The Competition and Markets Authority (CMA) in the UK is launching an investigation into concerns that social media stars and influencers may not be declaring payments or rewards when they endorse goods or services online.

UK Consumer law

Consumer law, under the Consumer Protection from Unfair Trading Regulations 2008, requires that if a blogger is paid to promote a product or service, they must make clear to their audience that it is in fact a paid-for endorsement. However, the CMA has identified growing concerns that these influencers may be misleading their audience by failing to declare their commercial relationships with these featured brands.

Brands have long taken advantage of the sales boost that can come when consumers see their favourite reality star or celebrity wearing the brand’s products. Celebrities posting pictures online is an increasingly effective way to drive consumer interest in the products featured. However, if the social media post is in fact a paid endorsement and not a genuine independent opinion or recommendation from the celebrity, then this can be misleading to consumers who may buy the product on a false premise.

As CMA explains, “social media stars can have a big influence on what their followers do and buy. If people see clothes, cosmetics, a car, or a holiday being plugged by someone they admire, they might be swayed into buying it”.

The investigation hinges transparency in social media, to ensure that consumers know whether products featured by social media influencers are paid for endorsements or genuine recommendations and preferences.

Advertising Standards Authority

The CAP Code, enforced by the Advertising Standards Authority (ASA), also requires that marketing communications must be obviously identifiable as such and “not falsely claim or imply that the marketer is acting as a consumer or for purposes outside its trade, business, craft or profession; marketing communications must make clear their commercial intent, if that is not obvious from the context.”

ASA guidance for social media influencers suggests that paid-for posts should include identifies such as ‘#Ad’. Surely, this is not too difficult, even on platforms that limit the number characters in each post, such as Twitter?

However, in July the ASA took action against Made in Chelsea star, Louise Thompson, for failing to disclose that an Instagram photo featured product placement. The reality TV star was photographed wearing a Daniel Wellington watch on the beach, offering a discount for the watch in the caption of the post. The post was subsequently banned and Thompson censured. Daniel Wellington argued that the central and prominent position of the watch within the photo indicated clearly to users that the post was sponsored. The ASA said the post should have been followed by a clear indicator such as ‘#Ad’ or ‘#sponsored’ as per its guidance.

US practice

In the US, it is not uncommon for influencers to tag their marketing posts with phrases such as a “paid partnership with…” For example, see the Instagram account of Portland Trailblazers basketball player, CJ McCollum, who regularly posts with that label. Thus consumers can distinguish where a post is a paid promotion and where it is a genuinely personal post uploaded by the player. This level of transparency is facilitated by a feature on the platform to signpost paid content with the ‘paid partnership’ tag.

Next steps

The CMA expects to provide an update of the investigation by the end of the year. In the meantime, it is reaching out to social media influencers and consumers to illicit information about their experiences with this content.

With the eyes of both the CMA and the ASA firmly placed on advertisers and influencers, it is important for advertisers and influencers to encourage and promote transparency as the investigation develops.

Since, to some extent, UK rules derive from EU Directive, it will be interesting to see if the EU commission considers that a pan-EU investigation is necessary and the extent to which the UK will retain the requirements post Brexit.