A guide to social media marketing regulation for businesses and influencers

Over the past decade, social media influencers have emerged as a common form of advertising for businesses. Brands increasingly engage influencers to promote their goods and services through online platforms, with the intent of persuading consumer purchasing decisions in their favour.

Given the relative newness of this form of advertising, the frameworks that regulate influencer marketing are still in their early stages. However, recent changes in law and regulation suggest that this position will soon become more restrictive, presenting a challenge for influencers and the businesses that engage them.

In this article, we provide an overview of the current regulatory position governing influencer marketing and offer some suggestions for influencers and businesses to assist them in navigating the laws and regulations that apply.

What does the law currently require?

There are several laws and regulations that are, or may be, relevant to influencer marketing. These are:

• The Australian Association of National Advertisers (AANA) Code of Ethics, which requires that advertising be ‘clearly distinguishable as such’ to the relevant audience. The Code of Ethics acts as a means of self-regulation in the industry to ensure that advertising and marketing communications are legal, decent, honest and truthful, and that they have been prepared with a sense of obligation to the consumer and society and a sense of fairness and responsibility to competitors. The AANA Code of Ethics applies to advertising or marketing communications where:
  • the advertiser or marketer has a reasonable degree of control over the advertising or marketing communication; and
  • the advertising or marketing communication draws the attention of the public in a manner calculated to promote the product, service, person or organisation.

While a breach of the Code of Ethics will not result in any financial penalty, all decisions relating to a breach are published on the Ad Standards website. This may create reputational damage for a business or influencer, particularly where the decision is reported on in mainstream media. A breach may also be referred to a government agency such as the ACCC if the AANA considers it appropriate;

• The Australian Influencer Marketing Council’s (AiMCO) Influencer Marketing Code of Practice, which provides guidance to businesses when engaging in influencer marketing and sets out what is considered to be ‘best practice’ with advertising disclosure regarding influencer content. The AiMCO Code states that it is not necessary for the brand to have creative control over the material created by the influencer, or for a written contract or brief to be in place with the influencer, for the brand to be considered to have a reasonable degree of control;
• The Australian Consumer Law (ACL), which makes it an offence to engage in misleading or deceptive conduct or to make a false or misleading representation in a variety of circumstances. There is potential for a serious breach of the AANA Code of Ethics to be referred to the ACCC for a breach of one or both of these sections, or for severe misconduct to breach these sections in its own right. While influencer marketing has not yet been subject to any public action under the ACL, the ACCC is increasingly aware of influencer marketing and its impacts on consumer spending. A breach of the ACL can result in significant financial penalties that are determined in reference to the overall financial turnover of a company, which can be as high as $10,000,000. For individuals, the maximum penalty is $500,000. The ACCC has published guidance around social media advertising;
• The NSW Fair Trading Act 1987, which requires an intermediary (in this case, potentially the influencer), before acting under an arrangement that provides for the intermediary to receive a financial incentive, to take reasonable steps to ensure the consumer who will be supplied with the goods or services to which the financial incentive relates is aware of the existing arrangement. A ‘financial incentive’ means a commission or referral fee or other kind of payment prescribed by the Fair Trading Regulations 2019 (NSW). Note that, while consumers must be informed of the existence of such arrangement, there is no requirement to disclose the nature or value of the financial incentive;
• The laws relating to criminal conduct in Australia and in each State and Territory which prohibit ‘secret commissions’, including under the Crimes Act 1958 (Vic) and the Crimes Act 1900 (NSW). The general effect of these laws is to make it an offence for one party to pay money or give a benefit to another party, in return for the receiving party referring or influencing a customer to acquire goods or services from the first party. While this arrangement is generally legal where a customer is informed that the receiving party is receiving a benefit for the referral, serious legal issues may arise where the customer is not made aware. While the ramifications for this type of conduct will vary between jurisdictions, a breach can generally result in significant legal penalties or imprisonment; and
• The Therapeutic Goods Administration (TGA), which regulates the advertising of therapeutic goods in accordance with the Therapeutic Goods Act 1989 (Cth) (Act) and the Therapeutic Goods Advertising Code (Code), which was recently updated in 2021.¹ The recent changes introduced to the Code prohibit paid or incentivised testimonials in advertising by persons who are engaged in the marketing or supply of the therapeutic goods. The prohibition under the Code specifically applies to influencers and other persons who will receive ‘valuable consideration’ for the making of the testimonial.² Note that the word ‘testimonial’ refers to a statement made by a person who claims to have used the product – influencers are still able to give endorsements (being statements of approval or support of a therapeutic good as distinct from statements based on their personal experience with the product), so long as they are given in accordance with the requirements of the Code, eg the advertisement must still be accurate, balanced and not misleading. The effect of the updated TGA regulatory position is that influencers cannot promote therapeutic goods (which include products like vitamins, supplements, protein powders and sunscreen) through a testimonial if they are being paid or have received some other incentive for that testimonial. Under the Act, those found to be in breach of the Code will commit a criminal offence or be subject to a civil penalty under the Act, with the maximum penalties being 5 years’ imprisonment or, for body corporates, a fine of $11,110,000.

