This article is written by Sriranjini Garegrat.

Digital era and digital marketing 

Over the last decade, we have observed that there is not a single sector/ industry that technology has not disrupted. From a little child to the elderly, everybody is attached to their smartphone, smartwatch, smart home, smart tv, laptop, or the latest smart something that is launched into the market! All aspects of our lives from work, shopping, entertainment, and social interactions marginally shifted to digital platforms. Now, the digital era is synonymous with digital marketing.

Social media is one such innovation that came out of digitization and, it’s no secret that the number of social platforms out there is – to put it lightly – high. Social media has changed the way in which people communicate and interact with each other. Individuals who could have never imagined speaking to each other due to their geographical distance, can now talk, see, employ, build a company and become best friends all in a matter of seconds! 

Easy accessibility and the reach of social media platforms have become a selling point for brands and marketing teams across the globe. The plethora of platforms to choose from and variety in demographics does not hurt either. Companies have always set aside copious amounts on marketing strategies. With the advent of digitization, advertisers have now turned to digital arenas for marketing their products. Social media is one such digital marketing route. To put things a little into perspective, according to Datareportal, in July 2021 there were about 4.48 billion social media users around the world, which equates to about 57% of the total world population. 

Image source: Kepios analysis (Jul 2021)

It is, therefore, no surprise that advertisers would choose social media platforms as their choice of avenue for product placement. In this article, we will look into the regulations, rules, and ethical codes surrounding social media marketing with a specific focus on influencer marketing.

The influencer marketing trend

Social media influence has gained so much popularity in the last few years that it has become a full-time lucrative job. What seemed like a term that was coined for everyday users of social media who were engaging audiences by talking about their lives, cracking jokes, or just having a conversation to increase followers on their pages, is now the most sought-after gig by celebrities and models alike. Needless to say, the impact that influencers have on their audience along with their seamless reach to millions of people from the comfort of their homes, did not go unnoticed by marketing teams the world over. The influence that influencers have on end consumers is no joke. Due to their authenticity and simplicity, people often turn to their favourite influencers for product advice. 

Associate professor of marketing Anjali Bal defines influencer marketing as, “a type of social media marketing that uses endorsements made by people, organizations, and/or groups seen as influential or experts in a particular area.”

This is what influencer marketing hub states about influencer marketing: “the important thing here is that the online collaborators are genuinely influential. They have to influence the type of people with whom a brand wishes to establish a touchpoint. Influencer marketing is much more than finding someone with an audience and offering them money or exposure to say good things about you.”

Influencers could range from celebrities who are already well known to the public (‘celebrity influencers’) or individuals who have acquired a huge following and created a niche for themselves by their prominent social media presence (‘everyday influencers’). You can learn more about the concept of everyday influencers HERE. Brands have an array of individuals to choose from to endorse their products/services. Much of their choice would depend on the following factors:

• Cost;
• Following (reach);
• Social media presence;
• Knowledge of the industry (niche);
• Delivery/ authenticity of endorsement.

Influencer marketing was already gaining momentum in a pre-pandemic market. During the pandemic, physical shooting of advertisements was banned in most countries, brands therefore, leaned all the more towards social media marketing. A market that was worth US$8 billion in 2019, is predicted to be worth a whopping US$15 billion by 2022. Furthermore, organizations have realized that the only way to reach and connect with a younger audience is through social media.

So how exactly does this form of marketing work? Organizations could either hire an influencer to create a short video on their social media page to endorse their product or, collaborate with celebrities that have a huge fan following on social media stirring up a trend amongst consumers. The fundamental steps that go into executing a successful influencer marketing campaign would look something like this:

Image source: Media Ant

Fast-food chains have entered such collaborations in the last year to drive up traffic in an industry that was considerably affected by the pandemic. A recent example of this would be the BTS meal created by McDonald’s in collaboration with the Korean boy band ‘BTS’. McDonald’s in the past has also collaborated with rap artist Travis Scott however, the BTS meal was a much bigger success (not surprising considering the boy band has 47 million followers and counting just on Instagram!). It was reported that the BTS meal brought in the most customers the chain had seen in the whole year in merely a week since its launch. 

Some interesting influencer marketing case studies can be found HERE and HERE.

What could possibly go wrong?

Influencer advertising has picked up a lot of momentum in the last few years. The last year saw retail outlets being shut, shooting of ads getting banned, and cost and budget cuts happening on a high scale. Yet companies and manufacturers had to sell. In order to sell, you have to market. Marketing teams, therefore, had to adapt overnight and shifted the majority of their marketing strategies to influencer marketing on social media. 

