A number of celebrities and social media stars are being investigated by the Competition and Markets Authority, which says it has concerns that some influencers are failing to disclose that they are being paid for their endorsements.

In the early days of social media, Instagram and Facebook were seen as ways to connect with those closest to us, and to provide an insight into our private lives. Today however, models and celebrities can make thousands (if not hundreds of thousands) of dollars with every photo they post, simply by featuring a product in their image. This nuanced form of targeted marketing deliberately blurs the line between “advertising” and “personal” sharing, and it’s big business. According to the Financial Times, Instagram influencers earned more than $1bn (£770m) in 2017.

Pictured here is Chiara Ferragni, Italian fashion writer, influencer, businesswoman; and the first-ever blogger to be the focus of a Harvard Business School case study. Is this post of hers an advertisement, or is she just sharing the love?

Under American law, companies who work with influencers (defined as “key individuals with significant social media followings”) to promote products, services, or brands must follow certain rules, many of which are set out in Title XVI (Commercial Practices) of the Code of Federal Regulations. In particular, when there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement, such connection must be fully disclosed. (16 C.F.R. §§ 255.0-255.5).

In practice, this means that when a company pays an individual – either in cash, or through discounts, free travel, or products – the company and influencer should enter a written contract. The contract should oblige the influencer to both “disclose its material connection to the advertiser clearly and conspicuously,” as well as “refrain from making any false or misleading statements about the products and services.”

This advert is nearly identical post to Chiara’s above, but Victoria at inthefrow here has included #ad. Is that clear and conspicuous enough?

Here in the United Kingdom, where influencers are paid to promote, review or talk about a product on social media, the law requires that this must be made clear. The use of editorial content that promotes a product –also known as “advertorials” or “native advertising”– must clearly identify that the company has paid for the promotion.

Earlier this month, the Competition and Markets Authority (CMA) launched an investigation into whether consumers are being misled by celebrities who do not make clear that they have been paid, or otherwise rewarded, to endorse products online. In its press release, the CMA announced that it has already written to a range of celebrities and social media influencers to request information about their posts and the nature of the agreements they have in place with brands. This comes just weeks after Made in Chelsea star Louise Thompson was slapped on the wrist for failing to disclose an Instagram post as a paid-for advertisement for watchmaker Daniel Wellington.

The regulator is also asking consumers to share their experiences, and says it would “particularly benefit from hearing from people who have bought products which were endorsed on social media.”

The investigation is being carried out under Part 8 of the Enterprise Act 2002 in respect of potential breaches of the Consumer Protection from Unfair Trading Regulations 2008. If an influencer ignores the CMA’s requests to comply with the law, an enforcement order in court. As for next steps, breaching such an order can lead to an unlimited fine or a jail term of up to two years. However, examples of meaningful penalties are still almost non-existent.

What do you think? Are influencer adverts easy enough to spot, without the hashtags and caveats? Interestingly, a study by Bazaarvoice and Morar Research found that nearly half of the 4,000 UK consumers polled are “fatigued” by repetitive influencer content. The majority also said they felt influencers were publishing content that was “too materialistic” and “misrepresented real life.” Notwithstanding this, the World Federation of Advertisers reported that 65% of multinational brands plan to increase their influencer investment. Perhaps there’s truth in what Chiara herself once quipped: “some loved me, some hated me—but they all followed me.”

Interested in this topic? Be sure to check out The Fashion Law’s Annual Brand and Influencer Report: The Good, Bad, and Highly Problematic. Featured photo above is Lena Perminova at Paris Fashion Week Autumn/Winter 2018 | Source: Getty Images