The law governing Online Influencers
6 July 2023
Introduction
The internet age has opened up entirely news ways for traders to promote their goods and services. The most obvious of these is the use of their own websites, which allow users to shop from the comfort of their own home. Another, very topical, promotional tool is that of ‘social media influencers’ to promote goods and services on their own social media channels.
Such people are so-called because they post content, aimed at ‘influencing’ their followers on social media to contract with the brands whose goods and/or services they are promoting. They are also frequently referred to as “content creators”, “social media marketers”, “online influencers”, or simply “influencers.”
The use of well-known personalities to promote goods or services, of course, is nothing new and dates back to the earliest days of advertising. Until recently, however, it was the brand that controlled all aspects of the commercial presentation – they chose the personality, wrote the script, photographed/ filmed the commercial, decided where it should be published etc.
The last five years, however, have seen the exponential growth of a new form of advertising – the so-called “influencer marketing.” With such influencers, the situation described above is quite different. Instead of being provided with ready-made content and simply being asked to present it, influencers are generally given wide autonomy as to how they promote the goods or services of the brand which has engaged them. The content of the posts they publish on social media is largely up to the influencer themselves, and it is primarily the frequency of the posts which is dictated by the trader.
With much of this decision-making now handed over to the personality themselves, the question arises as to how this content is regulated, and to what degree the influencers can be legally responsible under various laws pertaining to defamation, intellectual property, consumer rights and finance. As this is such a broad area, this article proposes to focus on the last two of these.
The rise of influencer marketing
In 2016, the annual worldwide revenue generated by influencers worldwide was estimated at €1.5 billion. Today, it is approaching €20 billion. It’s not difficult, therefore, to understand the attraction of influencer marketing for would-be entrants. Aside from the potential financial benefits, it also offers the attractions of low set-up and running costs, flexibility of working hours and a large degree of autonomy. While some people operate as influencers as a full-time job, the flexibility it offers means that for many it is a “side-hustle” – a part-time job to boost their income outside of their principle occupation.
Likewise, the attraction for a trader to utilise the services of an online influencer, perhaps instead of the more traditional forms of press, radio and television advertising, is not difficult to grasp. Brands have long appreciated the value of “word of mouth” advertising, in which their goods or services are promoted by a user without any prompting by the advertiser.
The brands, and the public, place a high value of such endorsements are they are felt to be more “genuine”, coming from people who have first-hand knowledge of the goods or services. This is perceived as generating a greater element of trust than if the person were simply paid to put their name to it and speaking to an audience that was unknown to them.
The downside of word of mouth advertising is that it was traditionally limited to family and friends – while highly-valued, it was narrowly-published. The advent of social media, however, has allowed for the expansion of the audience to which such endorsements could be directed. Having built up a large following through posting about issues which engaged with a particular audience, the influencer was considered to have a closer connection to their followers than the more traditional celebrity endorsements, while also being able to directly target a size of audience which could amount to several million people.
Furthermore, advertisers could accurately gauge the success of any endorsements made by influencers, in terms of direct engagements with the post on social media, clicks through to the website, and any increase in enquiries and/or sales at the exact time the posts were published.
This article turns now to the regulation of content posted by these influencers, and the question of who – the trader whose goods or services are being promoted, or the influencer who is performing the promotion – is responsible for complying with these regulations.
Legislation governing influencer content
The principle legislative provisions are section 43 of the Consumer Protection Act 2007 (as amended by the Consumer Rights Act 2022), which deals with false, misleading and deceptive information, and section 46 of the same act, which deals with withholding, omitting or concealing material information. These sections provide that a practice will be considered to be misleading if the communication is likely to deceive the average consumer in respect of “the existence, extent or nature of any approval or sponsorship (direct or indirect) of the product”, or “fails to identify the commercial intent of the practice”.
Furthermore, section 55(1)(q) of the 2007Act, under ‘Prohibited Commercial Practices’, provides for a prohibited practice which has particular relevance for the advertising conducted by online influencers: ‘using editorial content in the media to promote a product (if a trader has paid for that promotion) if it is not made clear that the promotion is a paid promotion, whether in the content itself or in any oral, written, visual or descriptive representation in the promotion…”
Of crucial importance in the legislation is the description of a “trader”, to whom these provisions apply. Section 2 of the 2007 Act describes a “trader” as “(a) a natural person, or (b) a legal person … who is acting for purposes relating to the person’s trade, business, craft or profession, and includes any person acting in the name, or on behalf, of the trader.” The inclusion of a person “acting in the name or on behalf” of the trader clearly suggests that these provisions apply to the influencer promoting the goods or services in the same way that they apply to the entity which is providing them.
