On January 22, 2020, Josephine Palumbo, the Deputy Commissioner of the Deceptive Marketing Practices Directorate at the Canadian Competition Bureau (the “Bureau”), spoke at the Canadian Institute’s 26th Annual Advertising and Marketing Law Conference. During her remarks, Ms. Palumbo identified the Bureau’s current enforcement priorities as they relate to advertising and marketing in the digital economy. Among other things, these include a growing focus on the burgeoning influencer marketing economy, one that saw companies spend $1.9 billion in the U.S. and Canada, according to Instascreener.
A form of social media marketing, influencer marketing sees “influencers” provide testimonials, endorsements and/or product placements on Instagram, Twitter, YouTube, Facebook and other social media platforms to sizable pools of eager followers in exchange for some form of compensation. While the term “influencer” most famously includes the likes of individuals who boast millions of social media followers and command hundreds of thousands of dollars in exchange for social media posts (Kylie Jenner, Selena Gomez and Cristiano Ronaldo each reportedly make at least $750,000 per sponsored post on Instagram), the size of their followings is not actually the dispositive factor.
Instead, Ad Standards – the Canadian advertising industry’s non-profit self-regulating body – defines an “influencer” as someone who possesses the potential to influence others, regardless of the number of followers or viewers they may have.
As for why influencer marketing is on the Bureau’s radar alongside issues of fake online reviews, data privacy, and dishonest price claims, that is because it is a sizable and growing business. In fact, many companies now dedicate significant resources to influencer marketing due to the effectiveness of the marketing practice in raising awareness about a brand and its products among consumers, and getting consumers to actually buy the products being promoted. For example, a recent Ad Standards study revealed that at least 35 percent of Canadians aged 18-35 have made a purchasing decision based on the recommendation of an influencer. Given the impact that influencers have on consumers’ purchasing decisions, influencer marketing has become a priority for the Bureau.
With the ever-rising reliance on influencer marketing in mind, issues regarding the use of false or misleading information by influencers or/or their failure to disclose material information is particularly relevant.
In terms of the latter, the use of false or misleading information in connection with influencer endorsements can take the form of a promise of specific, scientific benefits that come from a wellness or beauty product if those benefits cannot be proven by the manufacturer, or the promotion of a product by an influencer who has not actually used the product (which is what was suspected of Kendall Jenner’s promotion of Proactive, for instance).
Meanwhile, the issue of disclosure is one of the longest-standing ones when it comes to influencer marketing, and it has been the subject of guidance issued by regulators around the world, including in Canada and the United States.
Much like the law in the U.S., the Bureau requires the disclosure of any “material connection” between an influencer and the business, product or service. In the Bureau’s view, a connection may be “material” if it has the potential to affect how consumers evaluate an influencer’s independence from a brand, including where the influencer: (i) received payment in money or commissions, (ii) received free products or services, (iii) received discounts, (iv) received free trips or tickets to events, or (v) has a family or social connection.
The Bureau has outlined best practices for disclosing a “material connection,” including requiring that the disclosure is prominent and visible on all devices (and not below Instagram’s “More” button), and includes plain and clear language and avoid the use of ambiguous terms and abbreviations. Ad Standards has been more specific, suggesting particular hashtags that are widely accepted as clear: #ad, #sponsored, #XYZ_Ambassador, #XYZ_Partner (where ‘XYZ’ is the brand name).
Canada’s Competition Act provides for a wide range of civil and criminal deceptive marketing practices provisions that apply to anyone who is promoting a product, service or business interest – including influencers. These include provisions relating to false or misleading representations, performance claims, ordinary selling price and testimonials, among other things, and a brand and/or influencer’s failure to comply with these provisions can have serious consequences, including administrative monetary penalties, restitution and reputational harm – and in some cases criminal fines and jail time. For example, administrative monetary penalties for making false or misleading representations contrary to the civil provisions of the Act have ranged from $10,000 to $10 million.
But far from merely issuing general guidance on these issues, the Bureau is taking action. Following a recent review of influencer marketing practices across various industries, including health and beauty, fashion, technology and travel, the Bureau sent letters to almost 100 brands and advertising agencies in December 2019 advising them to review their marketing practices to ensure compliance with the law, not unlike what the Federal Trade Commission did in 2017.
In addition to setting forth the rules regarding disclosure, the Bureau also made clear that influencer reviews and testimonials must be based on the actual experience of the influencer in order to avoid false advertising action.
The letters – paired with Palumbo’s specific mention of the growing focus on influencer marketing – send a very strong signal that the Bureau is, in fact, paying attention to influencers, and may begin holding these brands and advertising agencies responsible for representations made by influencers in the not too distant future.
Chris Margison, Jenna Ward, Justine Reisler and Robin Spillette are Antitrust/ Competition lawyers at Fasken. Edits courtesy of TFL.