Crackdown on social media influencers who fail to disclose payments
27th Jul 2023
In a case that social media influencers should not ignore, US authorities recently fined American celebrity Kim Kardashian $2 million for promoting cryptocurrency on her social media without declaring she was paid $385,000 to do so.
Kim K could probably pay that fine with the loose change at the bottom of her Gucci handbag, but the real damage was to her reputation.
Influencers earning big money on social media
The case revealed that many of the product endorsements that Kardashian and other celebrities and so-called influencers feature on their social media sites are just advertisements for which they have secretly been paid. (See ‘Manipulative’ TikTok and Insta influencers face $500k fines’, news.com.au.)
Celebrities and influencers can make big money flogging products to their followers. An eight-year-old American who had his own YouTube channel reviewing toys collected $32 million in 2018. US model Kylie Jenner, with 139 million followers, charges more than $1 million for a single promotional post. (See ‘An 8-year old made US$22 million on YouTube, but most social media influencers are like unpaid interns’, The Conversation.)
How much Australian influencers are earning
According to The Daily Mail, top Australian influencers can command up to $63,000 for a single Instagram post. Sport stars and celebrities can get up to $5,000 for a single sponsored advertisement. That is in addition to loads of free products. (See ‘How much Australia’s top influencers REALLY earn: Leaked figures reveal the eye-watering amounts brands pay for sponsored posts on Instagram’.)
It is tempting for influencers not to declare that these are paid promotions, because then it appears to followers that they genuinely like the product, giving the marketing some legitimacy and leading to increased sales. However, this sort of misleading marketing breaches consumer law and offenders can be fined up to $500,000.
ACCC looking for influencers not declaring paid promotions
The Australian Competition and Consumer Commission has launched a crackdown on influencers who fail to disclose their affiliation with the product or company they are promoting, particularly in the categories of beauty, food, travel, health, lifestyle and fashion. (See 'ACCC social media sweep targets influencers’ (Media Release, 27 January 2023.))
The ACCC is examining all social media channels to identify deceptive marketing practices and the role of advertisers, marketers, brands and social media platforms in facilitating misconduct.
Consumer law is designed to protect consumers against misleading or deceptive commercial conduct in order to encourage accurately informed purchasing. Advertising is not supposed to mislead or deceive consumers.
Those conducting marketing campaigns on social media should obtain legal advice to ensure they are complying with consumer law.
Public concerned with influencers not declaring paid endorsements
The ACCC says with more Australians shopping online, consumers often rely on reviews and endorsements to decide whether or not to buy.
ACCC Chair Gina Cass-Gottlieb said the public had already reported more than 100 influencers who had promoted various products without declaring that these were paid endorsements.
‘The number of tip-offs reflects the community concern about the ever-increasing number of manipulative marketing techniques on social media, designed to exploit or pressure consumers into purchasing goods or services,’ she said.
Companies also guilty of misleading online advertising
It’s not just small-time influencers who are subject to consumer law and face big penalties.
The full Federal Court recently upheld the ACCC’s penalty appeal against workplace advisor Employsure Pty Ltd and ordered the company to pay a penalty of $3 million for making false and misleading representations in its online advertising, suggesting it was affiliated with a government agency.
The judgement came after the ACCC appealed against a $1 million penalty originally imposed by a lower court as inadequate, saying there was a need to deter businesses from attempting similar actions in the future. (See ’Australian Competition and Consumer Commission v Employsure Pty Ltd  FCAFC 5).
This is an edited version of an article first published by Stacks Law Firm.
The ALA thanks Christopher Morris for this contribution.
Christopher Morris was admitted as a solicitor in February 2014 and works in a broad range of legal areas, including commercial litigation, debt recovery and insolvency. He has acted on many varied matters involving intellectual property, bankrupt estates, construction, corporate restructuring, contracts and many other areas of law. He has appeared in a number of jurisdictions, including the Court of Appeal of the Supreme Court, as well as the Federal Circuit and Family Court and the Supreme Court in the course of numerous bankruptcy and winding up proceedings.”
The views and opinions expressed in this article are the author's and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).