The life of an influencer seems too good to be true - constant gifts, infinite creative possibilities and the ultimate freedom to choose what you want to work on. Similarly for brands, engaging influencers as part of a marketing strategy can appear to be a relatively simple, inexpensive and effective exercise.
However, governments around the world are increasingly scrutinising and regulating influencer engagements. This can make the industry confusing to navigate.
Two of the key areas of regulation are:
- Influencer disclosure obligations; and
- Taxation
In this article, our focus is on disclosure obligations. Stay tuned for a separate article on the tax treatment of influencer engagements (including gifts).
Industry Regulation – What is it?
Australia has adopted a system of industry self-regulation to monitor marketing communications, including influencer content.
The main regulatory code is the AANA Code of Ethics, which is administered by Ad Standards, and applies to all influencer engagements, regardless of media or the product being advertised.
It’s a voluntary system, where any member of the public can complain that an ad is in breach of the Code of Ethics, and Ad Standards will consider the complaint based on prevailing community standards and publish its findings.
While it’s a voluntary scheme, advertisers tend to comply with the determinations of Ad Standards and take it seriously. There are costs associated with amending or removing advertising, and there are reputation issues to consider in relation to adverse determinations. Ad standards can also pass on its findings to government regulators.
Are Influencer Posts Advertisements?
In short, yes!
The Code of Ethics defines “advertising” broadly to include any activity undertaken on behalf of an advertiser which the advertiser has control over, and which is designed to promote a product.
What Are the Requirements?
Under section 2.7 of the Code, advertising and marketing communication is required to be clearly distinguishable as such.
For influencers, this means posts need to be disclosed as advertising, not dressed up as organic posts or editorial. Also, ads should not be camouflaged as news, current affairs, independent market research, user-generated content, private blogs or independent reviews.
What About Gifting? Do the Same Rules Apply?
Again, yes!
Recent Ad Standards determinations indicate that in most situations, if a brand gifts a product to an influencer, and the influencer chooses to post about the gift on their social media platform, that will constitute advertising and the influencer must disclose the relationship with the brand.
This can be the case even if there is no contract, and no direct request or instruction by the brand. For example, last year Ad Standards determined that La Mer breached section 2.7 of the code in circumstances where it had gifted influencer Rachelle Rowlings a product without specifically engaging her to post about it. The influencer subsequently posted an Instagram story featuring an image of the product and the text “thank you @lamer family [heart emoji]”. The post was reported for its ambiguity as to whether a commercial relationship existed between the influencer and La Mer. La Mer argued that since the influencer was not obliged to post about the gift, that it was not in fact advertising, despite having provided a written note accompanying the gift stating:
“Thank you for your love of la mer! We remind you to disclose in each post that you’ve received this complementary gift to ensure full transparency to your followers. #GiftedbyLaMer”.
The Panel deemed the lack of a formal commercial or contractual agreement to be inconsequential and emphasised La Mer’s motivation in providing the gift to the influencer could reasonably be assumed to be to get the influencer to post about it.
Ad Standards found that in this instance the advertiser had a reasonable degree of control due to the reality that the decision to “gift” something to an influencer was commercial in nature.
While it is certainly debatable in some instances whether a brand actually does have a reasonable degree of control over an influencer, absent any instructions or contractual relationship, brands and influencers need to take a cautious approach given the Ad Standards position.
How do I Clearly Disclose the Commercial Arrangement?
Merely mentioning the brand name in the post is unlikely to be sufficient to clearly distinguish the post as advertising according to Ad Standards, particularly if the post could be interpreted as organic rather than commercial.
Interestingly, it is also unclear whether the use of “#FreeGift” is sufficient to establish the nature of the post, notwithstanding that it might be the most accurate explanation of the nature of the transaction.
Instead, when disclosing that something has been gifted, influencers should use one of the following hashtags in the caption of the post (not the comments):
“#Ad; #Advert; #Advertising; #PaidPartnership; #PaidPromotion; or #Sponsored”.
The below hashtags may not be sufficient and are not recommended:
“#sp, Spon, gifted, Affiliate, Collab, thanks to”.
Government Regulation – The ACCC Sweep
Until 2023, the ACCC had been pretty quiet about all of this.
While fines have historically been dished out when public figures made misleading and deceptive claims in advertising (Ian Turpie fans see here) we hadn’t seen any specific enforcement or commentary on influencers.
That changed this year, first with the announcement of an influencer sweep and then with the publication of the sixth interim report of the Digital Platform Services Inquiry.
The report found that four out of five influencer posts either failed to disclose advertising ties or may be otherwise misleading under the Australian Consumer Law.
The ACCC has flagged that various education, compliance and potential enforcement activities will follow.
The possible penalties under the Australian Consumer Law are significant. The maximum pecuniary penalty for individuals who breach the ACL is currently sitting at $2.5 million, and for corporations, it is the greater of $50 million, three times the value of the “reasonably attributable” benefit obtained if able to be determined by the Court, or 30% of the corporation’s adjusted turnover during the breach turnover period for the offence.
What if I gift product to a journalist or public figure, are they influencers?
Well, it depends. Great news for lawyers!
The term “influencers” has been interpreted broadly in practice and includes any person who has an audience or who can influence the thoughts or actions of others.
Brands will need to be vigilant with undertaking due diligence on their recipients of gifts. Just because the recipient doesn’t fit the usual mould of an influencer, doesn’t mean they won’t be classified as an influencer. Advertisers should consider: Does the person have a following? Are they in a position of influence? Have they posted about other products in the past? What type of post from the recipient is the brand expecting?
What about Finfluencers? Are they regulated too?
Yes, they are!
While they have been a little late to the party, ASIC published an Information Sheet in 2022 to clarify that: (a) if you’re providing financial product advice or arranging for your followers to deal in a financial product, you must hold an AFS licence; and (b) if your posts are not balanced, or can’t be substantiated, they may be considered to be misleading and deceptive.
That means that separately to the Australian Consumer Law, finfluencers and the companies that engage them need to be aware of Corporations Act requirements.
Is there less risk for micro-influencers?
No!
The ACCC has specifically stated that there may be increased disclosure requirements for “micro-influencers” with a small amount of loyal followers, as those followers may be less inclined to automatically assume a post is sponsored.
This means that disclosure should be particularly clear, upfront and obvious.
What happens now?
If in doubt, err on the side of caution. In the face of increasing scrutiny from regulators and the possibility of significant fines, more (disclosure) is less.
If you have any questions or you’re unsure about your responsibilities, please get in touch!
Sam Berry
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