CMA acts to prevent misleading online practices
The Competition and Markets Authority (CMA) has reminded celebrities, businesses and intermediaries about the rules around recommending products and services on social media and when such endorsement will constitute an advertisement.
What has happened?
Last week the CMA reminded 43 celebrities, 15 companies paying celebrities and the intermediary company, Social Chain Limited, about the rules around endorsing products and services on social media and the potential breaches to consumer protection law.
Following an investigation the CMA found that Social Chain had arranged for the promotion of games, takeaways, dating apps and films by social media personalities without declaring that the content was paid-for advertising. The investigation found that Social Chain was responsible for organising 19 campaigns featuring undisclosed advertising in a four month period. Social Chain has since undertaken to stop such practices.
Nisha Arora, CMA Senior Director for Consumer Enforcement, said: "Social media personalities can have an important influence on people's views, especially young people. It is therefore crucial that when people decide what to buy, they should not be misled by adverts on social media that read like independent opinions. Businesses, marketing companies and authors of online content all need to play their role in ensuring that advertising is clearly labelled as such."
What is the legal position?
What constitutes an advertisement from a third party (e.g. a celebrity or a vlogger)?
There are two components:
- Has the content been paid for by the business seeking to advertise its products/services? Payment includes non-financial relationships (e.g. the provision of free samples) and ongoing promotional contracts.
- Does the business supplying the product/service have editorial control of the content? The remit of 'control' is very wide and includes dictating exact content, dictating a specific section of content e.g. the requirement to include a link and/or having final sign off or a veto on the creative material.
What are the requirements if the content is an ad?
Consumers should not be required to play the role of detective. It is not enough for consumers to be able to work out that a social media post is an ad, it must be obvious. A simple way to make it obvious is to include a specific reference to the fact that the content is an advertisement e.g. #ad.
It is not mandatory to feature such a clear signpost but it is highly recommended and a useful way of ensuring consumers recognise that the content has been paid for. Explicit disclosure may not be required if the context of the ad is very clear.
This area of consumer protection regulation is coming under more and more scrutiny by the CMA. If you are paying individuals to endorse products/services and you (a) provide some form of payment in return for such endorsement and (b) have any degree of control over the content, it must be clear that the content is an advertisement.
This article was written by Caroline Swain.
For more information please contact Caroline on +44 (0)20 7203 5158 or at email@example.com
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