Attwood Marshall Lawyers Commercial Litigation Senior Associate Jade Carlson talks about “influencers”, and what can happen if they are found to be involved in misleading or deceptive conduct.
From Coca-Cola shaping the image of Santa Claus in their advertisements in the early 1930s, to the powerful partnership between Michael Jordan and Nike which began in the 1980s leading the way for some of the biggest sport endorsement deals in history, there are countless examples of how brands have successfully leveraged off the fame and celebrity of high-profile faces over the years.
Despite influencer marketing being around for many years, it has evolved significantly in the digital era. Today, it is becoming increasingly difficult to differentiate between a paid promotion and authentic opinions. Influencers must tread carefully with laws catching up to protect consumers.
Influencer marketing as we know it today on social media only kicked off in 2009, with bloggers and YouTubers setting the scene. It didn’t take long for influencer marketing to quickly spread to other platforms in the years to follow, with Instagram and TikTok now being considered some of the best platforms for marketing products and services.
Today, it seems like just about anyone can be an “influencer”, and there are plenty of people making a comfortable living from endorsing products and services online.
In an article released in 2022 by New Idea, it was reported that Australia’s richest influencer had a net worth of $426 million, with some influencers stating that they rake in $400K each year from influencer marketing alone.
It’s certainly become a booming industry in its own right. But just like advertising products in any other traditional sense, there are laws that apply to regulate the influencer industry and ensure consumers are protected from targeted campaigns.
How influencer marketing is regulated in Australia
The laws are still evolving regarding specific regulation of influencer marketing.
Australia currently has a self-regulation model, which is implemented by The Australian Association of National Advertisers (AANA). The AANA are generally the first point of contact if anyone has an enquiry related to advertising and marketing communications.
The AANA adopt a Code of Ethics to ensure that any marketing related content is legal, honest, and truthful.
As part of complying with the Code of Ethics, an influencer must label all content that is posted as “advertising” to ensure the audience understands that the individual is receiving a benefit from promoting that product or service. This is to ensure the influencer is being transparent, honest and upfront of their relationship with the brand.
The same Code applies to all forms of advertising, whether it be on social media or across traditional platforms such as radio, cinema, or television etc.
It doesn’t matter if the brand is paying an influencer money, or whether they are providing free products in return for the mention or post, either are considered a benefit and any influencer receiving a benefit from a brand must disclose this to their audience.
Social media platforms and the Code of Conduct
The ACCC (Australian Competition and Consumer Commission), announced earlier this year that they intend to investigate social media sites to crack down on misleading and deceptive behaviour. This is because despite influencers being required to disclose when content is sponsored, the ACCC is yet to penalise any Australian influencer for breaking the rule.
The ACCC intend to determine the extent of any misconduct in the market and where this behaviour is most prevalent.
It won’t just be the influencers themselves put under the microscope, the ACCC will also be looking at the role of influencer marketing firms and social media platforms such as Instagram and TikTok in facilitating misconduct.
Financial Influencers (“finfluencers”) a whole separate issue
The most recent Australian investigations into influencer marketing comes after the Securities and Exchange Commission in the USA fined Kim Kardashian $1 million in October 2022 for promoting a cryptocurrency without clearly saying she was paid $250,000 for doing so.
In addition to the fine, Kardashian was also banned from promoting the product for three years.
Kardashian is just one of several celebrities who have been caught up in regulations that require full disclosure by anyone getting paid to promote financial products.
The rise of financial influencers, otherwise known as “finfluencers” is a whole other issue, with ASIC (Australian Securities and Investments Commission) ensuring existing regulatory frameworks under the Corporations Act 2001 apply to finfluencers.
Anyone providing financial advice, or promoting a financial product, must hold an Australian Financial Services Licence. This includes anyone making a recommendation or statement of opinion that is intended to influence someone to make a decision in relation to that financial product.
Influencer marketing and consumers
Consumers are becoming more aware of influencer marketing and how to identify these campaigns, however there is still the need for better protections in this space and to ensure that brands and their promoters are doing the right thing.
In 2021, it was reported that Australians lost more than $144 million to scams on social media, which was almost double the amount recorded in 2020, and four times what was recorded in 2017. From these statistics we can see there is a real need to ensure consumers are better protected online.
At the end of the day, businesses must make sure that statements on social media are true, accurate, and can be proven, and that they refrain from making false or misleading claims.
Influencers must label their sponsored content clearly to show the audience they have been paid or received a benefit for making the post. Influencers must not promote financial products or be perceived as giving financial advice if they are not licenced to do so.
Consequences for breaking the Code of Conduct
The Ad Standards Panel are the entity that uphold the AANA Code. However, they are not a court or government regulator which means they do not have the power to punish influencers who break the code.
The ACCC can require that claims made on social media be substantiated. They may also commence proceedings where a breach of Consumer Law has taken place. This would be in the instances of misleading and deceptive conduct under the ACL where businesses or individuals leave out key information, such as when content is sponsored or leading consumers to purchase something based on false or misleading information.
Such a claim may not only have consequences for the influencer, but also the brand promoting their product or service through that person, and any marketing agency involved in the campaign.
Breaching Australian Consumer Law – what are the penalties?
If a claim of this nature proceeds to legal action, it may see any of the parties involved in the campaign responsible to pay damages to an individual who suffers loss for breach of the ACL or penalties.
The maximum penalty for a breach of the Australian Consumer Law was increased a few years ago from $220,000 to $500,000 for an individual (in this case that would be the influencer) and for a corporation (in this instance that would be the brand engaging the influencer) from $1.1 million to the greater of:
- $10 million
- 3 times the value of the benefit obtained from the contravention or offence
- If the value of the benefit cannot be calculated, then 10 per cent of the corporation’s annual turnover in the preceding 12 months.
The financial penalties are just one aspect to look at; there is also the reputational damage to the influencer and potentially the brand whose products or services are being marketed.
When we look at financial marketing specifically, the consequences can be much more severe. “Finfluencers” were warned last year by ASIC that they may face up to five years’ jail time if they are found to be promoting stocks and investment funds without a financial services licence.
Attwood Marshall Lawyers – helping consumers understand their rights
Taking legal action against a company or individual for misleading or deceptive conduct can be a very costly exercise.
It is important to get the right advice from an experienced Commercial Litigation lawyer to find out if you have a claim for damages under the ACL.
Attwood Marshall Lawyers have a large Commercial Litigation team that are well-versed at handling compensation claims of this nature and helping consumers understand their rights.
If you believe someone’s conduct has caused you financial loss, it is important to act quickly and obtain advice at the earliest opportunity.
To discuss your specific matter, please contact our Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email firstname.lastname@example.org or free call 1800 621 071.