The sanctions which can be imposed under the Act range from a fine of no more than €4,000 or imprisonment of up to 6 months for a first summary conviction, up to a fine of no more than €100,000 or imprisonment of up to 2 years on indictment.
In circumstances where the influencer themselves usually creates the content, in the form of both text and visual images, the degree to which the entity on whose behalf they are posting was involved in the creation and/or approval of the content prior to it being published would appear to be a relevant issue in the apportionment of liability for any breach of the legislation. Anecdotal information suggests that the most common practice is for the contract between the trader and the influencer to provide that the latter must ensure that all legal obligations – be they to do with intellectual property or consumer protection legislation – are complied with.[1]
Specific regulation of influencers
While these provisions are generally geared towards anyone promoting goods or services, the question arises as to whether there is any regulation aimed specifically at online influencers. The simple answer, at least in this jurisdiction, is no.
In the US, influencers must comply with state and federal advertising laws, including Federal Trade Commission (“FTC”) regulations and guidelines against false and deceptive advertising. If an influencer endorses goods or products through social media, their publication must make it obvious when they have a “material connection” with the brand, to include either a personal, family, or employment relationship or a financial relationship. The last of these does not require the influencer to be paid a fee, but can include anything of value to mention a product.
In the UK, the Advertising Standards Authority published Guidelines in September 2018 directed towards online influencers. The Guidelines make it clear that influencers do not have to be paid for a specific promotion for it to be considered an advertisement, stating that “If you have any sort of commercial relationship with the brand, such as being paid to be an ambassador, or you’re given products, gifts, services, trips, hotel stays etc. for free, this is all likely to qualify as ‘a payment.” In respect of the onus on the Influencer to make it clear that their post is an advertisement, the Guidelines suggest that it must be ‘obvious’, which rules out burying a label such as “ad”, “collab” (“collaboration”) or “sp” (“sponsored”) in a long list of other hashtags, or putting it where it can only be seen by clicking ‘see more’ or clicking to view the full post.
The UK ASA regularly publishes reports on social media influencers who were considered to be repeatedly violating UK advertising rules by failing to adequately disclose advertising content. Not only are they threatened with having their content removed, and possibly fined, they are “named and shamed” by the national media, which is perhaps the most damaging outcome for the influencer who faces losing the trust of their online following.
By contrast, the most recent Advertising Standards Authority of Ireland (ASAI) Code became effective back in March 2016, and is unsurprisingly silent on the modern advertising practice of social media influencers promoting goods on social media in return for payment. Section 4 of the Code addresses ‘Misleading Advertising’, and says nothing about endorsements on social media other than providing that, under ‘Matters of Opinion’, “consumers being misled about any matter that is capable of objective assessment. Assertions or comparisons that go beyond subjective opinions should be capable of substantiation.”
A Guidance Note was issued by the ASAIExecutive in November 2016,. Entitled ‘Recognisability of marketing communications’, it refers specifically to Social Media, and provides that “Where celebrities are sponsored by brands or paid directly to promote a brand’s products, it must be clear that their posts are marketing communications. The context of the post or accompanying #may make it clear that it is a marketing communication. However where the context or accompanying # does not make it clear, it is incumbent on the advertiser to ensure that clear guidance is given so that clear ‘flags’ are used, for example #ad.” It should be noted, however, that this Guidance Note does not bind the Authority nor the Complaints Committee.
While the ASAI publishes details of complaints received in respect of online influencers in its Complaints Bulletins, such bulletins rarely identify the influencer in question, and receive little publicity as their publication is limited to the ASAI’s website. In March 2023, however, the ASAI revealed that they were working on new guidelines, in conjunction with the Competition and Consumer Protection Commission, about disclosure requirements for online influencers.[2]
Tax implications for online influencers
There is a further issue which arises other than whether or not the commercial nature of the publication is clearly flagged. This issue is the taxable status of the benefit which the influencer receives from the goods or services which they promote.
The first issue to consider is what obligations rest on the person posting the content to identify that there is a commercial benefit for them to do so. Commercial benefits for influencers come under three broad categories – (i) straight payment of a fee for the content they post; (ii) the provision of goods or services in lieu of a fee but with an agreement to post content in return; or (iii) the simple provision of a gift, with no obligation to post content (though there would probably be an expectation that it would be acknowledged via a post on social media).
