marketing and how the influencers as well as brands engaging influencers can stay on the right side of the law.
The guidelines primarily call for a clear representation of a ‘material connection’ with the brand by making a legible and hard to miss disclosure in the endorsed content.
A ‘material connection’ with a brand includes a personal, family, or employment relationship or a financial relationship – such as the brand paying you or giving you free or discounted products or services.
Some of the key elements of the FTC guidelines include:
- Placing the disclosure in a manner so that it is hard to misse. disclosure is to be placed in the endorsement message itself and not to be mixed into a group of hashtags or links. For picture and video content, superimpose disclosures on picture and video itself;
- Using simple and clear language to describe the nature of relationship such as “thanks ______ for the free product”;
- Using terms ‘advertisement’, ‘ad’ or ‘sponsored’ when posting;
- Using hashtags such as #ad #advertisement and #sponsored to further evidence the paid relationship, though not necessary;
- Using platform’s disclosure tools (where available) in addition to your own disclosure;
- Talking about experience with a product only after personal use;
- Desisting from making claims about a product that the brand/advertisers will not be able to provide
While at present there appears to be lack of clarity as to the penalties imposed on brands and influencers found non-compliant with the FTC guidelines, the regulatory body is looking to review the Endorsement Guidelines to include stricter punishment and civil liability.
It is however pertinent to mention that the FTC has in the past taken several brands and advertisers to court on account of misleading advertisements and failure to disclose.
Some of the earliest cases filed against influencers and brands for non-compliance with the FTC guidelines are discussed below:
In The Matter of Deutsch LA, Inc.
In 2014, the FTC had filed a complaint against Sony and its advertising agency, Deutsch LA. According to the complaint, a member of Deutsch LA had sent an email to employees asking them to tweet about the PS Vita using the hashtag #GAMECHANGER. The email, however, did not make a mention of a requirement on the part of employees to disclose their relationship to Deutsch LA or Sony. According to the FTC, Deutsch’s failure to disclose that tweets were from employees of Sony’s ad agency was deceptive. That matter was eventually settled with Sony agreeing to the FTC’s terms to give buyers $25 in cash or $50 in merchandise credits.
In the Matter of Lord & Taylor, LLC
In March 2016, the FTC filed a complaint against the clothing brand Lord & Taylor on account of deceptive marketing and non-disclosure of paid advertisement posts on Instagram. The clothing brand was said to have engaged and paid over 50 fashion influencers between $1,000 and $4,000 each to promote a certain dress. As a part of the deal, the Influencers were to put posts on Instagram wearing the dress and tagging the brand using specific hashtags. However, the influencers were not directed to disclose that the Instagram posts were commercially motivated advertisements.
In the Matter of Kardashian/Jenner Family
In 2016, an American advertising watchdog agency Truth In Advertising (TINA.org) sent a letter to the Kardashian/Jenner family notifying the family that more than 100 of their Instagram posts were in contravention of the guidelines laid down by the FTC as they failed to disclose that they are paid advertisements. The Kardashian/Jenner family was provided a week’s time to take corrective measures failing which TINA.org threatened to file a complaint with the Federal Trade Commission.
However, the Kardashian/Jenner tribe took note of issue and rectified or deleted about 58 percent of the 130 examples catalogued by TINA.org in their notification letter and edited about one-third of the posts to include #ad at the start of the post.
In the Matter of Floyd Mayweather & DJ Khaled
In 2018, renowned boxed Floyd Mayweather and a music composer DJ Khaled were seen promoting Centra Tech’s initial coin offerings on their various social-media accounts. However, the promotional posts failed to disclose that both Mayweather and Khaled are being paid for the same. Interestingly, instead of the FTC, the U.S. Securities and Exchange Commission took note of the failure in disclosure of promotional payments and filed charges against both Khaled and Mayweather.
The Advertising Standards Authority (ASA), the Committee of Advertising Practice (CAP) and the Competition and Markets Authority (CMA) are the regulatory bodies responsible for the management of influencer marketing and misleading advertising in the United Kingdom.
