Influencer Marketing: There Is More Than Meets The Eye!! – Media, Telecoms, IT, Entertainment

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 1. 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 2.

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:














Parameters

Governing Bodies

Relevant Legislations/Guidelines Requirement regarding clearly identifiable
disclosure
Hashtags/labels advised to be used Responsibility of compliance Sanctions/Penalties

USA

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.

UK

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.

EU

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

And


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.

UNITED STATES

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’
3 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:

  1. Placing the disclosure in a manner so that it is hard
    to miss
    e. 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;

  2. Using simple and clear language to describe
    the nature of relationship such as “thanks ______ for the
    free product”;

  3. Using terms ‘advertisement’, ‘ad’ or
    ‘sponsored’ when posting;

  4. Using hashtags such as #ad #advertisement and #sponsored to
    further evidence the paid relationship, though not necessary;

  5. Using platform’s disclosure tools (where
    available) in addition to your own disclosure;

  6. Talking about experience with a product only after personal
    use;

  7. 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
4.

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 5.

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 6.

UNITED KINGDOM

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) 7
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:

  1. Using labels such as ‘ad’, ‘advertisement’,
    ‘advertisement feature’ etc. at the beginning of the
    post;

  2. Ensuring the labels are easily visible and do not get lost in a
    sea of hashtags;

  3. 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.

EUROPE

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.

Belgium

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:

  1. Receipt of compensation by the Influencer; and

  2. Advertiser/brand’s control over content

Additionally, the Recommendations require the brands and
influencers to ensure that the posted content:

  1. 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.;

  2. 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
).

France

The Autorité de Régulation Professionnelle
de la Publicité (ARPP)
is the regulatory body for
advertising in France. ARPP’s Digital Advertising and
Marketing Code 8
provides a framework for all
advertising and marketing communications in France.

The applicability of the Code depends upon fulfilment of the
following requirements:

  1. Whether the brand/advertiser has some editorial control of the
    post;

  2. Whether the influencer is being compensated in return;

  3. 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:

  1. That marketing communications and advertising are
    clearly distinguishable ;

  2. 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.

Spain

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.

Germany

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.

Netherlands

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.

Italy

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.

Australia

The Australian Association of National Advertisers
(AANA)
has implemented a set of rules, namely the
Code of Ethics 9, 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
10 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
11:

  1. Include their failure to respond in their case report;

  2. Forward the case report to media proprietors;

  3. Post the case report on Ad Standards’ website; and

  4. If appropriate, refer the case report to the appropriate
    Government agency

India

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
12
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:

  1. 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.

  1. 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;

  1. 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;

  1. 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;

  1. 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;

  1. 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 13
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.

Parting thoughts

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.

Related Posts

Social Media Influencer – Legal
Implications

Influencer Marketing Social Media- Misleading
Advertisements Draft Guidelines

Footnotes

1 https://entrepreneurship.babson.edu/what-is-influencer-marketing/

2 https://www.grandviewresearch.com/industry-analysis/influencer-marketing-platform-market

3 https://www.ftc.gov/system/files/documents/plain-language/1001a-influencer-guide-508_1.pdf

4 https://mediakix.com/blog/ftc-influencer-marketing-violations-cases-history/

5 https://www.truthinadvertising.org/exposure-without-disclosure-cashing-kardashians/

6 https://www.sec.gov/news/press-release/2018-268

7 https://www.asa.org.uk/uploads/assets/uploaded/3af39c72-76e1-4a59-b2b47e81a034cd1d.pdf

8 https://www.arpp.org/nous-consulter/regles/regles-de-deontologie/digital-advertising-and-marketing-communications-code/

9 https://aana.com.au/wp-content/uploads/2020/09/AANA_Code_of_Ethics_PracticeNote_Effective_February_2021.pdf

10 http://aana.com.au/content/uploads/2017/01/AANA_Distinguishable-Advertising-Best-Practice-Guideline__Final.pdf

11 https://sociallawco.com.au/influencer-marketing-in-australia-how-to-avoid-legal-issues/

12 https://asci.social/guidelines

13 https://ascionline.in/index.php/how-to-complaint.html

For further information please contact at S.S Rana &
Co. email: [email protected] or call at (+91- 11 4012 3000).
Our website can be accessed at
www.ssrana.in

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.