Influencer marketing has evolved into a pillar of the digital economy, having a worldwide valuation of over €21.1 billion. In light of the exponential growth of this phenomenon, together with the fact that generally, influencer marketing is targeted to youths, it was considered as the ripe time by local and EU legislators to establish a framework that will ensure that consumers rights are protected whilst respecting the role of a social network influencer.
Content Monetisation in a Nutshell
Influencer marketing is one of the business models that strengthened in the ever-growing content monetisation economy - where users earn money through content creation for social media platforms. According to SignalFire, around the world, there are over 50 million content creators, of which 2 million can make a full-time career out of creating content. Essentially, influencer marketing is a collaboration between popular social-media users, or influencers and brands to promote brands’ products or services. This concept is not new to the internet age; these partnerships have been going on since the dawn of social media. In 2009, the US Federal Trade Commission was one of the first to regulate them through the ‘Mommy Blogger Law’.
Regulating Influencers
As things stand, European consumer law does not provide a clear definition of influencers directly. Currently, the European Commission is studying different options to set up a legal framework for this specific commercial practice. This notwithstanding, although legislation does not define influencers, the Directive 2005/29/EC (hereinafter referred to as UCPD) includes a definition for traders. The law clearly states that ‘trader’ refers to:
any natural or legal person who, in commercial practices covered by this Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trade (Article 2 (b) of UCPD);
This definition indicates that if a social media user generates revenue through content monetisation and engages in commercial practices towards consumers, s/he is considered as a trader and is thus regulated by extensive EU and national legislation on consumer protection. The notion of commercial practices is widely interpreted. It includes communication which aims to advertise or sell products or services. Therefore, reviews are also considered as commercial practices. Simply put, an ‘influencer’ is considered as engaging in advertising. When one evaluates a product in return for compensation - one leverages advertising abilities to enhance revenue. Conversely, if an airline pilot purchases a lipstick you promote, which is completely unrelated to their profession and is an additional item they wish to purchase, s/he are regarded as your consumer. This has also been further confirmed by case law.
To aid influencers adapt to the new framework, the EU Commission has launched an Influencer Legal Hub. Commissioner for Justice, Didier Reynders, said:
“The business of influencers is thriving and a lot of consumers - often young people or even children - trust their recommendations. This business model, however, also comes with legal obligations. Influencers too must follow fair commercial practices and their followers are entitled to transparent and reliable information.”
Given that influencers are being considered as parallel to their peers who promote items offline, they are also regulated by national consumer affairs authorities. In order to protect cross-border purchases, a network of national public enforcements have joined forces. The Consumer Protection Cooperation has the abilities to detect irregularities and take prompt actions against rogue traders.
Disclosure Advertising
Although in it’s natural form, influencer marketing is aimed at looking organic and natural, the law is clear that this must conform with the principles of consumer protection. Influencers must always disclose if their content has an underlying commercial element. This mirrors the industry standard in other advertising sectors, such as TV marketing and door-to-door marketing. The Court of Justice of the European Union highlighted this in the Peek and Cloppenburg case, wherein advertising services were provided in return for photos protected by copyright. This case brought clarity to the UCPD highlighting one of the pivotal obligations within the directive applicable to influencers.
The UCPD’s Annex lists practices deemed inherently unfair. An unfair practice (Point 11, Annex of UCPD. ), which the European Commission has confirmed that it is directly relevant for influencer marketing deals with ‘advertorials’.
Within this list, the European Commission has explicitly emphasized the relevance to influencer marketing in point 11 of the Annex, specifically addressing 'advertorials.' Advertorials refer to media content which present information about a product or service in a manner that may appear objective, similar to non-sponsored content, yet contains advertising elements. This has the potential to mislead consumers. Point 11 expressly prohibits undisclosed advertorials. Any connection between a payment or the provision of something with 'asset value' to a party and an advertising service must be disclosed to consumers. This disclosure requirement extends to services, including scenarios where you receive a gifted haircut, test-drive a car, or enjoy a complimentary stay at a hotel.
What this means for you
It is estimated that in 2023, influencer marketing has grown into a 20 billion Euro industry. This is a significant increase of 29% from the previous year. It is therefore undoubtable that whether you engage in it directly or not, influencer marketing will affect a decision or outcome. Whether you engage content creators to promote your business, or you are a content creator yourself, it is vital to understand the legal parameters which apply.
How we can help
At Chetcuti Cauchi, we seek to apply a pragmatic business approach to each client’s needs. Our lawyers strive to keep abreast with the latest legal developments to ensure that our clients are informed and enabled. Get in touch to find out how we can assist.