Social media Influencers: hidden advertising restrictions

The UK’s Competition and Markets Authority (CMA) has published guidance so Influencers can avoid the infringement of consumer laws regarding posting “hidden advertising” online. Whilst we do not wish to comment on the legal aspects, there could be tax consequences if Influencers benefit from income derived from such activities.

Social media platforms have responsibilities under consumer law to prevent and tackle unlawful practices such as hidden advertising, where they are occurring on their services (including sites in ‘desktop’, ‘mobile’ and ‘app’ based formats). In particular, platforms have a duty to act with professional diligence under regulation 3 of the Consumer Protection from Unfair Trading Regulations 2008. These principles are addressed to social media platforms to help them, and their users avoid infringing consumer law, by setting out practical steps that platforms can take to comply with these responsibilities.

  1. Incentivised endorsements must be clearly identified as advertising and must be distinguishable from other content.
  2. Content creators must label content as advertising where they have been paid or otherwise incentivised to endorse a product, service or brand, or they have a commercial interest in the brand or its products or services
  3. Content creators are required to use a particular tool that the platform makes available to label content as advertising.
  4. Using technology and algorithms designed to identify proactively content containing incentivised endorsements that have not been clearly and prominently labelled as such. This should enable platforms to invite content creators who are posting suspected hidden advertising to label it properly or confirm that it is not in fact advertising. Platforms should ensure any such algorithm put in place is effective. For example, as a minimum it should take into account relevant factors such as:
    • relevant metadata of any content, such as captions that tag specific brands, embedded links to brands’ websites or affiliate links added above / beneath content
    • branded content prominently visible within image or video content that can be reasonably identified by automated image recognition tools.
  5. Taking reasonable steps where an algorithm identifies suspected hidden advertising, including flagging this to the relevant brand for their confirmation.
  6. Promptly removing content which has been confirmed as hidden advertising
  7. Applying proportionate and effective sanctions to content creators who have posted hidden advertising, to deter them from doing it again. These could include blocking them from posting for a defined period, suspending their account, and if there are still infringements, closing their account completely. Sanctions should be escalated for repeat offenders

What are incentivised endorsements?

Incentivised endorsement means content appearing on a platform’s service which occurs where:

  • a brand (whether directly or through any intermediary) makes payment to a content creator in connection with promoting itself or its products on the platform; and / or
  • there is a commercial relationship between the content creator and the brand, which includes the following circumstances:
    • an arrangement entered into by a content creator in respect of any brand or its products, where there is payment (as defined below) made or offered in the year prior to the content being posted, or where there is a long-term relationship (such as where a content creator acts as an ambassador for the brand
    • where the content creator has any (direct or indirect) ownership interest in the brand; and / or
    • where the content creator is a director, or otherwise sits on the management board, of a brand, and in either case the content creator’s post depicts or refers to the brand or its products in any way

Payment includes any form of monetary payment; commission; a loan of a product/ service; a free product/service (whether requested or unsolicited); or any other incentive such as discounts, shares or equity, leases or rentals free of charge or on more favourable terms than those offered to the general public, ‘freebies’, free stays, invitations to events etc. Influencers should note these forms of payment for services rendered could be taxable.