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News Analysis 27 Sep 2021 - 4 min read

Big brands urging influencers to flout advertising disclosure rules, but lawyers warn 'Spam Act' moment, $10m ACCC fines loom

By Sam Buckingham-Jones - Senior Writer
influencers are a growing section of the marketing budget

Influencer marketing is a $5.8 billion industry, growing at 15 per YoY, per HypeAuditor. There's no suggestion influencer posts for Samsung or McDonald's were deliberately misleading, but both were recently found to breach Ad Standards disclosure rules.

Influencer ads are increasingly being pulled by Ad Standards. But that may be the least of their worries. One agency says they’re being asked by big brands to deliberately make influencer marketing less obvious, risking millions in fines under Australian Consumer Law. Media lawyer Stephen Von Muenster says influencer marketing’s “Spam Act” moment looms – sooner or later, the legal limits of advertising on social media through content creators is going to be tested, and it's going to hurt.

What you need to know:

  • Some marketers are either unaware of the rules governing influencer marketing or are deliberately trying to break the rules, according to agencies.
  • But lawyers warn it’s only a matter of time before the ACCC takes action, with individual brands potentially facing millions of dollars in fines.
  • Clare Winterbourn, the founder of influencer agency Born Bred Talent, says she’s being asked whether brands can “get away with” not making the commercial relationship clear. 
  • The ACCC says businesses “cannot mislead or deceive” in their marketing. But it has not taken any action – “yet”.
  • Ad Standards’ Richard Bean says the rules are clear – disclose the relationship – but admits the scale of social media means it’s a harder area to police.

We get a lot of brands asking whether we can get away with not putting [#ad] in there – but this is now a legal requirement. We’re still educating a lot of big brands.

Clare Winterbourn, Founder, Born Bred Talent

'Authentic' posts risk breaking law

Big brands are risking millions of dollars in fines by flouting distinguishable advertising rules when using social media influencers. Lawyers warn the sector is facing its own "Spam Act moment", which ultimately hobbled rogue digital marketing operators. If they are right, brands deliberately trying to circumvent disclosure rules could soon feel significant pain.

Clare Winterbourn, the founder of influencer agency Born Bred Talent, says marketers regularly ask whether it’s possible to place products as “authentic” partnerships, rather than paid ads, despite an increased focus from Ad Standards on disclosure rules.

“We’re still educating a lot of big brands, and we get a lot of brands asking whether we can get away with not putting it [#ad or #sponsored] in there – but this is now a legal requirement. It comes down to an education piece. The talent, too. Influencers who are working in this space, don’t understand that it is a legal requirement.”

She thinks watchdogs could do more to reduce "confusion" on the part of both brands and influencers. But the rules are relatively straightforward.

The Australian Competition and Consumer Commission says under Australian Consumer Law (ACL), businesses “cannot mislead or deceive consumers in their advertising or marketing”.

In basic terms, that usually means putting '#ad' prominently within paid posts. Though even big brands like Samsung appear to be falling foul of what constitutes and influencer ad, and what is not.

The ACCC said it has “not yet taken action against a social media influencer… [but] continues to work closely with industry bodies and international protection agencies to address any misconduct that has a wide impact on consumers.”

If it does decide to act, Australian Consumer Law enables the regulator to hit brands with fines of up to $10 million or three times the benefit received, while individuals face fines up to $500,000.

Media lawyer Stephen Von Muenster said the ACL “might apply to a lack of transparency by influencers and brands”. If the ACCC decides it does, and the lines continue to blur, an example may be made.

From conversations I’ve had with CMOs and Marketing Directors, it’s evident there is still a lack of awareness around all the scenarios that require disclosure and how it’s meant to show up.

Sam Kelly, Managing Director, Hello Social

“We haven’t had a case, but when that [first] case hits, that is going to be big news," said Von Muenster. He thinks it will be akin to the first spam cases. 

"Everyone was spamming everyone and then in 2003 when the Spam Act came in, ACMA brought some big, high-profile cases." Suddenly, he said, "everyone took more notice of the rules".

He thinks the lack of a "big stick" case to date and relatively weak industry regulation is "why you're still getting brand marketing managers think 'we can camouflage this a bit', even though they know they shouldn't."

Brands courting trouble

The Australian Influencer Marketing Council (AiMCO) last month updated its Code of Practice with a gifting and ad disclosure guide.

“When consumers recognise sponsored content and understand that they can raise complaints about disclosure, it shows that influencer marketing is maturing as a channel,” Detch Singh, CEO of martech agency Hypetap and chair of AiMCO, said.

“The recent increase in rulings is also one of the reasons we released an update to the AiMCO Code of Practice to clarify some of the edge cases and grey areas around disclosure… It seems to me that the view from Ad Standards is quite straightforward: Disclose the nature of the commercial relationship if you are talking about a brand.”

Sam Kelly, Managing Director of Hello Social, said: “From conversations I’ve had with CMOs and Marketing Directors, it’s evident there is still a lack of awareness around all the scenarios that require disclosure and how it’s meant to show up.

“More education is required and that’s why Hello Social and AiMCO have been doing so much in this space – to make sure brands understand the rules and avoid any breaches or penalties.” 

Advertisers do need to think carefully about what's going to happen with their products as a result of their relationships with advertising mediums, whether they're traditional media or social media or whatever.

Richard Bean, Executive Director, Ad Standards

Read the rules

A change to the Australian Association of National Advertisers’ Code of Ethics in February this year that meant ads must be “clearly distinguishable as such” has prompted more than 120 complaints about posts on social media. Yet those breaking the Code are a minority, said Executive Director of Ad Standards, Richard Bean. There is “no evidence there’s a huge problem”, he suggested.

“Advertisers do need to think carefully about what's going to happen with their products as a result of their relationships with advertising mediums, whether they're traditional media or social media or whatever,” Bean said.

Alongside Samsung's recent run in with the ASB, McDonald's was this month found in breach after a host at an Adelaide radio station sponsored by the company shared an image of its food on his popular personal account

In both cases, it was found the advertiser had “reasonable control” over the posts through their commercial relationship, even if they weren’t necessarily aware the posts were coming. McDonald's said it was “disappointed” with the outcome but respected the decision. Samsung said it was “concerned” by the ruling’s implications and is appealing.

The fundamental purpose of the Code of Ethics is transparency, so content creators should declare if they are sent a gift and their motivation for sharing a post, Bean said.

“[The community panel] may conclude that even though a specific post was not specifically required under a contract or by an advertiser, it would not have occurred but for the relationship between the two and it clearly led to an advisement for the product,” Bean said. 

“The potential for people to not be aware or to get it wrong in their interpretation of the code [on social media] is higher than in a highly professional environment where you have a big brand advertising on a commercial television station… Given that, it seems to be working remarkably well. The rise in complaints seems to indicate that people are aware both of the code and the existence of Ad Standards to complaint to. And the compliance rate, it's good. So it's everyone's on a learning curve, I guess. But it's an upward curve.”

With influencer marketing taking an increasing share of advertising dollars, how long the ACCC gives the market to do its homework before setting a test remains to be seen.

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Sam Buckingham-Jones

Senior Writer

Market Voice

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