The fashion and luxury sector, which thrives on hype and exclusivity, is particularly well-placed to benefit from influencer marketing. One strategically placed product can be instantly disseminated to thousands (and in some cases, millions) of potential purchasers around the globe in an instant.
Influencer marketing targets the younger audience and a recent survey suggests that Millennials and Generation Z will represent more than 40% of the overall luxury goods market by 2025.
The influencer industry is under ongoing scrutiny from watchdogs including the UK's Advertising Standards Authority (ASA) and Competition and Markets Authority (CMA), as well as the Federal Trade Commission (FTC) in the US.
In the UK in particular, influencer advertising has been thrown into the spotlight recently following an investigation by the Competition and Markets Authority (CMA) which led to a number of influencers undertaking to improve the way they disclose paid-for ads and endorsements on social media. The ASA has also recently issued new guidance for influencers.
While these interventions are interesting developments and show that the role of influencers is under regulator scrutiny, the regulatory framework in this area is not new. There are specific rules that advertisers should be aware of in the UK.
The CAP Code (administered by the ASA) covers non-broadcast advertising and requires that advertising should not, among other things, materially mislead consumers.
Under the CAP Code, all adverts should be obviously identifiable as marketing communications. In influencer terms, this means that consumers should be able to see at once that the post they are looking at is an ad. This applies across all mediums.
The Consumer Protection from Unfair Trading Regulations 2008 (CPUT Regulations) prohibit unfair commercial practices and, in particular, those that are likely to cause a consumer to make a transaction which they would not have otherwise made. The CPUT Regulations are enforced by the CMA and Trading Standards.
The key requirement then is that it must be clear whether a post is an ad or not. If it is unclear, there is a risk that the influencer (and the brand) will fall foul of the rules and be subject to enforcement action by the ASA and/or the CMA.
Transparency is vital and it is important that companies find the right balance between making ads inviting and not hiding their status as ads. The most straightforward way to make it clear that something is an ad is to include a label to distinguish the content from editorial material.
The following are acceptable terms that can be used to label advertorials in the UK, provided they are reasonably prominent so that readers can recognise the content as an ad; for example, #ad may be appropriate for a tweet, but not necessarily for a magazine ad:
Conversely, the below terms are not acceptable; while they might indicate that a brand was involved in the process, they are unlikely to clearly indicate that an advertiser has paid for and has editorial control over the content:
Some social media platforms have introduced specific features to help influencers disclose when a post is an ad. For example, Instragram allows influencers to mark a post as a "Paid Partnership".
Whether the use of such features satisfies the regulator's requirements remains to be seen. There have been no rulings and no guidance. For now, it would be a risk to simply rely on these features but they are, at least, a step in the right direction.
The ASA's new guidance for influencers clarifies that if an influencer has been "paid" (either in money or in gifts/freebies), but there is no arrangement with the brand or control by the brand, then it is unlikely the content will count as advertising under the CAP Code.
Even so, the CMA does expect influencers to disclose when they have been given a product they're posting about for free. This is particularly relevant in the fashion and luxury brands sector, where influencers are regularly gifted products by brands in the hope that they will post about the products or be seen wearing them. Gifting is an effective (and cheap) way of marketing the products and relying on the power of celebrities and influencers.
While there has been no specific guidance on this, it does suggest that influencers will need to mark posts with #gift (or similar) when they are posting about products they have received for free, even if the post doesn't amount to an ad.
With the regulators clamping down on the disclosure of ads, is there still a benefit for brands paying large sums of money to influencers to advertise their products and services where it is more obvious that what they are posting are paid-for ads?
A study by the University of Georgia has found that "disclosure language" such as 'Paid Ad' accompanying Instagram posts can "negatively impact attitudes and behavioural intention". Part of what makes influencer advertising so appealing is that in the majority of cases it is a form of native advertising; advertorial content that is deliberately designed to fit in with its online habitat.
In other words, it doesn't look like advertising at all and consumers might think that what they are looking at is independent/editorial content. Arguably if the veil bears an ad label, it's suddenly less beguiling.
On the other hand, a recent survey suggests that only 4% of people actually trust the information they receive from influencers. With this in mind, the increased transparency could in fact serve to build trust between members of the public and brands/influencers.
If a brand is planning to use an influencer, one of the first things to consider is the contract with the influencer. The contract should include provisions on:
Having contractual terms in place is important; however there are limitations to the protection they provide.
How likely is it that a brand will actually enforce the terms against an influencer if it is in breach? This will obviously depend on the scale of the breach and the damage caused to the brand. It will also depend on the relationship with the influencer. Much like building a brand, building relationships with influencers can be a long and costly process.
Symbiosis of brand and influencer, finding the right person who embodies the right image is also a difficult, time-consuming task. In an increasingly saturated market, finding the new face of your brand before they are snapped up by the competition, and keeping them once you do, is not easy.
In Jul 2018, the ASA ruled against Made in Chelsea star Louise Thompson and watch brand Daniel Wellington. Louise Thompson posted an image on her Instagram account wearing a watch and cuff with the Daniel Wellington Instagram page tagged. It included the caption "sippin' [sic] on yummy coconuts 3x size of my skull! Wearing my @danielwellington classic petite Melrose 28mm watch and matching cuff… you can get 15% off using the code 'LOUISE'."
There was a commercial relationship between Louise Thompson and Daniel Wellington. The ASA concluded that the marketing communication was not obviously identifiable as such in the absence of a clear identifier, such as #ad. Daniel Wellington had a written contract with Louise Thompson which required her to include terms such as #ad to make it clear that such posts were ads for Daniel Wellington.
Despite this, the ASA still considered that they were jointly responsible for ensuring that promotional activity conducted by Louise Thompson on Daniel Wellington's behalf was compliant with the CAP Code.
This case highlights the importance of approving social media posts before they are published and ensuring that this is a contractual right.
Influencers can operate independently, but where a brand enters into a formal relationship with an ambassador, finding the right person is the primary objective. Being able to end the relationship at the right time and in the right way is also important though. After all, fame is fickle; Love Islanders, take note!
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