Italy: The Italian Competition Authority Focuses Again On Social Media Advertising Practices

The Italian Competition Authority ("ICA") has launched an investigation concerning some practices carried out by the social media company TikTok Technology Limited ("TikTok") and by Crystal Drops Co. (the "Trader")¹ an American company that produces and sells drops that allegedly change eye color semi-permanently by both lightening melanin and inhibiting its production (the "Product").

Specifically, according to the statement opening the proceeding that was published on October 10, 2021 in Bulletin No. 40-21 ("Statement"), the ICA proceeding is aimed at analyzing mainly (i) the possible nature of hidden advertising attributed to a video posted on the TikTok platform showing a young girl promoting the Product ("Video") without such Video being clearly recognizable as advertising; (ii) the possible threat to the safety of adolescents and children watching the Video and possibly using the Product; (iii) the potentially misleading nature of some "medical" references (for example the logo of the "Federal Drug Administration" - "FDA" and trust marks such as "FDA approved," as well as an image of three doctors in white coats with stethoscopes) used on both the Video and the Trader's website (https://changeicolor.com accessible from https://www.crystaldrops.co) and Facebook page; and (iv) the possible lack of clear information on the Product and the Trader on the Trader's website.

• Possible nature of the Video as hidden advertising

According to the Statement, the Video shows a young girl holding the Product's cardboard box bearing the Trader's logo, as well as the FDA logo, which is insistently framed. The girl, while showing the box, enthusiastically reports her positive experience with the Product, just before an image of three doctors in white coats with stethoscopes and the FDA logo appear.

According to the ICA, the sharing of the Video may constitute a case of hidden advertising, making it a misleading commercial practice under Articles 20 and 23(m) of the Consumers' Code (Italian Legislative Decree of September 6, 2005, No. 206). Indeed, the rationale behind this prohibition is that the lack of indication of the commercial intent of content may prevent consumers from using their natural interpretative defenses, which are normally triggered when an advertising intention is made explicit. More specifically, Article 23(m) provides that a commercial practice is misleading in all circumstances when it uses "editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer".

The ICA has repeatedly shown special interest in the growing phenomenon of hidden advertising on social media. On October 18, for example, with the submission of commitments by British American Tobacco Italia S.p.A., the ICA officially closed an investigation opened against that company and three influencers for alleged hidden advertising of tobacco products on their Instagram posts.² Similar investigations of hidden advertising on social media were also conducted by the ICA against Barilla,³ Aeffe S.p.A., and Alitalia,⁴ as well as influencers, and those were closed with commitments as well.

• Possible threat to the safety of adolescents and children

The ICA further argues that the Video may constitute a violation of Article 21(4) of the Consumers' Code, according to which a commercial practice is always misleading when it is likely to reach children and adolescents may, even indirectly, threaten their safety. According to the Statement, incautious use of the Product could be detrimental to the health of children and adolescents, who represent a particularly vulnerable target group due to their age and inexperience.

The ICA's close attention to commercial conduct involving children and adolescents was also noted in 2020, when the ICA opened an investigation against Activision Blizzard Inc. for, among other things, violation of Article 21 (4) of the Consumers' Code.⁵ Specifically, the ICA examined advertising messages that Blizzard displayed on its free-to-download game Hearthstone, inciting children and adolescents to make in-game purchases with real money. In that context, the ICA claimed that traders must follow the maximum degree of transparency and clarity when children and adolescents are involved, as they may not have clear awareness of the economic and psychological mechanisms behind in-game purchases.

• Potentially misleading nature of "medical" references

According to the Statement, no clear information was provided either in the Video or on the Trader's website and Facebook page about the nature of the Product. The use of references such as the "FDA" logo, trust marks such as "Trustpilot," "FDA approved," and "Medical travel certified," as well as the image of three doctors in white coats with stethoscopes, appears designed to emphasize the medical nature of the Product; at the same time, the fact that the Product is used externally, and thus for an aesthetic purpose, suggests to consumers that they are dealing with a cosmetic.

Accordingly, the ICA argues possible violation of Article 21(1)(b) of the Consumers' Code, since the average consumer may result to be deceived due to omission of the main-and most important-characteristics of the Product. In addition, with specific reference to the use of the trust marks, the ICA alleges that such use may be contrary to Articles 22 and 23(1)(b) of the Consumers' Code, which considers the use of a trust mark without authorization misleading; specifically, in the case at issue such marks seem to be aimed at reinforcing the scientific credibility of the effectiveness of the Product, without their scope being sufficiently determined.

• Possible lack of clear information on the Trader and the Product

With reference to the Trader's website and Facebook page only, the ICA alleges possible violation of Article 21(1)(b) and Article 22 of the Consumers' Code due to the lack of clear information about the nature and efficacy of the Product (it was not sufficiently emphasized that the claimed effect of changing eye color is limited to 12 months), its ingredients, and the name, address, and contact details of the person/company responsible for its production. Similarly, the ICA finds that commercial communication on the website may violate Article 49(1)(b) of the Consumers' Code, as it lacks the mandatory precontractual information set forth therein. Moreover, the ICA also maintains that there is possible breach of Article 9 of the Consumers' Code, since the relevant commercial communications are provided in English only, while Article 9 of the Consumers' Code states that all consumer information must also be provided in Italian. In an earlier decision against Etihad,⁶ the ICA confirms that Article 9 of the Consumers' Code applies not only to the information written on product packaging, but also to the websites where the products are sold.

Footnotes

1 Italian Competition Authority Bulletin No. 40, October 11, 2021, pp. 35 ff., https://agcm.it/dotcmsdoc/bollettini/2021/40-21.pdf.

2 For the Italian text of the decision, please refer to this link.

3 For the Italian text of the decision, please refer to this link.

4 For the Italian text of the decision, please refer to this link.

5 For the Italian text of the decision, please refer to this link.

6 For the Italian text of the decision, please refer to this link.

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