Worldwide, there has been increased regulatory scrutiny of social media influencers, including the UK’s ASA guidance (see previous update by John Wilks and Claire Sng) and Competition and Markets Authority investigation, the European Commission’s ‘Behavioural Study on Advertising and Marketing Practices in Social Media’, and the recent crackdown by South Korea’s Fair Trade Commission.

This flurry of activity is a timely reminder for businesses operating in Australia to review their social media practices for compliance with the Australian Consumer Law (ACL) and the Australian National Advertising Association (ANAA) Code of Ethics. Below, we set out a number of considerations for operating and advertising on social media in Australia. Further, there is a clear direction from media and political avenues focusing on the online behaviour and presence of a number of Australian businesses.  Increasingly, a business’s online presence is not only a potential area of legal exposure but also an area where reputation risk needs to be managed to minimise the risk of broader brand damage.

Direct advertising

Features recently integrated into the Instagram platform now allow businesses to post information on their products with tags that embed pricing information, product feature descriptions and website links. These tags help the platform play a larger role in direct product marketing.

However, to the extent representations made in embedded tagging exceed – in terms of product characteristics – the characteristics that the product itself can reasonably support, there is a risk such representations could be considered false, misleading or deceptive. Under the ACL, businesses are precluded from making false statements or engaging in conduct in the course of trade and commerce that is, or is likely to, mislead or deceive ordinary consumers about the relevant product or service offering. Accordingly, businesses should ensure that all product information included in advertisements is accurate, can be fully supported, is regularly updated, and consistent across all advertising mediums, especially where social media posts link to websites.

Recent amendments to the ANAA Code of Ethics also require advertising and marketing communications to be ‘clearly distinguishable as such to the relevant audience’. Sponsored posts by ‘influencers’ should therefore disclose the sponsorship using either inbuilt ‘paid’ or ‘sponsored post’ descriptions or the hashtags ‘#ad’, ‘#spon’ or ‘#sponsored’, otherwise there is a risk consumers will be misled as to the authenticity of product reviews or endorsements. Where posts are not clearly marked as sponsored, businesses should assess whether disclosure obligations arise for their content by considering whether they have a reasonable degree of control over the material and whether the material draws the attention of the public in a manner calculated to promote the product.

Hashtags

‘Hashtags’ are a long standing feature that have been used to greatly improve traffic. However, they are increasingly being viewed as ‘conduct’ that is capable of enlivening the provisions of the ACL. Accordingly, businesses should ensure that their hashtags correlate with the product they are selling and would not lead consumers to form a mistaken belief about the product’s features.

Negative reviews

Adverse publicity is a fear many businesses have and, considering the potential for negative reviews to ‘go viral’, there is temptation to delete these posts. As a general rule, these reviews should not be removed as there is a risk of misleading consumers about the general body of the product reviews. Similarly, there are reputational risks associated with not responding to negative consumer comments in a balanced and fair way and this can often be more damaging than the initial review. With this in mind, businesses should establish clear ‘house rules’ that apply to posts on social media pages, and these should be prominently featured on the business’s social media pages. In other words, there is an element here of “if you live by the sword, you – may – die by the sword”.

“Micro influencers”

In recent times, businesses have questioned the value of “celebrity” social media influencers, such as elite athletes, who charge exorbitant sums for a single post. Instead, these businesses are favouring partnerships with “micro influencers”, such as amateur athletes or professional athletes in more obscure sports (i.e. base-jumping or motocross) as a more cost effective marketing strategy, particularly where there is an engaged social media base.

A “micro influencer” is a social media user with between 1,000 to 90,000 followers who makes posts promoting products.  Their key advantages include use of products out of real loyalty to a brand (in some cases), smaller and more intimate followings that share a uniting passion for a particular sport, person or subject matter and, as a result, followers perceive the influencer’s endorsements as being more genuine.  “Micro influencers” also require much lower remuneration, if any, and exist in greater abundance than “celebrity influencers”, meaning they can generate content at a scale that captures more market segments.

It has become common practice for businesses to send “micro influencers” free products and/or pay nominal amounts in return for an Instagram post or YouTube review of a product.  However, whilst these “micro influencers” present enormous return on investment potential, there are significant legal and reputational risks involved with using less sophisticated influencers.  Accordingly, businesses should ensure that “micro influencers” are made aware of obligations:

• under the ANAA Code of Ethics and ACL to clearly indicate that their content is sponsored;
• to not improperly use the business’s intellectual property such as trade marks, or infringe any third party rights; and
• to comply with social media policies to ensure that any posted content is not taken down by platform moderators.

To ensure compliance and risk mitigation, businesses should actively monitor content they have sponsored and request corrections if necessary.

There have also been reported instances of children being used as “micro-influencers”. This is a particularly nuanced and potentially dangerous area in which business may wade. As a minimum step, businesses should confirm the capacity of the influencers and athletes to agree to relevant terms and conditions or that they take all reasonable steps to ensure parental consent is obtained before entering into any agreement if they are under the age of 18.