What’s next for influencer marketing regulation?

It would be reasonable to expect that influencer marketing regulation will only get more restrictive as time goes on. This is because:

1. Consumers are getting smarter. Businesses now rely on influencer marketing more than ever, spreading their marketing spend across different celebrities, content creators and even everyday ‘micro-influencers’. In response, consumers are doing their due diligence and recognising the patterns (eg the hashtag that paid influencers use to market the products of a business), and are in general more likely to understand their consumer rights in this area than ever before;
2. The ACCC have recently put influencer marketing high up on their radar. In the ACCC Priorities for 2022/23 (which we covered in more detail here), the ACCC made it clear that it will focus on compliance and enforcement activity related to manipulative buying tactics by social medial influencers, specifically, practices that seek to distort or disregard consumer choice and fail to disclose commercial relationships with brands; and
3. There have been slow but steady movements in the laws surrounding influencer marketing. This includes, most recently, the changes made to the Code by the TGA to prohibit paid or incentivised testimonials and to require endorsements made as part of social media advertising to comply in all respects with the Code.

How can businesses and influencers protect themselves?

Before creating marketing material for social media, brands and influencers should ensure they are aware of their legal obligations in Australia (and, if appropriate, overseas). While there is no standard form disclosure that is required in relation to marketing material, the prevailing requirement arising from the various pieces of the regulatory framework is to ensure that advertisements are clearly distinguishable as such, which can be achieved by communicating the existence of a paid arrangement in a way that is clear and prominent.

For businesses, the following tips are likely to assist:

• Familiarise yourself with the obligations that arise under relevant laws and regulations;
• Have in place a formal agreement with the influencers you engage which clearly sets out your expectations in respect of the advertisement;
• Require the influencer to include ‘disclaimers’ in the advertisement to clearly distinguish the content as an advertisement (for example, #ad, Paid Partnership, Branded Content);
• Monitor the social media pages of the influencers you engage to ensure that influencers are complying with their contractual requirements; and
• If you’re unsure about whether the form or substance of your advertisement creates any risk, seek legal advice.

For influencers, the following tips are likely to assist:

• Familiarise yourself with the obligations that arise under relevant laws and regulations;
• Include ‘disclaimers’ in your advertisements to clearly distinguish your content as an advertisement (for example #ad, Paid Partnership, Branded Content). If the business that is engaging you has a preference to not include these types of disclaimers, remind them of their obligations under Australian law;
• Ensure that the advertisements you create are accurate, truthful and (if relevant) factually substantiated;
• Take specific care in relation to advertisements for products that the TGA considers therapeutic goods, where you have received payment, free product or some other ‘valuable consideration’ for those goods. Ensure that you do not make any testimonials in relation to these products, and that any endorsements you make comply in all respects with the Act and the Code;
• Avoid any strong or definitive claims and wording (for example, “this product can fix any problem”) or any other content that may be likely to mislead or deceive consumers; and
• If you’re unsure about whether the form or substance of your advertisement creates any risk, seek legal advice.

However, it is important for businesses and influencers to be aware that the requirements of an advertisement will be highly fact dependent. The risks (and thus the disclosure obligations) may be more or less relevant depending on the nature of the goods or services, the relevant industry in which the business or influencer operates, and the general reputation of the business or the influencer. The correct approach will require an analysis of the context in each case.

How can we help?

We have a dedicated consumer law and commercial contracting team that can assist you with reviewing contracts and marketing materials and provide you with related advice to ensure that you protect your legal interests and brand reputation. If you would like more information about the services we provide please contact us.

This article was written by Teresa Torcasio, Partner, Zoe Vise, Associate, and Alexandra Youn, Law Graduate.

¹The Therapeutic Goods (Therapeutic Goods Advertising Code) Instrument 2021 (Cth) commenced in 1 January 2022, repealing its predecessor, the Therapeutic Goods Advertising Code (No. 2) 2018 (Cth).
²Therapeutic Goods (Therapeutic Goods Advertising Code) Instrument 2021 (Cth), s 24(4).