Social media might mean that the way in which individuals share cat videos has changed forever, but it has also changed how businesses interact with their consumers. Many have quickly realised the value of influencers in driving demand for their products. But before splurging on a deal with the latest Instagram hotshot (or entering into such a deal with a company), it is important to understand the legalities.
Who are social media influencers?
Influencers are social media personalities who have large followings on sites like Instagram, Facebook, Twitter and YouTube. Some are celebrities who are also active on social media. Others are entirely famous for their online identity. Their constant presence in our online lives, as well as the sense that they are icons giving real advice, is what makes them so effective.
Misleading or deceptive conduct
Those of you who have read our previous blogs would recall that ‘real world’ law is equally applicable in the social space. Laws against misleading or deceptive conduct apply to online influencers as they do to all advertisements (these laws are found in the Australian Consumer Law).
The Australian Consumer Law, which makes misleading or deceptive statements unlawful, applies to what is said about the product or service endorsed by an influencer. Where an influencer goes online to advertise your product but does so in a way that is likely to lead customers into error (e.g. by making them believe things which are not true, or by failing to say things you would reasonably expect them to mention) then that influencer has likely engaged in misleading or deceptive conduct.
But there is another side to this: influencers can also be misleading or deceptive about their relation to the product. For example, it would likely be misleading or deceptive for an influencer to claim that they love, or have achieved great results with, a product they’ve never tried. Similarly, it can be misleading or deceptive for them to fail to disclose their affiliation with that product’s manufacturer. You may remember the hot water that the SA Tourism Commission got into in 2012 when they paid celebrities to make positive tweets about Kangaroo Island (MediaWatch article). This kind of ‘undisclosed endorsement’ can certainly give rise to liability for misleading and deceptive conduct.
Finally, businesses can engage in misleading or deceptive conduct by implying non-existent affiliations with influencers. For example, using photos of influencers – who have never used your products – in your marketing campaigns could be misleading or deceptive too.
Pre-contractual warranties
Another source of liability is known as ‘pre-contractual warranties’. If an influencer says something about your product or service that isn’t true, and that induces a customer to buy the product or service, it could breach the law. For example, an influencer might tell people that a cosmetic product they have been testing has certain effects or contains certain important materials. If a consumer can show they relied on that statement, they may be able to bring an action for a false pre-contractual warranty. Whilst this can be avoided if the business makes it clear to the consumer that the influencer’s belief or opinion is not necessarily correct, doing so isn’t likely to help with the sales pitch!
Liability
Given that the opinions of influencers can have legal consequences, the next question is who gets in trouble: the influencer or the company whose product is being promoted?
It is most common for the company to be held liable for misleading or deceptive conduct. This is because the conduct in issue is often the use of the influencer (e.g. the posting the influencer’s material on the brand’s social media pages). It is established that posts on a brand’s social media page can give rise to liability for misleading or deceptive conduct where the business ‘is aware of the material being published and has accepted general responsibility for its publication’, such as by leaving the content on their page (ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34, 42).
Kim Kardashian’s Instagram post that drew FDA warning in the USA (Full Article)
However the influencer or their agent could also be liable for making the misleading statements in the first place, and so influencers need to be careful about the products they endorse and the way that they endorse them (ACCC v Advanced Medical Institute Pty Ltd (No 3) [2006] FCA 1066).
In such situations individuals, or the ACCC can take legal action stop the misleading or deceptive conduct and make the business notify its customers of the breach, give refunds and otherwise compensate customers for loss or damage.
Comparison to US law
Australian law is less stringent than US law when it comes to marking paid posts. The US Federal Trade Commission, under its Guides Concerning Use of Endorsements and Testimonials in Advertising, requires disclosures where a connection exists between the endorser and the seller that might materially affect the weight of the endorsement. In practice this requires social influencers to disclose most sponsorship deals. There are further requirements for other types of advertising such as expert endorsements.
So what should you do?
At the end of the day, being open and transparent is the key. If you are using influencers to promote your brand, you may want them to use a ‘#endorsed’ or ‘#ad’ hashtag to make it clear that there is a connection. If you’re an influencer, you should be careful about what products you endorse, and how that endorsement is communicated to the public. In any case, if you are unsure, make sure you ask for some advice!
By Paul Gordon and Henry Materne-Smith
Paul Gordon is a Social Media Law expert at Adelaide firm NDA Law. His practice specialises in the intersection between law and technology.
