Under the influence: can our law keep up?

Social media influencers – popular online personalities with established credibility and large online followings – wield considerable power.

Frith Tweedie

While consumers may not always trust what brands tell them, social media influencers are perceived as providing authentic and reliable recommendations. They can endorse products to influence consumers’ perceptions, behaviours and ultimately purchasing decisions.

And they’re big business. The industry is projected to generate as much as US$10 billion by 2020, with brands relying on influencers’ perceived credibility and social proof to drive sales.

UK research has shown some brands will pay as much as £75,000 for a single post by a popular influencer, with other reports indicating brands can be expected to pay over US $100,000 per post.

These influencers are so successful that an increasing number of would-be social media influencers are even falsely creating the impression their content is sponsored to increase their social media credentials.

But it’s not always plain sailing for brands using influencers to promote their products. Breaches of influencer contracts are increasingly common, while imposter influencers could ultimately damage a brand’s reputation and carefully curated image.

Swipe left human influencer – hello virtual influencer.

Virtual or CGI (computer-generated image) influencers are attracting attention and investment. “Lil Miquela” is a 19-year-old model who wears clothes from the likes of Prada and Chanel, and has 1.5 million followers on Instagram. Her creators recently closed a funding round topping US $20 million to continue developing her and some of its other avatar creations.

While Lil Miquela and other popular influencers like Bermuda, Blawko and Shudu are not real people, these virtual influencers regularly promote famous brands and products. The problem? It’s not always clear whether their posts are sponsored.

And questions of authenticity inevitably arise. What are we to make of posts on Lil Miquela’s Instagram account that claim beauty brands like Ouai keep her hair “silky smooth” - despite her hair being a purely digital creation?

Keeping ads honest

Advertising in New Zealand is self-regulated by the Advertising Standards Authority (ASA), whose stated mission is to ensure every ad is a responsible ad. Those requirements are supported by the Fair Trading Act 1986, prohibiting false or misleading representations.

Recent changes by the ASA lift the bar for influencers and brands, requiring them to clearly identify advertisements and ensure there is “truthful presentation” of content.

The Advertising Standards Code 2018 stipulates that all advertisements – messages designed to influence consumer choice, opinion or behaviour where the content is directly or indirectly controlled by the advertiser – must be clearly distinguishable as such, whatever the form or medium. Giving an influencer free product in return for brand-controlled content will count as an ad just as much as a cash payment.

Where it’s not clear that a social media post is an ad, the ASA’s Guidance Note on Identification of Advertisements requires the use of “#ad”, “Promotional Feature” or similar advertisement identifiers, including logos, brand names or other visual cues.

The perspective of the applicable audience will be relevant to establishing whether the ad is appropriately identified. So, for example, if it’s clear from Lil Miquela’s Instagram posts that she is pushing Puma because she’s decked out head-to- toe in prominently-branded Puma gear, and is waxing lyrical about how fabulous the brand is, then it’s possible no further disclosures will be required.

This analysis will be context-specific, potentially making it harder for brands and influencers to know exactly where the guard rails are.

“Truthful presentation” means ads cannot mislead, deceive or confuse consumers, abuse their trust or exploit their lack of knowledge.

So Lil Miquela’s claim that a shampoo “keeps my strands silky smooth” when that is physically impossible could be considered an unrealistic and inaccurate claim, likely to mislead, deceive or confuse consumers.

If such a claim were held to be a misleading or deceptive representation under the Fair Trading Act, a brand could face a fine of up to $600,000 on conviction under the Fair Trading Act 1986.

It’s worth noting that influencer risks aren’t just hypothetical either.

The recent FYRE festival debacle illustrates influencers’ ability to sell a dream – luxury accommodation and “the best in food, art, music and adventure” – instead of the reality of half-built tents with rain-soaked floors, meals of little more than cold cheese sandwiches and general chaos.

Supermodel Kendall Jenner is reported to have been paid US$250,000 for posts promoting FYRE on social media as a glamorous party on a luxury Bahamian island, with tickets costing up to $100,000. Importantly, none of the FYRE influencers disclosed that the festival organisers were paying them for their posts. #ad anyone?

What’s clear is that influencers and virtual influencers have arrived, as have their emerging cousins “digital humans” as created by the likes of New Zealand’s Soul Machines and FaceMe.

For now, New Zealand’s advertising standards and laws appear just about able to keep up. But as artificial intelligence, social media platforms and celebrities continue to merge, it’s unclear how long that balance will last.

The upshot is any New Zealand business wanting to use social media influencers – virtual or otherwise – must ensure their influencers’ posts are clearly identifiable as ads if that’s what they are.

Brands using virtual influencers will need to take particular care to avoid misleading or confusing consumers in relation to claims about “real life” experiences like the taste or feel of products.

And beware of spending big bucks using any type of influencer to sell dreams that are unsupported by reality – even if you have Kendall Jenner on speed dial.

Frith Tweedie leads the digital law practice at EY New Zealand. This column was first published in cio.co.nz

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