Social influencers and how to manage the risk to consumers

  • Opinion

    24 October 2019

Social influencers and how to manage the risk to consumers Desktop Image Social influencers and how to manage the risk to consumers Mobile Image

An increasing number of companies are shifting away from traditional advertising methods and recruiting “influencers” to advertise products to their social media followers.  The new marketing technique brings with it new consumer protection concerns where the underlying commercial intent of an influencer’s post is not disclosed.

While New Zealand has not yet seen enforcement action in the social influencer space, it is looming, as signalled by the Commerce Commission (NZCC) and the NZ Advertising Standards Authority (ASA) at the 2019 Competition Matters conference:

“Advertising where influencers don’t acknowledge that what they are advertising is paid for content is likely to be a breach of the Fair Trading Act as well as the ASA [Code] and fines could be imposed”.

New Zealand businesses can take valuable learnings from:

a) The ASA’s February 2019 Guidance Note on Identification of Advertisements.

b) Action taken by international regulators including:

i) The September 2019 “Influencers Guide” published by the United Kingdom’s ASA and Competition Market’s Authority (CMA).

ii) The US Federal Trade Commission’s (FTC) endorsement guide.

Guidance from New Zealand Regulators

In February 2019 the NZ ASA released a Guidance Note on Identification of Advertisements.  The Note provides further guidance on rule 2(a) of the ASA Code “Identification – Advertisements must be identified as such, regardless of the medium used to distribute it.” The Note makes clear to NZ businesses that “when the_brand has control over the content [posted by an influencer] it is an advertisement and it must be identified as such.”

Failure to disclose this advertiser controlled content may leave a brand at risk of a complaint to the ASA and a breach of the ASA code.

However, in some instances the engagement is authentic, where influencers post a genuine opinion.  For example where the influencer is reviewing a free product and the advertiser has no right to approve the content of the post, that is not likely to be an advertisement.

The Guidance further identifies that while all parties to an advertisement have a responsibility to ensure that advertiser controlled content is clearly identified, usually it is the advertiser of the brand who has primary responsibility for compliance with the ASA code.

Guidance from United Kingdom Regulators

In September 2018, the UK’s ASA, in collaboration with the CMA released a guide to help social influencers “stick to the rules” by making clear when their posts are ads.

The Influencer’s Guide notes that labels such as “Ad” or “Advertisement” are less risky than labels such as “In association with” or “Thanks to [brand] for making this possible”.  However, the main thing to remember is that disclosure needs to be obvious.  Any label used to highlight the ad needs to be:

a) upfront (before people click or engage);

b) prominent (so people notice it);

c) appropriate for the channel (what can you see and when?); and

d) suitable for all potential devices (it needs to be clear on mobile too).

The release of the guide follows the ASA’s project on the labelling of online ads to ensure its standards are effective.  It also follows ASA action in relation to a number of influencer posts and an investigation recently launched by the CMA that looks into whether influencers are properly declaring when they have been paid or otherwise rewarded, to endorse goods or services.

Guidance from the United States FTC
The FTC’s revised endorsement guide

The FTC’s endorsement guide, updated in 2017, reiterates that an endorsement must reflect the honest opinion of the influencer and can’t be used to make a claim that the products marketer couldn’t legally make.

In addition, if there’s a connection between an influencer and the advertiser that consumers wouldn’t expect and would affect how consumers evaluate the post, that connection should be disclosed.

The Guide also addresses ads that feature endorsements from people who achieved exceptional results.  If the advertiser doesn’t have proof that the endorser’s experience represents what people will generally achieve using the product as described, then that particular ad must make clear to the audience what the generally expected results are.

Our view

Guidance from New Zealand and overseas suggests that when using paid-for social influencers, the best ways for businesses to manage risks to consumers are to:

a) Implement robust agreements between your business and your influencers that require them to clearly disclose a connection between your business and the influencer.

b) Ensure that your agreements require influencers to label their posts with “#Ad” or “#Advert” upfront (before consumers click or engage); in a prominent place; that is appropriate for the channel; and suitable for all devices.

c) Train and Monitor influencers. Implement a compliance programem for influencers to follow, that teaches them what disclosures need to be made when.  Enforce the compliance programme.  Monitor the posts of the social influencers that your business engages with.

What’s next?

If you have any questions or want to understand more about how the above issues are relevant for your business, please contact one of our experts.