The ASA in September, 2010 released the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) which were later extended to cover online marketing, including influencer marketing. The CAP code is far more complex in comparison to its American counterpart and differentiates between varied forms of paid/sponsored advertisements such as, affiliate marketing, advertorials etc.
However, principally, the guidelines are more are less similar to the FTC Guidelines and the requirement for representation of any commercial association in an obvious manner remains common in both.
Much like the FTC, some of the more vital recommendations of ASA include:
- Using labels such as ‘ad’, ‘advertisement’, ‘advertisement feature’ etc. at the beginning of the post;
- Ensuring the labels are easily visible and do not get lost in a sea of hashtags;
- Only making claims about a product if the same can be backed up
Notably, the guidelines/rules applicable to certain categories of products, such as, food products, health supplements, alcohol etc. are more complex than others and require a higher level of adherence.
As regards the complaints raised for non-compliance with the CAP Code, as a preliminary measure, the ASA looks into the complaint and attempts to resolve it informally by providing adequate guidance and advice to the parties involved. However, the ASA may go on to conduct investigations in a few cases, while keeping the parties in loop throughout the investigation process. Once the ASA has made an assessment, the ASA Council (the independent jury responsible for deciding whether or not the rules have been broken) will make the final decision, or ruling, which is also published on their official websites.
After the ruling is passed, the party responsible is required to change or remove the objectionable content, failing which, CAP’s sanctions may be invoked. This includes, withdrawing membership from trading bodies, adverse publicity spotlighting mal-conduct on the ASA’s official website (https://www.asa.org.uk/codes-and-rulings/non-compliant-online-advertisers.html), to name a few.
The law regulating influencer marketing in Europe, while fundamentally the same, varies slightly from country to country, especially in the severity of potential sanctions. However, the disclosure requirements are essentially the same, i.e. if the influencer receives compensation or free/discounted products for their posts, the content must be labelled accordingly by use of relevant labels/hashtags such as #ad, #spon/sponsored, #promotion placed in a manner that is easy to identify.
Notwithstanding the fact that every country within the European Union has its own regulatory framework relating to social-media advertising and influencer marketing, all nations in the European Union are to adhere to the regulations laid down in the General Data Protection Regulation i.e. an all-encompassing unifying regulation that ensures that the laws governing data privacy are the same in all 28 member countries. The GDPR controls how brands, service providers, organizations, and marketers use the data and personal information of EU citizens.
Additionally, the applicability of the GDPR is not dependent on the location of the brand/marketer or where their business is located but is instead affected by whether their target audiences include members from the EU countries. This makes being aware of the GDPR mandatory for influencers whose subscriber base is not restricted to one continent.
On October 08, 2018, the Belgian Advertising Council published the ‘Recommendations for Online Influencers’. The Recommendations are targeted towards promoting consumer protection by clearly distinguishing whether the content posted online is an ‘honest review’ or an ‘advertisement’.
The applicability of the Recommendations envisages fulfilment of the following conditions:
- Receipt of compensation by the Influencer; and
- Advertiser/brand’s control over content
Additionally, the Recommendations require the brands and influencers to ensure that the posted content:
- Clearly identifies the business relationship between the brand and the influencer by use of identifiable disclaimers and markers such as “sponsorship”, “advertisement”, “promotion” or by use of hashtags such as #ad, #spon etc.;
- Makes use of simple language in the disclaimer and places disclaimers, hashtags, markers in a hard to miss manner
An influencer found not fulfilling the requirements laid down under the Recommendations will be held for its violation. The complaints emanating from non-compliance will be brought before The Jury of Ethical Advertising (Jury voor Ethische Praktijken inzake Reclame/Jury d’Ethique Publicitaire).
The Autorité de Régulation Professionnelle de la Publicité (ARPP) is the regulatory body for advertising in France. ARPP’s Digital Advertising and Marketing Code provides a framework for all advertising and marketing communications in France.
