18 January 2021
Social media has drastically changed advertising. Along with the more conventional forms of marketing, such as print, TV, radio, and pay-per-click ads, businesses are buying the influence of social media personalities.
Social media influencers could be a great way to promote your business online. However, before you begin advertising in this way, you must understand the rules.
While this form of advertising is not exactly new, it has been receiving a lot of attention from regulators in recent years. A number of countries have introduced new rules and tougher laws that control the relationship between businesses, online influencers, and their followers.
When operating online, you often have to meet the requirements of several different jurisdictions. In addition to obeying the law in the country in which your company is based, you must understand the advertising rules that protect your customers where they live.
TermsFeed is the world's leading generator of legal agreements for websites and apps.
TermsFeed Generators make it easy for you to generate the necessary legal agreements for your websites and apps:
With TermsFeed, you can generate:
For example, if a company based in the U.S. wants to market its mobile app to consumers in Canada and the UK, the company must obey three sets of rules.
Let's take a brief look at how advertising law is developing in some important markets worldwide.
The FTC Act (available here) is the most important law for businesses wishing to advertise to U.S. consumers. It empowers the Federal Trade Commission (FTC) to set and enforce rules around all forms of marketing, including the use of social media influencers.
Other regulators work alongside the FTC to enforce industry-specific laws. For example, the Food and Drug Administration (FDA) enforces rules around advertising of foods, cosmetics, and pharmaceutical products.
The FTC has stepped up its enforcement efforts in this area recently and has brought scores of cases against social media influencers and endorsers over the past two years.
In February 2020, the FTC began strengthening and formalizing its powers, stating that "misinformation is plaguing the digital economy" and warning that it will take "take bold steps to safeguard our digital economy from lies, distortions, and disinformation."
Canada's main advertising law is the Competition Act (available here), which is enforced by the Competition Bureau. In late 2019, the Competition Bureau launched a campaign targeting nearly 100 businesses using social influencers to ensure compliance with the Competition Act.
The Competition Bureau can impose significant penalties on those that violate the Competition Act, namely:
For a first offense:
For subsequent offenses:
In the UK, three public bodies regulate most marketing activities:
In recent years, these organizations have made significant efforts to raise awareness of the rules around using social media influencers. For example, in early 2019, the CMA secured undertakings from 16 high-profile celebrities to improve their social media marketing practices.
Considering the enforcement actions of regulators in all major markets, the lesson is clear: Advertising regulations apply to all types of advertisements, including endorsements made by influencers.
Our checklist combines the advice given by market regulators worldwide. It will help you stay on the right side of the law when using social media influencers to promote your business.
Although advertising rules vary between jurisdictions, certain practices are mandatory across practically all of them. Other actions are simply good practice and common sense, and they will help ensure that your business is operating in an honest and transparent way.
At every step, remember that your business is at least jointly responsible for the messages it solicits from social media influencers.
You aren't responsible for what everyone says about your company. Hopefully, there are plenty of people who will recommend your company purely because they are happy customers.
But there's a difference between a person who freely chooses to endorse your brand and a person whose endorsement your company solicits (whether you ask for it explicitly or through implication, e.g. by sending them a free product).
The key distinction here is the "material connection." The concept of a material connection is common to many jurisdictions, but the FTC Act provides a helpful definition:
According to this definition, is a link between your business and an influencer might qualify as a "material connection" if:
Many things can create a material connection, for example:
If you give or lend your product or service to a person, their endorsement of your company will qualify as a material connection. At this point, you will be engaging in advertising and, therefore, covered by advertising regulations.
If you have a material connection to an influencer, you must ensure that they disclose this.
Remember that this advertising model can take many forms, across many platforms, including:
One reason influencer endorsements can be so powerful is that they are not always easily identifiable as ads.
In fact, research into influencer advertising by polling company Ipsos Mori suggests that less than one-third of UK consumers felt confident in identifying influencer endorsements as ads.
All advertisers must clearly label any potentially ambiguous ads. To avoid accusations of deceptive or misleading advertising, you must ensure that influencers clearly disclose their material connection to your company.
There aren't many clear rules about what form a disclosure must take. However, regulators in most jurisdictions suggest several key principles.
Disclosures must be clear and unambiguous. For example:
Disclosures must be prominent. For example:
Consider the context in which the influencer is making a disclosure. If an endorsement takes place via video, the disclosure should be made within the video itself rather than (solely) in the description.
Here's an example from Twitter user @blushingnoir, who discloses a material connection to cosmetics company Biore:
Note that there are several disclosures here: #ad, #BiorePartner, and #BioreBabe. The latter two would probably be too ambiguous in isolation.
Remember that making knowingly false claims in advertisements is forbidden in most countries.
It seems obvious that your company cannot make false claims about the performance or effectiveness of its own products. However, many companies don't realize that the exact same obligations extend influencers.
False claims made by influencers can take several forms. For example:
You should take steps to ensure that influencers are not making false or misleading claims.
Many companies distribute their products for free in order to solicit reviews. You should ensure that the reviewer can provide an honest, good-faith assessment of your product. And remember that the reviewer must still make a disclosure, even if their review is critical of your product.
We've looked at the things that influencers must and must not do when endorsing your product. Your business may be jointly liable for the claims that influencers make on its behalf.
But how can you influence your influencers?
Creating a Social Media Policy is a great way to demonstrate to regulators that you have taken reasonable steps to ensure that influencers are promoting your business in a legally-compliant way.
Your Social Media Policy should provide all the information that influencers need to make a lawful disclosure to consumers in your target market. You should ensure that influencers have read and understood your Social Media Policy before endorsing your product.
Below is an overview of some key elements you should include in your Social Media Policy.
For a more detailed look, see our article Why You Need a Social Media Policy.
Influencers must understand the legal requirements that apply to their work promoting your brand.
Many advertising regulators, including the FTC (in the US), the Competition Bureau (in Canada), and the ASA (in the UK) provide market-specific guidance for businesses and influencers engaging in social media marketing.
You should provide influencers with links to the relevant regulatory guidance to help ensure they are aware of their legal responsibilities.
Here's how Nordstrom does this in its Guidelines for Endorsers Policy:
You should clearly explain what you expect from influencers. Base your guidelines on the advice of advertising regulators, and be specific.
It's particularly important to make influencers aware of the requirements around disclosures. It's best to be very clear about what text is acceptable, and where to place disclosures.
Here's an example from video game company Nexon:
Nexon provides helpful instructions about how influencers should disclose their material connections to the company across various channels.
As explored above, it's crucial that influencers do not make any false, misleading, or unsubstantiated claims about your company. Your Social Media Policy should make this clear.
Here's the relevant part of Fitbit's Social Media Policy:
Note the text in the red box: influencers must seek approval for any health claims they make regarding Fitbit's products. Given the strict rules around advertising consumer health products, this is a sensible policy.
Running an ad campaign using social media influencers could represent a great opportunity to promote your business. But you must ensure that you obey the rules.
To prepare for your influencer ad campaign:
Understand when you're advertising:
Ensure disclosures are clear:
Ensure endorsements are honest:
Create a Social Media Policy: