In today’s interconnected world, we are witnessing the rise of online personalities who build a following by consistently creating compelling content in blogs and on social media. Their audiences give credence to any review or recommendation they publish, so it is only natural that companies with products or services to advertise would want these influencers to generate “buzz” around their brands.
The world of influencer marketing has been growing exponentially. According to Business Insider Intelligence estimates, the influencer marketing industry will be worth as much as US$15 billion by 2022, up significantly from US$8 billion in 2019. A recent survey of marketers indicates that nearly two-thirds of marketers will increase their spending on influencer marketing this year. In the same vein, it has been reported that 75 per cent of Canadian companies now have dedicated budgets for influencer marketing.
Companies will often provide influencers with free products or free tickets to events, sometimes going so far as to enter contractual relationships where the influencer receives financial compensation.
This is quite normal. Influencer marketing is a form of advertising, after all.
As with any business activity, influencers must follow certain laws. Canada’s Competition Act prohibits misleading representations and deceptive marketing.
Civil breaches of these provisions can lead to administrative monetary penalties of as much as $1 million for individuals and $15 million for corporations. A criminal conviction can result in a fine without limit and imprisonment for up to 14 years.
Unfortunately, not all participants in the growing world of influencer marketing have been playing by the rules.
At the end of 2019, Canada’s Competition Bureau, the primary government body responsible for enforcing laws about misleading marketing practices, sent warning letters to close to 100 brands and marketing agencies involved in influencer marketing, advising they review their marketing practices to ensure compliance with the law. These letters followed a thorough review of influencer marketing practices across various industries, including health and beauty, fashion, technology and travel.
Guidance from the Competition Bureau
In 2018, the Competition Bureau published the fourth edition of its Deceptive Marketing Practices Digest, in which it provides guidance and advice to marketing professionals, businesses and social influencers about their responsibilities when conducting influencer marketing. Some highlights:
- Disclose material connections (such as monetary payment, free product, discounts, or a business or family relationship) with the companies whose brands they feature.
- Ensure that such disclosures are as visible as possible. Consumers should not have to dig around to find them.
- Do not create content that is misleading. Opinions must be based on the influencer’s actual experience.
- Clearly disclose material connections in each post.
- Avoid making representations that are false or misleading.
- Verify that influencers aren’t making performance claims on your behalf, unless such claims are based on adequate and proper testing.
Influencer marketing is under increased scrutiny. In addition to guidance from the Competition Bureau, Advertising Standards Canada has released disclosure guidelines for influencer marketing.
Similarly, in the United States, the Federal Trade Commission recently published a new guide entitled Disclosures 101 for Social Media Influencers, after having previously sent out more than 90 letters reminding influencers and marketers that relationships to brands should be clearly and conspicuously disclosed when promoting or endorsing products through social media.
The power of online influencers will continue to grow. Influencers act as curators for busy consumers who lack the time and inclination to research the newest products and services.
If you have not yet joined the influencer wave, now is the time to do so; but be sure to follow the rules.
Advertisers and influencers should be transparent with their intended audiences. This goes beyond merely complying with the law. A company that hides the fact it is paying influencers risks losing the trust of consumers and suffering reputational damage. Now, more than ever, goodwill is what sets a brand apart from its competitors.
To learn more about the world of influencers, NATIONAL's influencer marketing experts can help identify opportunities for your brand and increase your ROI. We have vast networks and expertise. We offer influencer strategies, marketing analytics, product seeding, brand ambassador programs, launch events and much more.
The author is a lawyer who has practised, published and lectured in the field of competition law. He serves as Senior Advisor, Financial Communications and Investor Relations at NATIONAL Public Relations.