The applicability of the Code depends upon fulfilment of the following requirements:
- Whether the brand/advertiser has some editorial control of the post;
- Whether the influencer is being compensated in return;
- Whether the posted content includes some kind of a ‘promotional message’
However, even in cases where the advertiser/brand has no control over the content and/or the influencer is not ‘promoting’ the product, the influencer is required to clearly indicate the nature of commercial relationship with the brand.
Amongst other things, the Code requires:
- That marketing communications and advertising are clearly distinguishable ;
- Labelling of the posts using French terms such as “publicité” (advertising), “sponsorisé par” (sponsored by), “en partenariat avec” (in partnership with) at the beginning of the post;
Sanctions include imposition of fines on both parties, cease and desist notices, removal and/or rectification of posts, publication of instances of mal-conduct in press and/or official websites resulting in reputational damage etc.
Content amounting to promotion of a product is liable to be labelled accordingly and improper labelling may be considered misleading. Additionally, like other EU countries, the requirement pertaining to clear and legible labelling of posts finds application in Spain as well. The posts are required to be labelled with terms such as “Publi” or “Anuncio” (“Ad” or “Advertisement”) at the beginning of the post.
In case of non-adherence, both influencers and brands could face a range of civil actions, including orders for take-down/rectification of content, imposition of fines etc.
In Germany, if the influencer receives compensation or a free product, the content must be labelled to signify such association. The influencers are required to use clear German terms “Werbung” or “Anzeige” (advertisement) at the beginning of the post and use of English terms such as “sponsored partnership” is not likely to be considered sufficient.
Punitive measures include serving of cease and desist notices requesting removal/rectification of posts, imposition of penalties, reputational damage etc.
If the influencer receives pecuniary compensation, the posts must be labelled accordingly. The influencer may use markers, indicators or statements notifying the public that the post is commercially motivated and that user discretion is advised. Influencers are advised to use terms such as #spon (sponsored), #paid, #adv (advertisement) or #promotion etc. at the beginning of the post.
The potential sanctions for misleading advertisements include imposition fines, request for taking down/rectification of content etc.
The Italian Competition Authority has laid down common rules of practice which require the influencer and the brand to make the advertorial nature of content apparent. If the influencer receives compensation or free or discounted products for posting on social-media, the content must be labelled accordingly. Influencers are encouraged to use terms, markers, hashtags such as “pubblicità”, “#pubblicità”, “#sponsorizzato” (or “advertising”), “promosso da…” (promoted by …) at the beginning of the post.
Ramifications of misleading advertisement and inadequate disclosures include imposition of fines, request for deletion/rectification of posted content etc.
The Australian Association of National Advertisers (AANA) has implemented a set of rules, namely the Code of Ethics, that govern all advertisers and marketers who promote brands, products and services.
Section 2.7 of the Code of Ethics requires advertising and marketing communication to be clearly distinguishable to the relevant audience, this includes using appropriate markers (such as #ad, ‘Advert’, ‘Advertising’, ‘Branded Content’, ‘Paid Partnership’, ‘Paid Promotion’) to indicate that the posted content is in fact a part of a commercial/business association.
AANA has also issued a Best Practices Guidelines for marketers and advertisers identifying what may be considered as acceptable marketing practices and what brands should steer clear of.
It is however worth noting that the AANA Code of Ethics exempts influencers from the responsibility of complying with the Code and notes that it is the responsibility of the advertiser – the brand owner who has control over the relevant material and whose products or services are being promoted. The AANA Codes does not apply to the broadcaster or publisher (influencer) unless they are acting as advertiser for their own products or services.
Non-compliance with the Code of Ethics is to be reported to Ad Standards – AANA’s independent, transparent and robust complaints handling system, which will then investigate the complaint. If the complaint is upheld and the advertiser fails to remove or amend the offending communication, Ad Standards will:
- Include their failure to respond in their case report;
- Forward the case report to media proprietors;
- Post the case report on Ad Standards’ website; and
- If appropriate, refer the case report to the appropriate Government agency
The Advertising Standards Council of India (ASCI), a voluntary self-regulatory organisation committed towards protecting consumers’ interests in India through self-regulation in advertising, is responsible for regulating influencer marketing in India.
