CMA issues guidance on influencer marketing, including #ad for gifts (!)

What is the CMA’s current stance on influencer marketing? And are they really insisting on #ad for gifts?

The question

What is the CMA’s current stance on influencer marketing? And are they really insisting on #ad for gifts?

The key takeaway

The Competition and Markets Authority (CMA) has published guidance designed to assist social media platforms, content creators, and brands in complying with consumer protection law, with a view to ensuring that consumers are protected from hidden advertising. This includes advising on the use of #ad for gifts (ie moving beyond the classic 2-step ad disclosure test of payment and editorial control).

The background

The CMA has been working with the Advertising Standards Authority (ASA), Ofcom, social media companies, and content creators to produce guidance designed to help those publishing and sharing paid promotions to comply with consumer protection law and protect consumers from hidden ads. 
Through this guidance, the CMA aims to ensure that consumers are always able to easily identify paid-for endorsements online and encourages organisations and individuals involved in influencer marketing practices to take be more proactive in tackling transparency and disclosure issues when advertising online.

The development

Three separate guides have been produced for social media platforms, influencers, and brands. 

1. Guidance for social media platforms

In “Hidden ads: Principles for social media platforms”, the CMA identifies six principles social media companies should follow to comply with their obligations under consumer law and, in particular, Regulation 3 of the CPUT Regulations that requires platforms to act with professional diligence. 
Platforms are required to:

• inform users that incentivised endorsements are required to be clearly identified as advertising and clearly distinguishable from other content
• provide content creators with tools so they are easily and effectively able to label any content as advertising
• take appropriate, proportionate, proactive steps and use available technology to prevent hidden advertising from appearing on their site
• make it simple for users to report suspected hidden advertising easily and effectively;
• facilitate legal compliance by brands
• enforce their terms and conditions and take appropriate action when violations occur.

2. Guidance for influencers

“Hidden ads: Being clear with your audience” builds on the 2019 guidance for influencers and reiterates that hidden adverts could be a breach of consumer protection law and advertising rules. This follows the upheld ASA ruling on Prettylittlething.com in July 2022, in relation to Instagram content from influencer Molly-Mae Hague (who is also the Creative Director of Prettylittlething.com), which was not obviously identifiable as an ad (see our Autumn 2022 Snapshot on this ruling). The updated guidance also covers the disclosure of gifts, and the importance of upfront, prominent disclosures when posting video content including stories and reels. Content must not be misleading or make false or unsupported statements. Ad labels must be easy to understand (eg #Ad or #Advert), prominent in posts, and obvious from the first interaction (eg at the start of a podcast). 

Picking up specifically on the hot topic of free ‘gifts’, the CMA states that [bold added for emphasis]:

“If you’ve been incentivised in any way to promote a brand, or product in your social media content…it’s important that all this content is clearly identifiable as an ad (or advertising) [including] where you’ve been paid to post content, received a gift, or post content about your own business."

“If you’re an influencer or content creator, whenever you’ve been incentivised to post, all ads, endorsements, commercial relationships, including sponsorships, competitions, prize draws or giveaways, affiliated links or programmes, discount codes, business partnerships, own brand promotions, product placement, reviews, content about gifts received for ‘free’ must be clearly labelled as an Advert or ad”.

“This applies to both formal agreements, such as written contracts or other agreements, and to more informal arrangements, including verbal or other situations where you’ve been incentivised to promote, endorse or review a product. It also includes businesses sending products or invites to events without asking for anything in return (‘freebies’ or ‘gifts’). It also applies where you post content about your own business too”.

3. Guidance for businesses/brands

In “Business responsibility and social media endorsements”, businesses and brands are told of their responsibility in tackling hidden advertising by:

• being clear with influencers who they pay or send gifts to that they must label their posts in an obvious way
• checking the posts to ensure they are properly labelled as ads, and
• taking action when this does not happen.

The guidance confirms that when posts are shared as part of a wider campaign, businesses themselves can be held accountable for misleading customers, as well as the influencers. 

Why is this important?

At present, the CMA has to go to court to establish and enforce a breach of consumer law. The acceptance of undertakings from businesses who are suspected to be in breach is the most common form of enforcement action in relation to consumer protection laws. However, the Government has now proposed to give the CMA enhanced consumer law enforcement powers to match its competition law powers through the Digital Markets, Competition and Consumer Bill. The Bill’s first reading is expected to take place in Spring 2023. Once this piece of legislation comes into effect, the CMA will be able to take direct enforcement action and will be able to impose fines of up to 10% of worldwide annual turnover for breaches of consumer protection legislation. 

Any practical tips?

Social media platforms should note that the new applicable principles are based on current market practices and technologies and therefore outline what the CMA considers platforms should be doing as of now. As new practices and technologies develop, platforms should keep their compliance under review. The CMA also notes that different platforms have distinguishing features and each platform may develop other methods of compliance which may not be specified in the principles. Additionally, brands should be cautious in monitoring influencer compliance and should proactively rectify content that does not sufficiently reflect the commercial relationship between the brand and the influencer. Brands should have a policy setting out conduct rules that content creators should follow and should inform them or their intermediaries of the requirements at the outset of the relationship.
Above all, watch out for the CMA’s take on using #ad free gifts and freebies etc. This is a shift in focus for the regulators and is almost certainly going to catch out brands and influencers alike.

Winter 2022