A recent study of social media users found that over 50% of users preferred getting product information from influencer accounts, and 34% have found brands solely based on influencer posts.

Soon enough, regulators and advertising boards around the world started to realize that the impact that influencers had on their followers was significantly high. There were several consumers that used products that their ‘idols’ or ‘icons’ had spoken highly of on their social media platforms, but caused severe allergic reactions when used by them. 

• Where does one go in such circumstances? 

• Who is to blame? 

• Where does the brand’s responsibility end, and where does the influencer’s responsibility start? 

• How are consumers protected? 
• Is there even a contract entailing the responsibilities of each party?

The concept is quite simple: advertisements that are broadcast on television also have to follow certain fundamental standards as set by the advertising board and local legislations. It has been a long-standing debate as to whether celebrities should be held directly liable for any misleading information regarding the brands they endorse. In fact, there were several FIRs filed against renowned Bollywood celebrities for making false and misleading claims in multiple sectors. 

Consumers have certain expectations from the people they watch or follow. A basic expectation to not be misled or lied to. Influencers have a lot of people following them and have built a reputation for being authentic. They have a significant influence on their followers’ physical, mental, and lifestyle preferences. Consumers are not concerned about the brand’s ethics in such matters, but they do trust that their icons (who claim to be everyday people like themselves), will not misrepresent or mislead them. Influencers are not to blame for this, they simply want an opportunity to showcase their skills. 

It is therefore important that there are standards or codes of ethics at the least for influencers and endorsers alike to follow when they choose influencer marketing as their medium to market their products. 

What are some notable examples of influencer marketing backfiring?

• Most recently, world-famous cricketer Virat Kohli received a lot of backlash because he stated that 11 Indian Olympians were from Lovely Professional University – thereby endorsing the education institution. This did not go down well with netizens who could not comprehend the connection between the skills of the Olympic athletes and the promotion for the university. It is important to note here that the post did not specifically state that it was a paid promotion as per India’s Advertising Standards Council guidelines.
• In another post, Bollywood actor Jaqueline Fernandez was seen holding a bottle of hair care brand Tresemme’s shampoo and conditioner. This post did not have any disclosures regarding promotion either. 
• In the UK, the Advertising Standards Authority started calling out social media influencers for openly and repeatedly flouting advertising standards and code of practice. The Authority strictly informed social media influencers that if they were seen flouting rules again, they would be subject to heavy fines, online ads shaming them, and removal of their posts. 
• Earlier in 2017, the consumer protection watchdog of the US i.e. the Federal Trade Commission (FTC) sent out 90 strongly worded letters reminding several celebrities and social media influencers of their obligations to follow the influencer marketing guidelines laid out by the FTC. Trevor Martin and Thomas Cassel, two Youtube stars were seen promoting an online gambling website on their Youtube channel. It was later found out that this gambling website was, in reality, jointly owned by these Youtube stars themselves. This information was not explicitly stated by the Youtubers in any of their videos. 

These few examples are only the tip of the iceberg… 

Influencer marketing regulations and ethics

Regulators around the world have understood the need for protecting the interests of consumers and influencers alike. There are various advertising legislations and standards that have been implemented around the world. Below is a quick glance at the influencer marketing regulations of some countries (this must not be considered as an exhaustive list by the reader. Each country has its own regional influencer/digital marketing laws):

