If a latte is poured without anyone to photograph it, does it make a design?
Instagram, TikTok and YouTube are this century's silver
screen. They're the way people stay in touch, share artistry,
and learn about the trends and fashions impacting the world they
live in. While showcasing the heights (and depths) of modern
self-expression, such expression has limits when brands sponsor
content.
From athletes to celebrity teachers, fashionable grandmas, and
now even computer-generated "simfluencers", social media
stars are increasingly leveraging followers into pricey endorsement
deals. The personal nature of the medium offers brand owners
something unique - a blurring of opinion and advertisement that
lends their marketing an air of authenticity. Yet it is precisely
this softening of the line between fad and ad that is catching the
attention of regulators - and getting some brand owners in
trouble.
In Canada, influencer marketing is regulated by the federal
government under the Competition
Act (administered by the Competition Bureau) as well as
the self-regulatory body, Ad Standards Canada. According to
guidelines set out by these bodies, there are two "Golden
Rules" advertisers must abide by when marketing through
influencers:
Golden Rule #1: Disclose any material connections
If an influencer talks about a product, service or brand, and
there is a connection between the influencer and the
product/service/brand which may affect the weight or credibility of
that statement, then the connection must be disclosed. This is
known as a "material connection". Of course, the most
obvious form of material connection is payment. But a material
connection can also include such arrangements as gifts, contest
entries, event invitations, family relationships, employment
relationships and ownership stakes.
As soon as there is a material connection between the influencer
and the product/service/brand, the influencer must disclose it in a
meaningful way.
Hashtags are a disclosure tool that everyone can easily
understand, but influencers and advertisers should make sure that
they choose an appropriate hashtag. Acceptable and widely
recognized hashtags include #ad, #sponsored, #[brand]_partner and
#[brand]_ambassador. Unacceptable hashtags are generally those that
are too ambiguous, such as #Spon, #Collab, #Ambassador, #Promo and
#[brand].
The disclosure must be clear, prominent and inseparable from the
content of the post and must be specific to each sponsored post
(rather than a blanket disclosure in an influencer's
bio).
There is no exact formula for disclosure, and the door may be
open for influencers and advertisers to get creative. What
ultimately matters, and will determine compliance, is that the
consumer is not manipulated and clearly understands that a
connection exists and that the content is sponsored.
If there is inadequate disclosure, then the influencer's
content could be considered false or misleading, contrary to the
Competition Act.
Golden Rule #2: No misleading marketing
As with all forms of advertising, any statements made in the course of influencer marketing must not be false or misleading. It is important that all parties involved ensure that any statements made by an influencer about a product/services/brand are:
- Genuine opinions based on experience,
- Claims based on facts, or
- Performance claims based on proper and adequate testing.
AI influencers
Proving no job is safe, bots and animated characters are now
entering the ranks of social media's elite.
Doing everything typical posters do - modelling clothes, sharing
stories, asking for discounts - virtual influencers are trending as
a way to reach online audiences without the pesky interferences of
humanity.
And just like other influencers, the same rules should apply (in
addition to Asimov's laws).
The primary difference is that "experience" can no
longer form a basis for making product claims. Until these
bots become self-aware, attributing positive feedback to AI
influencers runs the risk of "astroturfing" - the
practice of making fake reviews for an organization's own gain.
Since Canadian authorities have yet to provide public guidance on
the specific issues posed by AI influencers, advertisers should
proceed with caution when deploying AI influencer marketing.
Thought should be given to whether sponsored posts from AI
influencers should include additional disclosures regarding the
influencer's humanity (or lack thereof).
That said, AI influencers can be contrasted with dedicated AI
mascots. If an AI mascot speaks for one company only, repeated
reminders of the material connection to its creator are probably
not necessary since the connection is clear, similar to when
dedicated human spokespeople promote their affiliated brand.
Consequences for breach
Ad Standards reviews
several hundred ads each year, with 50-60 being referred for a full
adjudication. When one is found to contravene Canadian standards,
the advertiser is asked to change or withdraw the ad. Ad Standards
also publishes public reports detailing why, after its assessment,
the advertisement was found to be in breach.
Beyond these reports, there has been little enforcement by
Canadian authorities so far. Regulators are choosing an
educational approach - as when, in December 2019, the Competition
Bureau sent letters to nearly 100 brands and
agencies involved in influencer marketing, warning them to make
sure their practices complied with the law.
There is, however, one notable exception. In 2015, Bell was
fined $1.25 million by the Competition Bureau for directing Bell
employees to write favourable reviews of Bell products on various
websites and web application platforms without disclosing their
employment status. It remains to be seen if the Competition Bureau
will continue with this penalty-focussed approach against
individual influencers and advertisers.
In the United States, where influencer marketing is regulated by
the Federal Trade Commission (FTC), the FTC sent more than 90
letters to advertisers and high-visibility mega influencers,
reminding recipients of the requirement to clearly and
conspicuously disclose any material connection in influencer posts.
This type of focus on education rather than punishment is another
way in which we may see future action by the Canadian authorities.
Proper and lawful marketing is viewed as a shared
responsibility. When the regulators review influencer marketing,
they look at all entities involved and hold everyone accountable.
This includes not only the influencer and the advertiser, but also
intermediaries such as the advertising agency and the social media
platform.
By observing the Golden Rules, advertisers and influencers
ensure both compliance with Ad Standards Canada and
the Competition Act and the maintenance of
audience trust (because, of course, the greatest risk of bad
marketing is bad press). Proper disclosure of sponsorship or
promotion demonstrates advertiser and influencer integrity. Even if
the Competition Bureau is unlikely to go after a particular breach,
implementing the Golden Rules promotes consumer confidence.
Best practices
Advertisers can take steps to adhere to the Golden Rules of
influencer marketing by putting in place strong agreements with the
influencers they engage. These agreements should clearly set out
what type of content is acceptable and what type of content is
unacceptable, including the requirement to disclose a material
connection and to only make claims about a product which are
truthful and based on adequate testing.
To ensure compliance, advertisers should have the right under
their influencer agreement to remove an influencer's posts for
any reason, as well as provisions which limit the advertiser's
liability if the influencer "goes rogue" and does not
follow the Golden Rules.
In light of the potential pitfalls in influencer marketing, it is crucial that all those engaged in such activity seek legal advice from their advertising counsel to ensure that they abide by the Golden Rules. If you have any questions or would like further information, please contact a member of our firm's Marketing and Advertising group.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.