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Business Law, Digital Business Law

Influencers and Social Media Marketing: What You Need to Know

May 01, 2023 by Ava Aslani

Social media has become a key part of modern society and businesses have picked up on its usefulness as a marketing channel. With more and more consumers turning to the internet to inform their purchasing decisions, more and more businesses are now using social media marketing and content marketing as a way of branding and promoting themselves.

One of the latest trends in online marketing has been the use of key individuals to drive a brand’s message to its consumers. For example, instead of marketing directly to its target market, the makers of the latest fat-burning tea might choose to pay an influential celebrity figure, say a Kardashian, to post a picture on their Instagram praising the benefits of the tea.

With social influencer marketing quickly gaining popularity among brand marketers, influencer marketing standards and compliance with advertising guidelines has become a hot topic. Consumers have voiced concerns around transparency, while bloggers and influencers have been left to navigate this new form of marketing in the dark as Canada’s advertising guidelines have been playing catch-up in this emerging area.

Recent Changes in the Legal Landscape

Until recently, Canada’s advertising guidelines did not provide any rules or regulations around influencer marketing. This changed in 2017 with the implementation of new guidelines by Advertising Standards Canada relating to bloggers, celebrities, and other social media influencers who make endorsements or mention products or services in their posts in exchange for payment or other type of consideration. The guidelines closely reflect the disclosure rules enacted by the United States Federal Trade Commission in 2009, although the FTC has since tightened its rules in response to many influencers burying their disclosures in a sea of hashtags.

In addition, in 2019, the Competition Bureau of Canada published its "Guidelines for Influencer Marketing

What Are the New Guidelines?

The new guidelines on paid social media endorsements require endorsements or testimonials to disclose any material connection between the endorser, review, or influencer and the brand that makes the product or service available. If there is a connection (whether it is financial or through other incentives), it must be clearly and properly disclosed in proximity to the representation of the product in a way that is easy to understand and not ambiguous. This includes disclosing any free products, services, or other perks that an influencer may have received in exchange for a review or endorsement.

The rules apply to blog posts and posts on Twitter, Instagram, Facebook, TikTok, and whatever turns out to be the next trend.

How to Disclose an Endorsement

So how can bloggers and influencers ensure they are meeting the new standards? The regulations require explicit disclosure statements within any posts or videos that are paid social media endorsements. There isn’t necessarily specific wording that needs to be used, but the idea is to give readers the essential information.

The guidelines suggest that a simple disclosure like "Company X gave me this product to try" is likely effective. In the case of a video, the influencer could state that some of the products they are going to use in the video were sent to them by their manufacturers.

On social media platforms such as Twitter, Instagram, and TikTok, influencers will need to include hashtags such as #sponsored or #ad. However, it's essential not to bury these hashtags, because if consumers don’t read the words, there is no effective disclosure.

What Happens If You Don’t Disclose Properly

The enforcement of the new guidelines will mainly target sponsoring companies rather than individuals. If an influencer posts about a product without disclosing it, the ASC will contact the brand or company in question and request that steps be taken to prevent further posts. Unlike the FTC in the U.S., which is a government agency, the ASC is a self-regulating body in Canada and does not have the ability to issue fines. However, the Competition Bureau can take enforcement action against both sponsoring companies and individual influencers for non-disclosure, and such action could include fines and legal action. For example, in 2015, Bell Canada was fined $1.2 million after the company’s employees were found to have written online reviews of Bell products and services without disclosing their connection to Bell.

Final Thoughts

Social media influencers and bloggers need to be aware of the evolving rules and regulations around paid social media endorsements. Even though the ASC and Competition Bureau tend to target sponsors rather than individuals, it is important for individual influencers to follow the new guidelines in order to preserve their relationship with their sponsors and maintain their credibility with their followers. If you have any doubts on how to disclose, contact your sponsor and request that they provide you with specific wording to include in your posts.

Ultimately, transparency is key when it comes to paid social media endorsements, and influencers who prioritize transparency and honesty in their relationships with sponsors and followers are likely to reap long-term benefits.

Ava Aslani has built a successful practice specializing in tech startups and digital entrepreneurs. She can help ensure you get up and running with a solid legal foundation and set your company up for success!