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Legal obligations for social media influencers

By Claudette Yazbek

Brands are increasingly turning to social media influencers to promote their product or service. However, consumers may find it difficult to distinguish between a genuine post and a paid endorsement. These endorsements undoubtedly influence consumers’ purchasing decisions, and a lack of transparency about the commercial relationship can mislead consumers. So, when must an influencer disclose a sponsored post?

What does the law say?

Sections 18 and 29 of the Australian Consumer Law (ACL) prohibit businesses from making false or misleading claims or statements. These provisions apply to testimonials and reviews. For example, a business may risk misleading consumers if they offer an influencer a financial incentive to craft a social media post for a service they have not used and the post is indistinguishable from other genuine posts.

In July 2016, the International Consumer Protection Enforcement Network (ICPEN), of which Australia is a member, released guidelines for digital influencers. The ICPEN states that digital influencers should clearly and prominently disclose paid-for content. “Paid-for” extends beyond financial incentives and includes free clothing and tickets to events.

The guidelines also encourage digital influencers to say no to non-compliant businesses (i.e. those who ask for paid-for content without disclosure).

Regardless of the medium, any review or testimonial should reflect the person’s genuine views and opinions. Importantly, influencers, their creative agencies and businesses should ask whether the post’s overall impression is false or inaccurate.

For example, Australia Post’s use of social media influencers attracted scrutiny in 2014 after talent management agency, Moda Creative, paid Instagrammers on Australia Post’s behalf but failed to disclose the financial incentive. A caption accompanied some of the images celebrating the convenience and cost of the MyPost service while Instagrammers were depicted posting and collecting parcels.

Fake reviews and testimonials contravene the ACL, regardless of whether they are online or in traditional advertisements. The ACCC then advises prominent disclosure of any commercial relationship when posting and publishing reviews.

Who is responsible for disclosing the endorsement?

As yet, there are no cases in Australia providing definitive guidance on influencer marketing and who is responsible for disclosing the endorsement. However, we can take some guidance from the Federal Court’s decision in Australian Competition and Consumer Commission v Australian Medical Institute Pty Ltd [2006] FCA 1066.

The Court held that the Australian Medical Institute’s advertisements in major newspapers featuring a well-known entertainer were misleading and deceptive. The ACCC claimed the advertisement falsely represented that AMI’s nasal delivery spray had cured him of erectile dysfunction.

Importantly, the ACCC brought an action against three parties: AMI, AMI’s public relations and publicity consultant (Philip Somerset) and the entertainer. The Court held that Mr Somerset, an ad agent for AMI, knew the ads were untrue yet still authorised their publication.

As such, AMI and Mr Somerset contravened section 52 of the Trade Practices Act 1974 (now section 18 of the Australian Consumer Law) and were ordered to pay the ACCC’s costs. The decision is a warning to advertising agencies who prepare and publish ads on their clients’ behalf.

Agencies are taking steps to acquaint influencers with the importance of disclosure and transparency. Digital marketplace, TRIBE, which connects social media influencers and brands, requires influencers to clearly disclose any commercial relationship through the use of hashtags.

Their Terms and Conditions further state that they can review and monitor disclosure practices and reserve the right to remove influencers from the platform who don’t agree to the required levels of disclosure.

However, as influencer marketing is self-regulated, it can be difficult to enforce these terms.

How can businesses avoid falling foul of the ACCC?

It’s not illegal to pay social media influencers provided third parties are aware of the endorsement. Businesses and bloggers should disclose any commercial relationship in clear and unambiguous language (for example, through the hashtags #sponsored or #advertisement).

What constitutes sufficient disclosure ultimately depends on the platform – consumers must be able to reasonably ascertain the advertisement is sponsored. It is perhaps unlikely that #sp or #ad will do the trick.

Businesses should have an agreement in place with their influencer requiring them to disclose payment and monitor compliance on a regular basis. Digital agencies and influencer marketplaces should also educate influencers about their obligations to publicly disclose paid endorsements.

Claudette Yazbek is LegalVision’s Communications Manager and lawyer. She has a keen interest in startups, and writes extensively about the legal, political and business challenges they face.

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