By Bianca Lopez, Solicitor
1 February 2024
In December 2023, the Australian Competition and Consumer Commission (ACCC) released reports outlining their findings from two recent internet sweeps. The first sweep explored social media influencer activity, while the second sweep investigated online business reviews. Both sweeps focused on online activity from a misleading or deceptive conduct perspective.
Each year, the ACCC announces a list of Compliance and Enforcement Priorities that outlines the areas the ACCC will focus on for the following year. For the last two years, the priorities list has included consumer and fair-trading issues relating to misleading or deceptive advertising and marketing practices in the digital economy. It is, therefore, no surprise that the ACCC has looked specifically to the practices of social media influencers and online reviews in its investigation of online marketing’s compliance with the Australian Consumer Law (ACL).
Influencers, don’t forget the hashtag
In its review of influencer content, the ACCC completed a sweep of activity across Instagram, TikTok, YouTube, Facebook and Twitch. During the investigation, the ACCC reviewed the online activity of 118 influencers from seven sectors following reports from consumers that these influencers were posting potentially misleading information. The sectors included:
- beauty and cosmetics;
- food and beverage;
- travel and lifestyle;
- fitness and wellbeing;
- home and parenting; and
- gaming and technology.
You may recall our earlier article, published in January 2023 when the ACCC announced that the influencer industry was on its radar. In line with our predictions, the ACCC sweep focused on influencers with significant followings first, as well as the big brands that use more obvious influencer-led campaigns. As we noted in our earlier article, this approach makes sense given that the ACCC pursuing influencers with large follower bases makes for a more impactful example to the market.
As we noted in our earlier article, however, micro-influencers with smaller followings were not altogether safe from the sweep. The ACCC clearly understands that micro-influencers have profound impact on consumers and it was careful to also include a number of micro-influencers in the internet sweep.
Of the 118 social media influencers reviewed, the ACCC uncovered that a startling 81% were found to be posting potentially misleading advertising content. The sectors with the highest rates of concerning content were fashion (96% of posts) and gaming and technology (73% of posts).
The most common issue the sweep identified was that influencers were not adequately disclosing when brands were providing payment, gifts or other incentives in exchange for the influencers posting content for the brand. That is, consumers were not able to clearly identify which posts were part of commercial brand partnerships and which were organic posts from the influencers. The ACCC also raised concern with influencers using vague hashtags to disclose advertising – for example, using “#sp” or “#spon” in their captions – or formatting their posts to hide the brand partnership disclosure to make it difficult for consumers to identify a brand post.
The ACL clearly sets out that businesses must not mislead or deceive consumers, largely by the operation of section 18. This requirement extends to influencers engaging in trade or commerce, such as brand partnerships and collaborations, as well as to businesses and brands themselves who are using influencers to market their products or services online.
What does this mean for the brands?
The ACCC report included clear reminders for both influencers and brands with respect to influencer marketing. Indeed, agencies engaging with influencers on behalf of brand clients must also take note.
Importantly, the ACCC stated their expectations that brands and businesses will ensure influencers are aware of their obligations under the ACL when promoting products of services. Similarly, brands need to be mindful when providing clear direction to influencers for the partnership content, and agencies must also be mindful where they are contracting with influencers on their brand client’s behalf. That is, while clear direction to include the correct hashtags and promotional content disclosures is imperative, brands and agencies should be mindful that any suggested scripts or social copy should not direct influencers to misrepresent their opinion or experience with a product or service.
Further, brands and agencies should ensure they are across the relevant obligations relating to influencer sponsored content, and should have clear processes in place to monitor influencer content for correct disclosures, hashtags etc. As it relates to influencer marketing, when the brand is involved under a sponsored content / brand partnership type of arrangement, the ACCC can find the brand to be as responsible for the influencer content as the influencer themselves. This is a similar position to that taken by AdStandards when assessing AANA Code of Ethics compliance, in particular the “Clearly Identifiable Advertising” section 2.7. Any time an influencer receives consideration from a brand or the brand’s agency and there is some sort of relationship in place, there is a risk of AdStandards finding the brand to be in control of the influencer’s posts and thus, adverse determinations can be reached if those posts are not compliant.
Under the ACL, significant penalties can also be imposed for making false or misleading representations in advertising and marketing, which range from up to $2.5 million for individuals or up to $50 million for companies. In announcing the outcome of their sweep, the ACCC did state that no penalties have been imposed on the influencers who were under review, or the relevant brands from the influencers’ posts, at this stage. In other words, the ACCC was clearly keen to place the industry on notice.
However, the ACCC did state that influencers posting misleading messaging will be held just as accountable as any other form of advertising that contains misleading messages moving forward. This highlights again the need for influencers and brands to understand their obligations under law and to have steps in place to ensure compliance with these obligations.
Big no-no to fake business reviews
In the second internet sweep, the ACCC separately investigated 137 businesses for fake or misleading online reviews.
The ACCC identified that 37% of the 137 businesses had engaged in potentially fake or misleading online review conduct. The ACCC uncovered that there was a recurring issue of businesses using professional third-party review companies and comment moderation tools to curate online reputations and present a more favourable position in the market to consumers. The sweep found that the household appliances and electronics sector was the worst of the sectors reviewed when it came to potentially fake or misleading online reviews.
In addition to the above, the ACCC also discovered in the sweep that most businesses using third-party review companies were not disclosing whether the reviews were incentivised or paid, which raises similar concerns to the sponsored or paid influencer content discussed above.
As noted, it is a breach of the ACL to mislead or deceive consumers. It follows that businesses who are purposefully creating fake reviews, or who are editing or removing legitimate negative reviews, for the purpose of presenting a stronger position to consumers are likely to be found a breach of the ACL.
Where to from here?
Given the heightened interest from the ACCC in the influencer and online marketing space, it is important now more than ever that brands and agencies are doing things correctly in this area, in line with current guidance. In its reports, the ACCC has reminded businesses to ensure that influencers are aware of their obligations under the ACL, so it is imperative that you are providing influencers with clear direction when engaging influencers for sponsored content. This includes ensuring that your influencer agreements clearly set out the obligations for relevant hashtags such as “#sponsored” and for the ‘paid partnership’ features to be enabled in any content the influencer posts under the arrangement. Monitoring these posts is also crucial, as simply telling an influencer to behave rarely works and is not a useful defence.
The ACCC announced that it will release guidance in the first part of this year for influencers and businesses to remind them of their obligations under the ACL to disclose advertising in social media posts. We will provide further updates on the ACCC guidance once it has been released.
Further, the findings from the online reviews sweep are set to form the basis for updated compliance material for businesses, following the ACCC’s further review of online platforms. The ACCC did not provide an indication of when this updated compliance material can be expected to be released, however it is important to note that this is clearly a current area of interest for the ACCC.
In the meantime, however, the ACCC has encouraged consumers and businesses to contact the ACCC to report any potentially misleading advertising or potentially fake or misleading online reviews. This again highlights that these are key areas under scrutiny, and brands and agencies should be mindful of the importance of ensuring influencers are complying with disclosure requirements for paid social content, and should also be aware of the importance of not manipulating reviews in an effort to present a more favourable product or service to consumers.
We understand that influencers and online reviews are an important part of digital marketing for brands and agencies. If you are working with influencers or would like further information or advice on the disclosure requirements for influencer social posts or obligations under the ACL with respect to misleading and deceptive conduct in online advertising, please contact one of our experts below.