INFLUENCERS AND ADVERTISING

2nd July 2021

Internet, Social media, For private clients, For corporate clients

INFLUENCERS AND ADVERTISING is the first in our upcoming series on influencers and the law. Future articles will cover topics such as influencer liability and intellectual property matters.


Influencer advertising takes a significant share of advertising spend, especially in sectors such as beauty, luxury and others, but also of general fast-moving consumer goods. The child Youtuber Ryan Kaji was reported to have had sales of some US$30m directly from his YT channel “Ryan’s World” on which he was unwrapping and reviewing toys, while separate merchandising operations by the entrepreneur resulted in further US$200m of sales.  

In a piece on the Chinese market, a recent article by Yuan Yang, Social media influencers help Chinese brands outfox foreign rivals  found that:

Young Chinese consumers … expect a sophisticated ecommerce experience. When buying a lipstick, they might first watch an influencer promote it on Douyin, … then switch to social media platform Xiaohongshu for reviews from professional beauty bloggers before finally buying it on Alibaba’s Taobao after consulting customer feedback and photos.

However, audiences struggle to distinguish paid for promotion from the influencers’ organic content, expressing independent opinions on the products they are reviewing (report). 

Consumer and protection of competition laws then oblige influencers to disclose paid promotions. 

This article contains an overview of what counts as promotion or advertising and offers tips on how influencers can properly mark advertising, ensuring transparency for their audience.

Signposting: Advertisement vs organic content 

Influencers are required by law to disclose when advertising and, therefore, must provide clear indicators or signposts of which content includes paid promotion. Appropriate disclosure messages may vary, but should always appear instantly with the promotional content. 

In general, sufficient indicators might include: 

  • Visual marks on video content such as ‘ad’, ‘advertisement, ‘advert’, ‘paid promotion’ etc in watermarked in the content 
  • Voiceover in audio or video content such as ‘this segment is a paid promotion’ or ‘is paid for by’. Voiceover announcements can complement a visual mark in video content but should not replace it and are more likely to be sufficient warning to consumers in audio-only content 
  • In all cases, the signposts must be in a language or signifier understandable to the target audience.

Indicators that may be insufficient include:

  • Signposts such as ‘in association with…’, ‘sponsored by…’, ‘thanks to…’, ‘made possible by… ‘, “affiliate links” or any abbreviations or signifiers consumers are unlikely to be familiar with like, ‘aff’ or ‘sp’.

In addition to making the statement that discloses the nature of the content, influencers and brands must ensure that the communication is visible and prominent:

  • Hashtags hidden in a large number of hashtags or behind a ‘read more’ button are likely to be deemed insufficient.
  • The mark, signifying advertisement should be visible without the need to engage with the post. The viewer should be able to tell the content includes advertising when scrolling through their feed (with social media that use the feed structure)
  • The mark must be visible on all posts that include references to the paid promotion. For example, influencers posting sequencing stories, comprising ads, are obliged to indicate each story that it includes paid promotion.

EU law and national variations across the EU  

According to the EU Unfair Commercial Practices Directive (UCPD), a trader is obliged to disclose the commercial nature of a practice if it is not otherwise apparent from its context. Influencers come within the requirements of the UCPD when they engage in their work as a business.

Social media accounts may also qualify as a so-called “information society service” in EU law if they or their owners support themselves by advertising. This means they are also within the ambit of the E-Commerce Directive.

Neither the UCPD nor the E-Commerce Directive provides requirements on the wording of disclosures and it is up to Member States to legislate.

While consumer law obligations for influencers and brands are broadly similar across the EU, there are important national variations, particularly in potential sanctions in failure to adhere to domestic regulation. 

For example, Bulgaria’s sanctions are considerably lesser than France and Italy’s as presented below: 

 

Possible sanctions for failure to adequately disclose paid promotion Likely sufficient labels
Bulgaria  Fines between BGN 500 and BGN 30,000 and reputational damage  #реклама (#аd) #спонсорирано (#sponsored), #безплатни мостри (#free samples), #в партньорство с/ in partnership with; combined with #[brand name]

Social media in-build branded content disclosure option (e.g. Instagram)

Italy  Italian law requires a high standard of transparency. 

Influencers and brands can both face fines of up to 5 million EUR.

However, a first offence is likely to result in an order to cease-and-desist and take down content

“pubblicità”, “promosso da…” (promoted by …), at the start of each post. 

Hashtags such as: “#pubblicità”, “#sponsorizzato” or “advertising”, followed by the name of the brand.

France Brands can be fined up to 3 million EUR  

Influencers can face up fines of up to 300,000 EUR and two years of imprisonment

Order to cease-and-desist and take down content

“publicité” (advertising), “sponsorisé par” (sponsored by), “en partenariat avec” (in partnership with) included at the beginning of each post 

 

What counts as advertising requiring appropriate disclosure?

Influencer advertising is broader than simple marketing for a fee. It includes cases when:

  • Influencers receive free products, services, licences or ‘gifts’ from a brand, even if received without prior agreement (barter or exchange)
  • Influencers promote their own products, services or events (direct selling) 
  • When affiliate marketing

Affiliate marketing

Affiliate marketing is generally content which a promoter (the affiliate) uses to digitally market products and services for which the promoter receives revenue-associated payment. 

Usually, there is a hyperlink or a discount code, allowing the affiliate to get paid by the promoter for every ‘click through’ or sale associated with the affiliate’s content. 

Affiliate links are a form of advertising and therefore you should aim to follow the same disclosure standards for affiliate marketing as for all other marketing included in your content. 

Key takeaways 

  • Influencer advertising falls under the same consumer law regulation as traditional advertising.
  • Transparency is key. Influencers must ensure paid advertising is properly disclosed as such with their audience.
  • In the EU there is some national variation in which labellings are sufficient and possible sanctions for failure to adhere to local law. Sticking to labels such as “ad”, “advertising” and “paid promotion” as well as the local language equivalent is the safest way for influencers and brands to protect themselves against sanctions.

 

This article is also available at Lexology.com

© New Balkans Law Office 2021

The Bulgarian and dual-qualified lawyers of New Balkans Law Office are regulated by the respective Bar of their registration. New Balkans Law Office is a brand name of Legal Services EOOD, a company registered under Bulgarian law. Reg’d No. 202331677. Further details are available here.

© New Balkans Law Office 2021