Clearly, if the client simply pays the influencer for the sponsored posts, then that income should be declared by the influencer in their tax return. A more complex question, however, arises in the increasingly common situation whereby the influencer is not paid directly for their sponsored content, but is instead given the benefit of goods or services in return.
This has traditionally been dealt with under the “benefit in kind” (also referred to as “payment in kind”) legislation, where under the traditional employment relationship, an employee may have been given the benefit of a company car. In this situation, the employee would be taxed for that benefit at source through the monthly payroll.
Self-employed contractors being offered free or discounted goods or services in return for benefits is very much a modern-day phenomenon, however, and is not covered under the “Benefits in Kind” guidelines published by the Revenue Commissioners.
This could take the form of an influencer who obtains the free use of a car for a year in return for attending a few events run by the car dealership, to use a very topical example. The person may be given a new kitchen at a heavily-discounted price in return for posting videos of it being installed, and a description of how it as “changed their life.” They may be offered a relatively costly cosmetic procedure, such as hair replacement or dental work, in return for a series of “before and after” videos. They may be given a free, week-long, all expenses paid cruise for themselves and a guest in return for regular social media posts while they are on board.
It appears that any such benefit which an influencer gets, by way of free or discounted goods or services, should be considered as income.[3] On this basis, the onus would appear to be on the self-employed person to put a value on the benefit they have received, based on the market value of those goods or services. In respect of a cruise, this is an easy enough cost to quantify, but in terms of the provision of a free car for a year, perhaps not so straightforward.
Having arrived at the value, however, the influencer would be obliged to declare it as revenue in their end-of-year tax returns. Failure to do so would amount to filing an incorrect tax return, with the obvious penalties which that may bring. In practical terms, it is unclear as to how enthusiastically the Revenue Commissioners monitor such occurrences.
Conclusion
As it has done with many areas of law, the internet age has disrupted the traditional manner in which goods and services are advertised, and provided new challenges to legislators. With the advent of online influencers, the person presenting the commercial message is no longer a mere mouthpiece for the trader – they are most likely the person who made the most significant editorial and commercial decisions in respect of the publication.
It is interesting to note that when responding to a complaint about a commercial post by an online influencer, the ASAI addresses the complaint to both the trader and the influencer, although invariably the former states that the latter had undertaken to accept all responsibility for any legal obligations arising from such content. This suggests that there remains a degree of uncertainty as to who may be ultimately responsible for any breaches of consumer protection law.
What is clear is that there has, thus far at least, been a soft-touch approach towards the frequently lax attitude that influencers display in respect of making clear that their often gushing endorsement of a service or product has been largely dictated by a commercial benefit which they derive from its provider. No proceedings appear to have ever been instituted against a person, despite often clear and repeated breaches of the Consumer Protection Act 2007, a situation which is no doubt of concern to the more traditional media outlets whose advertising revenue has been hit by the growth in influencer marketing.
It remains to be seen whether the promised initiative by the Advertising Standards Authority of Ireland leads to greater clarity in respect of the responsibilities of both the trader and the influencer, clarity which is surely to be welcomed in this burgeoning area of commercial activity.
[1] The Complaints section of the ASAI’s website reveals that, when a complaint is put to both the trader and the influencer by the ASAI, the trader almost invariable comments that under their agreement, the onus was on the influencer to comply with all statutory requirements in respect of the content they post. See https://www.asai.ie/complaint_medium/online-influencers-social-media-account/
[2] Reported at https://www.irishmirror.ie/news/irish-news/advertising-board-clamp-down-irish-29344492. It is perhaps worth noting that the ASAI gave an undertaking to “name and shame” offenders in 2018, although it does not appear to amount to anything more than the listing on the Complaints Bulletins described above. See https://www.irishexaminer.com/news/arid-30837213.html.
[3] This was apparently confirmed by a spokesperson for the Revenue Commissioners back in 2019, who stated that “Bloggers who are in receipt of products, or other non-monetary benefits, in return for posting online promoting the product, will be subject to tax on the benefits they receive,” a spokesperson for the Revenue Commissioners says.” Available here: https://www.independent.ie/business/media/just-how-do-influencers-make-their-money-and-is-the-game-up-for-them/37790397.html