The rise and prevalence of advertising via influencers on social media sites has experienced rapid growth.  In recent times however, the lack of disclosure by certain influencers of their commercial relationship with the brand owners of the brands which they advertise to followers has been brought to the forefront and received negative publicity. In the last 12 months, a number of key celebrities have been joined personally to various litigation proceedings for not having disclosed that they had entered into a commercial arrangement with the brands they were advertising for and received a benefit. Many of these cases have predominately been issued in the United States, however, given the Australian Association of National Advertisers’ (‘AANA’) approach (see original article below), it may not be long before such an action is commenced in Australia.   The implications of this are likely to affect the advertising industry and the relationship between influencers and brand owners.

It is therefore important that arrangements between the influencer and the brand owner are made clear at the commencement of the relationship in order to clarify the terms of the arrangement and ensure compliance with the law and transparency in relation to social media promotion.  This can be reflected in a written agreement between the parties. Pointon Partners have been involved in drafting and reviewing of influencer, sponsorship and ambassador agreements on behalf of brand owners as well as on behalf of influencers.  If you or your organisation are using social media influencers to promote your products, or if you are a social media influencer, feel free to get in touch with us to discuss this article, or any queries you may have in relation to these developments.

Article Dated: May 9th, 2017

On 1 March 2017, a new provision was introduced into the Australian Association of National Advertisers’ (AANA) Code of Ethics (Code). The new provision stipulates that ‘Advertising or Marketing Communications must be clearly distinguishable as such to the relevant audience’. This is set to have a considerable effect on celebrities and other social media “influencers”, many of whom are paid significant amounts to advertise products on Instagram and various other social media platforms. These influencers and the advertisers that pay them will now need to ensure that such posts are identified as advertising, rather than being “camouflaged” as independent reviews, user-generated content or private blogs.

What does the provision target and when will it apply?

Like all provisions of the Code, the new provision applies whenever material “draws the attention of the public in a manner calculated to promote” a product or service, and the advertiser has “a reasonable degree of control” over the material.

There is no absolute requirement that advertising or marketing communication must have a label. If it is clear to the relevant audience that the content is commercial in nature, then no further disclosure or distinguishing element is needed.

Accordingly, the provision would not apply when an advertiser collaborates with an influencer to create editorial content that is distributed by the brand via its own social media presence, as the commercial nature of the communication is evident by the nature of the communication.

Similarly, if an advertiser were to send the influencer merchandise with no conditions attached, and the influencer subsequently made a post about the merchandise, then the new provision of the Code would not apply due to lack of content control. However, if the advertiser were to arrange with the influencer to post content on social media where the advertiser retains control over the content, this likely would be considered a marketing communication which must be clearly distinguishable as such to the relevant audience – this applies equally whether the influencer is paid in cash or is given free samples.

What is the complaints process if the Code is breached and what are the ramifications of a breach?

A complaint for a breach of the Code can be made to the independent Advertising Standards Bureau (Bureau). If a dispute is lodged with the Bureau, the Bureau’s Complaints Board (Board) must decide whether any of the advertising claims disputed are not substantiated, and it then must provide the case decision to the advertiser with an invitation to produce an Advertiser Statement stating whether the claims will be modified or discontinued.

Immediately after receiving such an Advertiser Statement, or if a response is not received from the advertiser within a nominated period, the Board must issue a final case report to the parties, identifying the advertiser, the product, the subject matter involved and the final decision.

Where an advertiser does not agree to modify or discontinue an advertisement found in contravention of the Code, the Board can also refer the case report to an appropriate government agency and/or forward it to media proprietors. For example, in some instances there could be potential liability under the Competition and Consumer Act 2010 (Cth) for misleading or deceptive conduct, in which case the case report might be referred to the ACCC.

What will be the effect on social media influencers?

As a result of the new provision, it is evident that transparency is the key determining factor. The new provision could have a significant effect on the ways in which brands, companies and advertisers engage social media influencers to promote their products, goods and services. In the AANA’s best practice guideline notes recommend that brands require influencers to use the hashtags ‘#[brand] #ad’ within their social media posts in order to ensure compliance with the new provision, and several influencers have begun using these hashtags in their posts.

If you would like to discuss this article, please contact David Mazzeo, Felicity Cara-Carson or Stefano Mazzeo  on (03) 9614 7707.