Understanding consumer law when conducting influencer marketing campaigns in the EU and UK
The Rise of the Influencer
The days of traditional advertising, relying solely on newspapers and brochures, are long gone. In today's digital age, brands have a world of opportunities at their fingertips, thanks to the internet and the ubiquitous smartphone. Social media has emerged as a key player in this digital transformation, offering brands a cost-effective way to target specific market segments and leverage the power of influencer endorsements.
With as many as 17% of people having made a purchase from a brand after seeing someone endorsing a product on a social media, influencer marketing is big business.This trend has propelled influencer marketing to a multi-billion dollar industry (estimated $16.4 billion in 2022 ), with the market value estimated to reach staggering heights ($143 billion by 2030) in the coming years.
The success of influencer marketing can be attributed to the trust and credibility that influencers have built with their followers over time. When influencers endorse a product or service, their followers are more likely to believe their recommendations and consider making a purchase. This trust-based relationship is a powerful asset for brands looking to connect with their target audience and drive sales.
What are the regulatory implications of influencer marketing?
As the influencer marketing industry continues to grow, so too does the scrutiny from regulators. Both the EU and the UK have taken significant steps to ensure consumers are aware of commercial content and that influencers are transparent in their practices. Influencers who engage in regular commercial activity, such as brand deals, are considered 'traders' under EU consumer law. This designation places specific obligations on influencers to clearly disclose any advertisements they make. Failure to do so can result in legal consequences.
The Consumer Protection Cooperation Network conducted a comprehensive investigation into influencer marketing practices to assess compliance with EU consumer protection legislation. The results were concerning: nearly all (97%) of influencers investigated posted commercial content but only one in five (20%) systematically indicated that their content was advertising.
The investigation highlights the importance of transparency in influencer marketing. Influencers must clearly disclose any commercial relationships or sponsored content to avoid misleading consumers. Failure to comply with these regulations can lead to fines and other penalties.
The EU's New Consumer Protection Rules
The EU's new consumer protection rules have introduced more stringent sanctions for non-compliance, emphasizing the importance of ethical and transparent influencer marketing practices. These sanctions include turnover-based fines, giving regulators increased leverage to drive compliant marketing and advertising practices.
To assist influencers in understanding their legal obligations and navigating the complexities of EU consumer law, the European Commission has launched the Influencer Legal Hub. This comprehensive resource serves as a one-stop guide, providing valuable information on the EU legislation applicable to influencers.
Key Features of the Influencer Legal Hub:
Video Training: Gain practical knowledge through engaging video tutorials.
Written Legal Briefs: Access concise and informative legal briefs on key topics.
Overviews and Important Cases: Explore relevant EU laws and case studies to deepen your understanding.
Expert Collaboration: Benefit from the insights of academic experts who have contributed to the development of the Hub.
As influencers are categorized as traders under European law, it's crucial to understand your legal obligations when engaging in advertising activities on social media. The Influencer Legal Hub provides guidance on:
When to disclose advertising activities
Where to disclose advertising activities
How to effectively disclose advertising activities
It's important to note that while the EU provides a general framework, specific consumer protection rules may vary across individual member states. Always seek country-specific legal advice before launching any influencer-led campaign to ensure compliance with local regulations.
Let LegalLens help you navigate the complexities of influencer marketing and ensure your campaigns are compliant and ethical. Contact us today for a consultation.
In the UK, the Digital Markets, Competition and Consumers Act (DMCCA) is set to introduce significant changes that will have a direct impact on influencer marketing practices.
Once the relevant implementing measures are brought into force (expected in autumn 2024), the DMCCA will prohibit the commission and publication of fake consumer reviews. This means businesses can no longer cherry-pick favorable reviews or hide less complimentary ones.
Moreover, businesses will be required to conduct due diligence to ensure that reviews they publish are genuine and not influenced by incentives or other factors that could compromise their objectivity.
The Advertising Standards Authority (ASA) has been actively involved in investigating online advertisements and promotions, including influencer marketing campaigns. The ASA has upheld complaints against influencers who failed to adequately disclose sponsored content, highlighting the importance of transparency in influencer marketing. The recent enforcement action by the Financial Conduct Authority (FCA) against influencers promoting an unauthorized foreign exchange trading scheme serves as a stark reminder of the potential consequences of non-compliance. This case demonstrates the regulator's commitment to holding influencers accountable for their actions.
At LegalLens, we are committed to providing expert legal guidance to influencers and brands navigating the complex landscape of influencer marketing. Our team of experienced attorneys can help you understand and comply with the latest regulations, ensuring your influencer marketing campaigns are both successful and ethical.
Is it the same for podcasts?
Podcasts have emerged as a powerful tool for influencer marketing, offering brands a unique opportunity to reach targeted audiences through audio content. However, the intimate nature of podcasts and the perceived authenticity of trusted hosts have raised concerns among regulators regarding the transparency and genuineness of ads featured in this format.
In June 2023, the Advertising Standards Authority (ASA) launched an investigation into the clarity and identifiability of commercial content in podcasts, specifically focusing on host-read ads. The ASA's consumer research revealed that participants had concerns about the authenticity of hosts' claims and their ability to influence listeners' purchasing decisions.
The ASA's investigation highlighted the importance of clear and upfront disclosure of commercial content in podcasts. The research found that consumers valued the use of explicit labels, such as "paid-for advertisement" or "sponsored," at the beginning of ads. Additionally, using distinct sound effects or music to mark the start and end of ad breaks can further enhance clarity and avoid confusion.
To ensure compliance with advertising regulations and maintain consumer trust, influencers and brands should adhere to the following best practices:
Use explicit labels to clearly indicate sponsored content.
Employ consistent sound effects or music to distinguish ads from the surrounding content.
Avoid misleading or exaggerated claims and ensure that endorsements reflect genuine opinions.
Consult with a legal professional to ensure compliance with all relevant regulations and guidelines.
LegalLens: Your Trusted Partner
At LegalLens, we specialize in providing expert legal guidance to influencers and brands operating in the podcasting and influencer marketing industries. Our team can help you navigate the regulatory landscape, ensure compliance with advertising standards, and protect your interests.
Contact us today to schedule a consultation and learn more about how we can assist you.