The ASCI on May 27, 2021, released guidelines for ‘Influencers Advertising on Digital Media Platforms’ which are scheduled to come into force from June 14, 2021. The Guidelines mandate influencers to make disclosures identifying that the posted content is an advertisement and is commercially motivated. Much like its foreign counterparts, the Guidelines also delineates the manner in which the disclosures are required to be made, the labels to be used, the criteria to be applied while determining whether disclosures are required or not amongst other things.
The key elements of ASCI’s Guidelines are summarily discussed below:
- Criteria for determining the need for disclosures: Disclosure is required if there is any material connection between the advertiser and the influencer (material connection isn’t limited to monetary compensation), disclosures are required even if the evaluations are unbiased or fully originated by influencer, so long as there is a material connection between advertiser and influencer.
- The disclosures must be upfront and prominent so that it is not missed by consumers of average intellect – the disclosure should not be placed in a manner that’s hard to miss, should not be buried in a group of hashtags, use of the platform’s inherent disclosure tool is encouraged in addition to an influencer’s own disclosure;
- The disclosure must be made in a manner that is well understood by an average consumer – Influencers are encouraged to use a list of acceptable disclosure labels, the language used in disclosures must either be English or the language used in the advertisement itself;
- The Guidelines provide for specific disclosure requirements for video and audio content such as duration of appearance of disclosure for video content as well as the placement of disclosure announcement in respect of audio content;
- Virtual influencers are additionally required to disclose to consumers that they are not interacting with a real human being. This disclosure must be upfront and prominent;
- Responsibility of disclosure of material connection and also of the content of advertisement is upon the Advertiser for whose product or service the advertisement is being aired, and also upon the Influencer.
Consequences of Non-compliance with ASCI Guidelines on Influencer Marketing
While the Guidelines do not specifically mention the complaint redressal mechanism, ASCI’s official website provides for filing complaints in case of non-adherence to ASCI Guidelines. The complaints may be made via phone or through ASCI’s website.
In addition to the ASCI, the Central Consumer Protection Authority (CCPA) created under the new Consumer Protection Act, 2019, is also responsible for handling complaints related to violation of consumer rights as a result of misleading advertisements. The CCPA can direct the offending party/individual to discontinue a misleading advertisement or modify it and impose penalties such as a fine to the tune of INR 10, 00, 000 and an imprisonment term for two (2) years. In cases of a subsequent violations, the fine as well as the term of imprisonment may be further increased to INR 50, 00, 000 and five (5) years respectively.
The regulatory framework pertaining to influencer marketing, including the ASCI Guidelines, appears to be comprehensive enough to address the current requirements pertaining to misleading advertisements. However, how the Guidelines fare on actual implementation and how prepared the governing bodies are to handle complaints will have to be seen once the Guidelines come into force from June 14, 2021.
For successful implementation of the guidelines, both influencers as well as advertisers will have to work hand in hand to ensure that all necessary steps towards adherence with the Guidelines are being taken. The brands should ensure that their engagement agreements clearly enunciate disclosure requirements and that the influencers comply with them. Further, the influencers in return should object to any directives from the brands that conflict with the ASCI Guidelines.
Additionally, digital platforms like Instagram, Facebook, YouTube etc. should endeavour to highlight, improve upon and create in-built disclosure mechanisms which can further aid in increasing transparency. These platforms may also consider developing technology that recognises whether the post being made contains a paid advertisement and should prevent the creator/influencer from posting the same without fulfilment of appropriate disclosure requirements.
Lastly, ASCI along with the CCPA should conduct periodic compliance checks to monitor the level of adherence with the Guidelines and stricter sanctions should be adopted in cases of repeated defaults.