Social media influencers – a mixture of risk and reward

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The use of social media influencers to promote products is on the rise. As digital advertising practices continue to evolve, the legal risks become more pertinent and must be proactively managed. While online content can be changed relatively quickly, damage can still be done in the short amount of time that a social media post is online due to its instant reach to thousands of viewers.

An ‘influencer’ is someone who uses their reputation to influence the purchasing decisions of their audience. They may provide a testimonial about a product or simply advertise it on a platform like Instagram. However, even when the business being promoted is not involved in the messaging, it raises potential liability issues, particularly if there is an element of gifting or paid promotion involved.

While New Zealand law does not require the use of hashtags such as #ad, the Advertising Standards Authority (ASA) enforces standards around misleading advertising and has recently released guidance for influencers stating that advertising content must be identified. While the ASA is a self-regulatory organisation and does not have the power to make orders or issue fines, influencers and brands face reputational risk in respect of adverse findings. These findings could also hold weight when determining whether an advertisement is misleading consumers under the Fair Trading Act 1986, where breaches can carry penalties of up to $600,000.

In a recent example, the ASA Complaints Board upheld two complaints against influencer Simone Anderson, making it very clear that non-disclosure of a sponsored post is considered misleading. Ms Anderson had not sufficiently identified that certain Instagram posts were in fact commercial endorsements. One of the posts was for an activewear brand and the second was for a hotel. Neither were controlled or guided by the businesses being promoted. Although Ms Anderson was not paid for the posts, it was concluded that compensation occurred in the form of free goods and commissions through an affiliate code, and the provision of free accommodation. The ASA found that both posts met the definition of “advertisement” and disclosure of the commercial arrangement was required. The ASA’s latest guidance recommends the labels ‘Ad’, ‘Advert’ or ‘Advertisement’ are used in the first interaction consumers have with the ad content, with or without hashtags.

While in these cases the complaints were made against the influencer rather than the businesses they were endorsing, in other countries regulators have taken a stricter approach and held both parties to be liable if the advertisement is found to be misleading. In order to avoid misleading consumers and causing damage to your brand, businesses should proactively manage how they engage with influencers, and likewise influences need to exercise caution when posting content.

Below are some helpful tips for both businesses and influencers

Key points for business

  • If you compensate an influencer to promote your business, whether or not you control the messaging, this is considered an advertisement and must be clearly identified as such from the outset. This includes the promotion of products, services, giveaways and discount codes. Compensation may be monetary but also includes provision of free product, services, credit, event tickets, travel, product loans, etc.
  • Ensure you provide influencers with guidelines on the claims they can and cannot make about the product/service as you may still be liable for content you did not prompt or approve.
  • Agree with the influencer how they will identify the content as an advertisement, as this is a joint responsibility. Consider whether you want this to be an informal or formal arrangement whereby you give final approval of the posted content if you want to maintain more direct control.
  • Consider the timing of the advertisement and platform or means by which the message is being conveyed and whether it adheres to other ASA guidelines.

Key points for influencers

  • If you are receiving any benefits to promote a business, this is considered an advertisement and must be clearly identified in consumers’ first interaction with the content. The ASA recommends using the terms ‘Ad’, ‘Advert’ or ‘Advertisement’, with or without hashtags. This must be OBVIOUS, CLEAR, PROMINENT, UPFRONT and separate from other disclosures, hashtags or links.
  • Label each separate post and segment that contains the relevant advertisement.
  • You can used other identifiers to clarify the nature of the advertisement such as #ambassador or #freetrial, but these should be in addition to and after the Ad/Advert/Advertisement label.
  • This includes the promotion of products, services, giveaways and discount codes. Compensation may be monetary but also includes provision of free product, services, credit, event tickets, travel, product loans, etc.
  • If you are being compensated to endorse a product/service, you must have genuinely used it.
  • Make sure any testimonials you give are accurate, factual and adhere to any guidelines or product statements issued by the company in question.