Cracking down on influencer #Ads

By Sharon Segal, Lili Meunier
27 May 2021
Brands which use influencers to promote their products and services on social media may find themselves in trouble if their relationship with the influencer is not disclosed to consumers.

Advertising culture has dramatically changed in recent years, with many brands expending significant budget on influencer marketing campaigns. In 2019, the advertising spend on influencers globally was around US$8 billion, with that figure set to reach US$15 billion by 2022.

Influencer marketing has become even more popular with the online shopping boom triggered by COVID-19 lockdowns. However, the line between sponsored advertising and personal endorsements is often blurred, making it incredibly difficult for consumers to distinguish between genuine endorsements and paid advertising.

Regulation of the advertising industry in Australia

The advertising industry in Australia is self-regulated under various codes administered by Ad Standards including the Australian Association of National Advertisers Code of Ethics.

Although these codes lack the force of law and carry no financial penalties for breaches, they are considered best practice for advertising. Complaints about breaches of the codes can be lodged by consumers with Ad Standards and are then considered by the Ad Standards Community Panel. Decisions made by Ad Standards are shared publicly, naming and shaming brands which breach relevant requirements of the codes.

A breach of an advertising code may also be one of the Australian Consumer Law. So far the ACCC has not taken any action against an influencer, but that could change.

A new requirement: clearly distinguishable advertising

In February 2021, the requirements of the Code of Ethics were tightened to require that all advertising is "clearly distinguishable as such".

Prior to this change, the requirement for clearly distinguishable advertising had a "relevant audience" test, which had the effect that influencer posts would be considered distinguishable as advertising if it was likely that the influencer's followers would understand that the post was likely made under a commercial arrangement, despite this not being explicitly stated. As influencer followers are generally aware that their followers have commercial arrangements with the brands they promote, the "relevant audience" test meant that influencer arrangements were generally able to avoid having to make express disclosure of the commercial relationship between the brand and the influencer.

The Practice Note which accompanies the Code of Ethics was also updated in February 2021 to provide guidance that:

“Where an influencer or affiliate accepts payment of money or free products or services from a brand in exchange for them to promote that brand’s products or services, the relationship must be clear, obvious and upfront to the audience and expressed in a way that is easily understood (e.g. #ad, Advert, Advertising, Branded Content, Paid Partnership, Paid Promotion). Less clear labels such as #sp, Spon, gifted, Affiliate, Collab, thanks to… or merely mentioning the brand name may not be sufficient to clearly distinguish the post as advertising."

Since the Code of Ethics was updated in February 2021, three brands have already have been found to be in breach of the requirement for clearly distinguishable advertising in section 2.7 of the Code of Ethics.

Runaway to an influencer breach

The first breach was an Instagram post by The Bachelor winner Anna Heinrich, who posted a photo of herself in a dress tagged with "Turning my apartment into a Runway, Then back to my PJs I go! Wearing: @runawaythelabel". The Ad Standards Community Panel found that while some followers may have understood that the post was paid advertising, there was nothing in the wording of the post or any hashtags which disclosed that the post was advertising material. The Panel found that tagging the brand on its own was not sufficient to clearly and obviously show that there was an arrangement in place between Runaway The Label and Heinrich.

… or Russian to two

The two other breaches involved Instagram posts by influencer Rozalia Russian. The first post featured Russian holding a bottle of Tom Ford perfume with the tag "summer in a bottle @tomfordbeauty"; the second featured two images of a pair of shoes being worn with the tag "Jordan 1 Quilt Low @doughstore". As with the Heinrich post, the Ad Standards Community Panel Panel found in each case that tagging the brand on its own was not sufficient to clearly and obviously show that there was an arrangement in place between the brand and Russian.

Interestingly in the case of the Dough Store post, Dough Store argued that it should not be held responsible for Russian's post because "We cannot control what a third party posts", "We also never paid miss Russian for any posts or stories", and "We sent her some items for free. She posts and tags all the brands she wears". It also indicated that it has now asked Russian to tag her posts with #gifted.

The Panel rejected these arguments and found that although there may not be a paid arrangement between Russian and Dough Store, Russian is a well-known influencer and Dough Store provided her with free product, presumably in the hope or expectation that she would post with the products – and that that would reasonably be considered to be advertising by Dough Store. It also noted that the fact Dough Store had asked Russian to tag her posts with #gifted indicates a relationship between Dough Store and Russian and that Dough Store does have some degree of control over what Russian might post.

Compliance 101: what do you need to do to avoid a breach?

Although the advertising codes are not law and compliance is voluntary, failure by an influencer to disclose their commercial relationship with your brand in compliance with the Code of Ethics could result in a determination of non-compliance by Ad Standards against your brand and give rise to negative PR. In some circumstances, it could also amount to a false testimonial or other misleading or deceptive conduct in contravention of the Australian Consumer Law (which is law!).

Accordingly, brands which use influencers to promote their products or services should ensure that their influencers disclose the commercial arrangement between them in a way that is acceptable to the brand and also complies with the requirement for clearly distinguishable advertising. Merely tagging the brand will not be enough. This applies to formal endorsement arrangements, as well as casual "gifting".

Where available, platform-specific advertising disclosure tools (eg. Paid Partnership on Instagram, Branded Content and Sponsored Posts) could be used to provide a clear and obvious disclosure of the relationship.

For platforms that use hashtags, brands should consider requiring their influencers to use the tags #Ad or #Sponsored, and additional hashtags such as #brandname, #campaign etc., #Ambassador, #Collab and #PaidPartner to convey the nature of the commercial arrangement in place.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.