The Great Social Media Shake Down

The age of digital marketing to generate brand awareness has encouraged companies to pay influencers on social media the ‘big bucks’ to endorse and promote their products to audiences online. As the influencer marketing sector is a metrics-based industry, every click counts. Commercially motivated users will simply do what needs to be done to secure their next pay-check for the sake of the unknowing consumer.  In this article, Litigation and Dispute Resolution Senior Associate Lachlan Boyle, and Law Clerk, Riley Hickey, explore the ACCC’s regulatory response to deceptive marketing practices to end influencer fraudulency once and for all.

The ‘Sweep’ – ACCC Cracks Down

The Australian Competition and Consumer Commission (‘ACCC’) recently took to Facebook encouraging users to name and shame influencers and content creators who engaged in deceptive marketing practices online. Influencers in the firing line mainly originate from the beauty, lifestyle, parenting, and fashion industries. While it is common knowledge that influencers may receive financial incentives for sponsored posts, the deliberate non-disclosure of promotional activity undermines the ability of consumers to make informed decisions when purchasing.

Some examples of misleading and deceptive marketing practices may include:

1.         undisclosed affiliate marketing

2.         false endorsements or testimonials

3.         the intentional omission of crucial information in sponsored posts

Both macro and micro-influencers will be subject to the investigation following the ACCC’s call-out, which emphasises that no one is truly safe from the clutches of the ACCC. The sweep also intends to scrutinise advertisers, brands and social media platforms for their role in facilitating deceitful conduct. Offenders can otherwise expect to come under fire for engaging in these practices, where disciplinary and enforcement actions will undoubtedly follow the conclusion of the formal investigation.

Various Social Media Platforms

The ‘influencers’ are regularly active on TikTok, YouTube and Instagram, as well as Snapchat, Facebook and Twitch.

They offer a range of products and services – anything from beauty, lifestyle, parenting and fashion to financial information – and the investigation is focusing on claims that sponsorships and affiliations are not being disclosed, as required by law, and that consumers are being deceived into believing endorsements are independent and impartial when those who control the accounts are actually benefiting financially from items, services, programs and subscriptions purchased.

The investigation follows a similar crackdown in the United States by the Securities and Exchange Commission (SEC), which fined several celebrities, including influencer Kim Kardashian who was fined $1.26 million last year for promoting a crypto token without disclosing she was paid a large sum of money for the endorsement.

Finfluencers

Further, the Australian Securities and Investments Commission is particularly concerned about ‘finfluencers’ – financial influencers who can use their position of trust to endorse and promote schemes that can result in individuals losing large sums of money by investing in shady financial schemes.

Statistics published by Australia’s consumer watchdog, the Australian Competition and Consumer Commission, or ACCC, Australia’s consumer watchdog – suggest that Australians lost nearly $300 million to scams in the first half of 2022 – a figure close to double the amount lost over the same months in 2021.

Penalties

While the sweep is intended for the ACCC to gauge the extent of misconduct in the market, it serves as a serious wake-up call to influencers publishing sponsored content online without appropriate specifications. As a gentle reminder to offending users, sharing misleading or deceptive content that otherwise fails to illuminate an underlying benefit or relationship is likely to breach Australian consumer law, where associated penalties can range anywhere up to $2.5 million for individuals.

Correspondingly, the ATO also plans to adapt its gift policy to include advertised merchandise, such that it must be declared within end-of-financial-year tax returns.

Key Takeaways – SOCIAL MEDIA SHAKE DOWN

It is imperative for influencers to thoroughly review the content they share on social media to ensure that any promotional material is disclosed appropriately, including merchandise, sponsored travel arrangements, attendance at sponsored events, and more. In recent years, influencers have become an essential marketing tool for brands to sell their products and services. However, Australian consumers have called for stricter regulations to prevent influencers from disseminating false or misleading information. The ACCC’s recent crackdown encourages influencers to be more cautious about the information they share with their followers and ensure its accuracy. Although this crackdown may decrease an influencer’s income, it can also benefit them by building trust with their audience through honest and accurate information.

RAMSDEN LAWYERS – HOW WE CAN HELP

In engaging in influencer marketing, you must ensure that you adhere to your endorsement disclosure obligations to avoid engaging in misleading or deceptive conduct. If you are concerned that your conduct may have contravened Australian Consumer Law, it is imperative that you seek legal advice at the earliest available opportunity.

If you require legal advice, Ramsden Lawyers can assist you. We are happy to arrange an obligation-free initial consultation to assist you in navigating your obligations under the relevant legislation.

The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice.  You should seek specific advice about your circumstances.