The Competition and Markets Authority (CMA) recently launched an investigation into concerns that social media stars are not properly declaring when they have been paid, or otherwise rewarded, to endorse goods or services.
Such endorsements are referred to as “influencer marketing”. This type of advertising is typically incorporated amongst non-advertising content and can be difficult for consumers to identify. The CMA are concerned that consumers are;
“…more likely to place trust in that product, as they think it has been recommended by someone they admire. They might not do so, however, if it was made clear that the brands featured have paid, or in some other way rewarded, the celebrity in return for endorsement.”
Relevant law
There is a variety of law relevant to the subject matter of the CMA’s investigation.
The UK Code of Non-Broadcast Advertising and Direct & Promotional Marketing (CAP Code), enforced by the Advertising Standards Authority (ASA), sets out that:
“Marketing communications must be obviously identifiable as such.”
If a business is not compliant with the CAP Code it risks being investigated by the ASA. The outcome of the investigation will be published on the ASA website (whether found in breach or not) and can affect a brand’s reputation.
After an investigation, the ASA may issue advice on how to comply with the CAP Code or seek assurances from those found to be in breach to change or withdraw an ad immediately. The ASA also has the power to refer non-compliant businesses to Trading Standards.
Trading Standards and the CMA enforce the Consumer Protection from Unfair Trading Regulations 2008, which outlines a number of banned practices, including:
- Using editorial content in the media to promote a product where a trader has paid for the promotion and not made this clear in the content or by images or sounds which can be identified by the consumer.
- Falsely claiming or creating the impression that the trader is not acting for purposes relating to his trade, business, craft or profession, or falsely representing oneself as a consumer.
Trading Standards and the CMA have a number of enforcement powers available to them, including; fines, criminal prosecution, confiscation of financial assets and injunctions.
Next steps
It will be interesting to see if the CMA investigation will result in new guidelines or enforcement against influencers not complying with the law. An update to the investigation is expected at the end of 2018.
In the meantime, businesses are advised to make sure that any influencer marketing is clearly identifiable as an advertisement. Any agreements in relation to influencer marketing should also make it clear which party is responsible for compliance with the law, and may also contain detailed guidance.
Gustaf Duhs