In the fast-paced world of digital marketing, brands are finding themselves at the centre of a regulatory storm surrounding influencer endorsements. The UK Competition and Markets Authority (CMA) and the Advertising Standards Authority (ASA) have set their sights on agencies, influencers, and the brands they represent, cracking down on the sharp practices that have plagued the industry.
The controversy surrounding transgender comedian Dylan Mulvaney’s endorsement of Bud Light has thrust social media influencers into the spotlight, highlighting their prominent role in many firms’ marketing strategies. According to the Influencer Marketing Hub, this sector is expected to generate a staggering $21.1 billion (£17 billion) in revenue this year, reflecting a remarkable year-on-year growth of 22%. In fact, nearly a quarter of marketing chiefs surveyed revealed plans to allocate over 40% of their annual budgets to influencer marketing.
However, as the popularity of influencer marketing has soared, so has the number of controversies and complaints. Many of these revolve around the lack of clear labelling on commercial content uploaded by influencers.
The ASA conducted an analysis of more than 24,000 Instagram Stories in 2021, revealing that nearly two-thirds of the 5,700 pieces of content identified as marketing material were not readily identifiable as such. Describing this situation as “unacceptable,” the watchdog called for action.
Kate Hawkins, a principal associate at the prestigious law firm Gowling WLG specialising in advertising law, sheds light on the issue: “Compliance with labelling requirements remains low. In many of the published ASA cases, non-compliance was obvious because the content didn’t use the #Ad hashtag. However, what the ASA has uncovered is likely just the tip of the iceberg. There are likely many more undisclosed ads, some of which are less obvious and potentially more misleading to consumers.”
In response to such cases, the CMA published guidelines last year, outlining criteria for ads and paid promotions by influencers. It expects platforms like TikTok, YouTube, Twitter, Snapchat, Pinterest, and Twitch to provide users with tools to label commercial content and report suspected hidden advertising. These platforms are also urged to offer better guidance to content creators on what constitutes a paid-for endorsement.
Furthermore, the CMA calls on influencers to be transparent about receiving payment for their posts and disclose when they are acting on behalf of a brand they own or work for. The term “payment” includes various forms of compensation, such as free or discounted goods and services, or even loans. To ensure clarity, posts should utilise hashtags like #Ad or #Advert, rather than ambiguous ones like #gift, #gifted, or #spon.
Crucially, the CMA places the responsibility on brands to ensure that any content resulting from their marketing efforts is clearly labelled as advertising when published on their behalf. Brands must thoroughly review the content to ensure compliance.
“We have worked diligently to ensure that both brands and influencers fully comprehend their obligations under consumer legislation,” asserts the CMA. “In the past year, we released three comprehensive guides—one for brands, one for influencers, and one for social media platforms—to assist them in staying on the right side of the law. We understand that most people and businesses want to do right by their followers and customers, and these guides provide them with the necessary tools to do so.”
The CMA’s Committee for Advertising Practice (CAP) code serves as the primary set of rules governing influencer marketing. Complaints arising from violations of these rules are adjudicated by the ASA. If an influencer or brand fails to comply with the ASA’s ruling, they may be found in breach of the law, facing enforcement action by trading standards authorities, and potentially even criminal prosecution.
The CAP code features specific guidelines for influencer marketing in various sectors. Notably, gambling ads faced new restrictions last year. Advertisements for gambling and lottery must not appeal strongly to children or young individuals, especially by associating themselves with youth culture. The code explicitly mentions the use of influencers in this context.
The Financial Conduct Authority (FCA) oversees advertising in the financial services industry. It has observed an increase in the use of social media influencers to promote investment products to younger users. The FCA disclosed that one influencer, without disclosing their position as the sole director of a regulated firm with credit broking permissions, promoted unauthorised traders at least twice. After negotiations, the FCA managed to halt these promotions.
However, it’s not just UK regulations that brands need to consider. Thomas Walters, co-founder and European CEO of the global influencer agency Billion Dollar Boy, emphasises the challenges faced when working in different markets. He cites a recent campaign supporting cosmetics brand Garnier, where strict laws on filters in certain Nordic markets complicated matters. To ensure compliance across all target markets, Walters and his team had to adapt their approach and explore immersive filters that effectively conveyed the product’s efficacy without violating regulations.
The new rules and guidelines have garnered broad support from agencies and their clients. An influencer campaign for Amazon, for instance, involved videos showcasing various activities, such as live product ordering, unboxing, and personal anecdotes. Each step of the campaign held the potential to breach regulations.
“When working in the gaming space, especially with a well-known brand like Amazon, we find that our audience consists mostly of young, impressionable individuals who trust us,” reveals Marvin Winkelmann, managing director of talent management agency AFK. “In such cases, having clear regulations and guidance like the CAP code is essential for protecting consumers from misleading content.”
While progress has been made, some experts call for even more specific guidelines. Sanchit Sareen, EMEA director of influencers and creators at impact.com, a partnership management platform, suggests raising awareness and addressing scenarios that extend beyond straightforward campaigns focused solely on commercial growth. He highlights topic-based influencing, where multiple brands are mentioned, and de-influencing, where creators provide negative reviews of specific products, as areas that require further attention.
Others express concerns over the clarity of certain terms used, such as ‘ad,’ ‘sponsored,’ ‘PR,’ and ‘gifted.’
“The inconsistency surrounding ‘gifted’ partnerships demands clarification. Many content creators and social media users find it confusing,” remarks Georgina Greenspan, managing director of agency Eat the Fox. “While both traditional media and influencers are obligated to label paid partnerships and adverts, only influencers are required to label gifted partnerships.”
The grip on influencer marketing is set to tighten further. The UK government has granted the CMA independent decision-making powers to determine whether consumer protection laws have been violated and issue fines accordingly.
“The ASA’s power to name and shame brands and influencers has been its most significant tool. By publishing rulings and disclosing non-compliance on its website, the authority has held these offenders under scrutiny,” explains Hawkins. She adds that the ASA has made it clear that persistent non-compliance may result in additional sanctions.