On January 22, 2020, Josephine Palumbo, the Deputy Commissioner of the Deceptive Marketing Practices Directorate at the Canadian Competition Bureau (the “Bureau”), spoke at the Canadian Institute’s 26th Annual Advertising and Marketing Law Conference. During her remarks, titled Honest Advertising in the Digital Age, Ms. Palumbo identified the Bureau’s current enforcement priorities as they relate to advertising and marketing in the digital economy. Among other things, these priorities include (a) influencer marketing; (b) fake online reviews; (c) dishonest information about data privacy; and (d) dishonest price claims.
To help businesses better understand how the Competition Act (the “Act”) applies to their online advertising and marketing practices, we are publishing a series of four blogs discussing the enforcement priorities noted above. In particular, each of the blogs will describe the conduct in question, identify the provisions of the Act applicable to the conduct in question and provide some general guidance on what businesses can do to help ensure that their advertising and marketing practices comply with the Act. This is the first of the four blogs, which deals with influencer marketing.
Influencer marketing is a form of social media marketing in which ‘influencers’ provide testimonials, endorsements and/or product placements for some form of compensation. These representations are typically made on Instagram, Twitter, YouTube, Facebook and other social media platforms.
Influencers come in many sizes, ranging from online personalities recognized by only a niche group of consumers to larger-than-life celebrities whose social media presence is a cultural phenomenon – with each of Kylie Jenner, Selena Gomez and Cristiano Ronaldo reportedly making at least $750,000 per sponsored post on Instagram! Ad Standards has defined an ‘influencer’ as someone who possesses the potential to influence others, regardless of the number of followers or viewers they may have.
Influencer marketing is a big and growing business, with many companies now dedicating significant resources to influencer marketing. Why? Because studies show that consumers listen to influencers. For example, an Ad Standards study revealed that 35% of Canadians aged 18-35 have made a purchasing decision based on the recommendation of an influencer.
Given the impact that influencers have on consumers’ purchasing decisions, influencer marketing has become a priority for the Bureau. As a result, it is essential that influencers, and the companies that engage them, be aware of and comply with applicable laws, including their obligations under the Act.
The Act includes a wide range of civil and criminal deceptive marketing practices provisions that apply to anyone who is promoting a product, service or business interest – including influencers. These include provisions relating to, among other things, false or misleading representations, performance claims, ordinary selling price and testimonials.
Failing to comply with these provisions can have serious consequences, including administrative monetary penalties, restitution and reputational harm – and in some cases criminal fines and jail time. For example, administrative monetary penalties for making false or misleading representations contrary to the civil provisions of the Act have ranged from $10,000 to $10 million.
How does this apply to influencer marketing?
In general, advertisements may raise concerns if they include information that is false or misleading or fail to disclose material information. This latter point is particularly relevant to influencer marketing and has been the subject of guidance issued by regulators around the world, including in Canada and the United States.
According to the Bureau, failing to disclose any ‘material connection’ between an influencer and the business, product or service being promoted is misleading. In the Bureau’s view, a connection may be ‘material’ if it has the potential to affect how consumers evaluate an influencer’s independence from a brand, including where the influencer: (i) received payment in money or commissions, (ii) received free products or services, (iii) received discounts, (iv) received free trips or tickets to events, or (v) has a personal family relationship.
The Bureau has outlined best practices for disclosing a ‘material connection’. First, influencers should ensure that their disclosure is as visible as possible. This requires that the disclosure be prominent and visible on all devices without having to click or tap a button to expand the post. Second, influencers should ensure that their disclosure is clear and contextually appropriate. It should include plain and clear language and avoid the use of ambiguous terms and abbreviations. Ad Standards has been more specific, suggesting particular hashtags that are widely accepted as clear: #ad, #sponsored, #XYZ_Ambassador, #XYZ_Partner (where ‘XYZ’ is the brand name).
How does this impact companies that rely on influencers to market their products and services?
The false or misleading representations provisions apply to both the person making or sending the representation and any person permitting the representation to be made or sent. As a result, brands and advertising agencies may be liable for representations made by or through influencers.
In fact, following a recent review of influencer marketing practices across various industries, including health and beauty, fashion, technology and travel, the Bureau sent letters to almost 100 brands and advertising agencies advising them to review their marketing practices to ensure compliance with the law. This sends a very strong signal that the Bureau may hold these brands and advertising agencies responsible for representations made by influencers. Accordingly, now would be a good time for companies who use influencers to review their marketing practices to ensure they comply with applicable laws and guidance.
If you would like assistance reviewing your marketing policies or have any questions about the advertising and marketing provisions in the Act – whether related to the digital economy or otherwise – you can reach out to any member of Fasken’s Antitrust/Competition Marketing group. Our group has significant experience advising clients on all aspects of Canadian competition law.
The information and guidance provided in this blog post does not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member Fasken’s Antitrust/Competition Marketing group.