SNo:	Country	Regulator	Governing Regulation	Mandatory Requirements Run-through	Useful Resource
1.	USA	Federal Trade Commission (FTC)	FTC’s Endorsement Guidelines	Influencer’s responsibility to be aware of their duties and disclose when necessary; Influencers must disclose when they have any financial, personal, employment, or family relationship with the brand – financial relationship does not only mean money. Even products given for equivalent value are counted; Even if posted by someone residing outside the US and foreseeable that the US audience will be viewing the post, this law applies. Disclosure rules: disclosures must be hard to miss and prominently placed under the post; in simple and clear language, bold font; disclosures must be the first thing that users see.	https://www.ftc.gov/system/files/documents/plain-language/1001a-influencer-guide-508_1.pdf
2.	UK	a. The UK Advertising Standards Authority (ASA); b. The Competition and Markets Authority (CMA); c. The Committee of Advertising Practice (CAP).	UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the CAP Code); and  The Consumer Protection from Unfair Trading Regulations 2008 (CPRs)	Brand has to have some level of ‘control’ on an influencer’s post for it to be counted as an ad under the CAP Code; ‘Sponsored ads’ where an influencer receives freebies, gifts, free visits to the store, etc. instead of cash, are not subject to the CAP Code; Ads must be obviously identifiable as ads and endorsements (prominent and clear labeling of posts); Consumers have to know that the ads are ‘paid for’; Make sure you are aware of the industry rules applicable to you when advertising products like food and supplements, or age-restricted products like alcohol or gambling.	https://www.asa.org.uk/uploads/assets/uploaded/3af39c72-76e1-4a59-b2b47e81a034cd1d.pdf
3.	India	The Advertising Standards Council of India (ASCI)	Guidelines for Influencer Advertising in Digital Media	Compliance obligations on both influencers and advertisers; If the advertiser has a ‘material connection’ with the influencer, they must ensure that the ad is compliant with ASCI’s Code for Self-Regulation of Advertising Content in India and the Guidelines; ‘Material Connection’ includes cash, free products, discounts, gifts, trips, hotel stays, awards, media coverage, an employment offer, etc. Even if an influencer is not specifically asked to speak about a product and provides an unbiased opinion, they would need to disclose the post as an ad if there is a material connection; Disclosures must have clear and unambiguous labeling. Like the US influencer law, disclosures must be hard to miss by consumers. Guidelines go a step further to state that influencers must conduct their own due diligence and ensure that advertisers can back up the claims they are making regarding the product.	https://ascionline.in/images/pdf/guidelines-for-influencer-advertising-in-digital-media-final.pdf
4.	France	Autorité de Régulation Professionnelle de la Publicité (ARPP).	ARPP’s Digital Advertising and Marketing Code.	Brand must have editorial control over the post. Influencers should be receiving monetary compensation in return;  It must be noted here that, even where the advertiser does not have ‘control’ over the post and the influencer is not ‘promoting’ the product per se, the post must clarify the kind of commercial relationship between the parties; Marketing communications must be clearly distinguishable. Must carry French labeling at the beginning of each post.	https://www.arpp.org/nous-consulter/regles/regles-de-deontologie/digital-advertising-and-marketing-communications-code/
5.	Australia	a. The Australian Association of National Advertisers (AANA); b. The Australian Competition and Consumer Commission (ACCC)	AANA’s Code of Ethics Best Practices Guidelines	The Code and its penalizing provisions are applicable to advertisers only. Influencers only have a duty to include appropriate labeling under their posts. The Code only applies to influencer’s when they are advertising their own products (because in this case, they are advertisers as well); Disclosures must stand out and use appropriate hashtags.	https://mba-lawyers.com.au/australian-social-media-influencers-now-required-to-disclose-advertising/

In 2016, celebrity Scott Disik put up a post where he shared a little too much information regarding his commercial relationship with a brand than he intended to. He had simply copy-pasted what was sent across to him and did not review or put his own efforts into the caption. His post read, “Here you go, at 4pm est, write the below: Keeping up the summer workout routine with my morning @booteauk protein shake!” This was what the post looked like:

Image source: Content Marketing Institute, Full disclosure: the murky world of influencer marketing

As an influencer, what should you remember when endorsing products?

The rules are pretty straightforward: 

• Be sure to do your due diligence on the brand and product;
• Your posts must be honest and transparent;
• Insist on a written document for short period/ ad hoc works also – always record your terms in black and white. At the end of the day, to your followers, you are the face of the brand/ product. It is your reputation on the line;
• Ensure your disclosures are unambiguous and prominent. Look up the requirements on labeling and hashtags. Some examples of clear hashtags are #ad #advertisement #partnership #paidpartnership #sponsored;
• Be aware of any applicable regional legislation and social media platforms’ endorsement guidelines. If brands insist on not including appropriate disclosures for any reason, you can let them know of the relevant legal implications. Some legislations inherently have hefty sanctions and fines mentioned for non-compliance; and
• You are allowed to ask questions regarding the products you are endorsing. 

Here is an example of an ambiguous and badly made influencer marketing post v. a clear, well made and compliant post:

Image source: Performance Marketing Association influencer guidelines

Regulatory concerns

Regulating activities on digital platforms or mediums is always tricky and legislatures are still grappling with the pace at which technology is advancing. Influencer marketing is also one such area that has certain concerns when it comes to building regulations around it primarily because it stretches across specific jurisdictions and industries. Some of the concerns that regulators face are:

• Fraudulent Accounts

As we are all aware, making an account on social media is no hassle whatsoever. It only takes a few minutes for your account to go live. The ease with which accounts can be made is sometimes taken for granted. Some individuals create “influencer accounts” with ads that they claim are sponsored, but in reality, there is no contractual relationship with the brand. Influencers might just be using or trying out the brands and uploading posts on the same. Brands are tagged in these posts, so to consumers, it may seem like a ‘sponsored partnership’. 

Influencers want it to look like a sponsored ad as well because when the brand notices the amount of publicity it is getting, they would want to monetize this by then creating a financial relationship with the influencer. 

Image Source: Captiv8, 2018 fraud influencer marketing benchmark report

• Fake number of followers

Brands and endorses primarily look at influencers’ followers to gauge the level of influence and popularity they have amongst consumers. The number of followers is also a metric for financial remuneration. More the influence, the higher the compensation. Some influencers, therefore, create multiple accounts under different names posing as consumers/followers of the influencer’s main account. These fake accounts are then sold in bundles thereby increasing their follower count. 

It has been reported that celebrities like Amitabh Bachchan, Badshah, and Shah Rukh Khan have also paid marketing agencies to boost their street cred. According to Kamala Bryant, a PR Manager who finds influencers to promote products on Instagram, three out of every ten influencers she comes across have fake followers.

• The influencer effect

Social media has content that a majority of adults might consider as problematic. Content relating to alcohol, drugs, pornography, unhealthy foods, and smoking. Such posts are also sponsored and influencers cannot possibly know the age group of all their followers. Their posts do create a negative impact on the minds of their younger followers. Children from a very young age are exposed to plastic surgery, unaffordable products, and pressure to keep up with the latest trends. 

Nowadays there is another problem in the tourism industry wherein influencers market places that are intentionally under the radar for conservation purposes. This drives up the traffic in such places, consequently leading to the destruction of the environment.

Conclusion

Influencer marketing is just now gaining momentum and thus, regulations surrounding this marketing strategy are also quite nascent. Legislators are realizing the importance of having separate laws to govern influencers and endorsers in the digital marketing arena. 

Compliance with legislation is extremely important to avoid hefty sanctions and fines, and this can only be successful if both the advertisers and influencers work together. 

Authorities must also regularly audit and monitor social media activity to highlight errors and provide time to advertisers and influencers for rectification. Directly penalizing them will not serve the purpose. 

Influencers require time and education regarding the implications of non-compliance to be able to follow the law. Knowing their rights will help them negotiate their affiliate contracts better. 

Some social media platforms like Youtube and Instagram have inherent endorsement guidelines that must be followed by influencers. This is a vital and useful policy that social media companies must inculcate within the culture of the organization. Social media can be accessed by different age groups, it is important to have strict marketing guidelines in place to ensure transparency to their users. Transparency always builds trust and finally increases the reputation of the organization in the long run.

The next time you see a post on social media by one of your favourite influencers, watch out for those hashtags and disclosures! 

References

• https://entrepreneurship.babson.edu/what-is-influencer-marketing/
• https://www.insiderintelligence.com/insights/influencer-marketing-report/
• https://www.businessinsider.in/retail/news/mcdonalds-new-bts-meal-is-already-outpacing-the-hit-travis-scott-meal-in-popularity/articleshow/83263001.cms
• https://influencermarketinghub.com/what-is-influencer-marketing/
• https://www.campaignindia.in/article/blog-virat-kohli-bats-for-lovely-professional-university-are-twitterati-over-r/471395
• https://www.mondaq.com/unitedstates/social-media/1056702/uk-and-us-social-media-influencer-laws
• https://inflownetwork.com/influencer-marketing-laws-in-the-usa/
• https://kleinmoynihan.com/uk-influencer-compliance-report-is-a-reminder-of-us-social-influencer-law-marketing-attorney/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration
• https://www.natlawreview.com/article/social-media-vs-reality-check-asci-s-new-influencer-guidelines
• https://www.mondaq.com/india/advertising-marketing-branding/1082536/influencer-marketing-there-is-more-than-meets-the-eye
• https://thepma.org/wp-content/uploads/edd/2017/09/PMA-Compliance-Council_Influencer-Guidelines.pdf
• https://sites.captiv8.io/fraudreport
• https://www.theatlantic.com/technology/archive/2018/12/influencers-are-faking-brand-deals/578401/
• https://guides.loc.gov/influencer-marketing/regulation
• https://www.financialexpress.com/brandwagon/the-rise-of-fake-followers-on-social-media/2069015/
• https://contentmarketinginstitute.com/cco-digital/april-2019/influencer-marketing-non-disclosure/

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