Influencer Marketing: The Legal Essentials for Influencers and Product-Based Businesses

Influencer Marketing: The Legal Essentials for Influencers and Product-Based Businesses

Commercial Law, Private Law, Regulatory Updates, Social Media Law

There are more than 64 million influencers’ accounts on Instagram all over the world. 

And it may seem like a sparkly, selfie-obsessed, sunkissed swathe of inspirational posts and weight loss tips where the only rule is that there are no rules.

But, of course, there are rules. Knowing what could land you in hot water (for both influencers and product-based businesses reaching out to influencers) will mean you’re a legally savvy influencer and not just there for the hype. 

Ready to dive into the wild and wonderful world of influencer marketing? Grab your virtual popcorn as we explore the drama, glamour, and the legal intricacies of influencer marketing.

The Legal Framework

A number of laws apply to influencers in Australia. Firstly, the Australian Association of National Advertisers (AANA) has a Code of Ethics that applies to all advertisers which sets the standard for advertising in any medium.

The Code of Ethics is the cornerstone of the AANA self-regulatory system and is supplemented by a Code of Advertising and Marketing to Children, Food and Beverages Code, Environmental Claims Code and Wagering Advertising & Marketing Communication Code. 

The self-regulatory system is underpinned by an independent, transparent and robust complaints-handling system administered by Ad Standards. Its’ object is to ensure that advertisements and other forms of marketing communications are legal, honest, truthful and have been prepared with respect for human dignity, an obligation to avoid harm to the consumer and society and a sense of fairness and responsibility to competitors.

The Code applies to all kinds of content, cinema, internet, outdoor media, print, radio, telecommunications, television or other direct-to-consumer media including new and emerging technologies. Which means Instagram, Tik Tok, Snapchat and all social media platforms are all fair game.

Influencers are also bound to comply with the Competition and Consumer Act 2010 (Cth) known as the Australian Consumer Law (ACL), which prohibits businesses from misleading or deceiving consumers. This applies to influencers engaging in trade or commerce, as well as brands and marketers using influencers to advertise online. The Australian Competition and Consumer Commission is the competition regulator, watchdog and national law champion (ACCC).

And don’t forget that if you’re in the therapeutic goods game, section 24 of the Therapeutic Goods Advertising Code 2021 (TGA Code) sets out the specific requirements for using endorsements and testimonials in advertisements about therapeutic goods. (Watch this space for our comprehensive to the TGA Advertising Code in the next week.)

So let’s take a look at some of the key legal areas influencer should wrap their head around:

1. Disclosure Dazzle: Let’s Play ‘Spot the Sponsorship’

Let’s talk about sponsored posts. If a brand offers you free products or pays you to post about them, you have to disclose it to your audience. Think of disclosure like a secret handshake – only cooler. 

Of the 118 social media influencers reviewed in the ACCC’s influencer sweep, 81 per cent were found to be making posts that raised concerns under the ACL for potentially misleading advertising

The ACCC is due to release guidance in early 2024 for influencers and businesses to remind them of their obligations under the ACL to disclose advertising in social media posts.

So be transparent about those sponsored posts, gifts, or any cash flowing into those influencer pockets. Think of it as a trust exercise for your followers. Your influencers have gotta spill the beans with a nod to the laws so hashtags like #Ad, #Sponsored will denote that they know their legal game.

2. Influencers and the Deceptive Mirage: Don’t Mislead Your Fans

Let’s talk about the FYRE Festival Fiasco of 2017. 

Picture this: a luxurious three-day music festival on Pablo Escobar’s private island, promising A-list celebrities such as rapper Ja Rule and models Kendall Jenner and Bella Hadid, 5-star cuisine, and non-stop celebration. And festival goers forked out thousands for it. 

What could possibly go wrong? Well, as it turns out, everything. The FYRE Festival, orchestrated by the infamous Billy McFarland (aged 26), became the epitome of a party that never happened. Disgruntled festivalgoers found themselves stranded in the Bahamas, facing hurricane tents, cancelled performances, and a scant supply of cheese sandwiches.

The festival’s downfall wasn’t just due to logistical nightmares; it was fuelled by the misleading promotion orchestrated by social media influencers. 

High-profile models and actresses were paid to post idyllic photos and videos on their private Instagram accounts, creating a mirage of the ultimate party destination. Little did their fans know, these influencers had no intention of actually attending the event. 

The aftermath left both disappointed festivalgoers and a legal conundrum in its wake. The disastrous Fyre Festival spawned lawsuits against the event’s organizers, who included Ja Rule and Billy McFarland, the latter of whom is now serving a six-year prison sentence for fraud.

As the FYRE Festival unfolded, legal questions arose, especially regarding the responsibility of influencers for promoting misleading content. 

In Australia, consumer protection laws, like the ACL, make it clear that deceptive advertising practices won’t be tolerated. While there’s no specific legislation targeting social media, the general laws on false and misleading claims in the ACL apply to businesses and influencers alike.

3. The Fine Print Finesse: Contracts Are the New Black

Contracts are your legal safety net in the unpredictable world of social media. 

An Influencer Agreement is a legal document which sets out the agreement between the Influencer and the Brand in relation to the rights and obligations of each party. Things like the length of the contract, confidentiality, permitted use of content, agreed fees and payment terms, exclusivity and restraints and the circumstances in which the agreement can be terminated should all be mapped out clearly in the contract. 

Make it clear who’s the boss, who’s getting paid, how to handle disputes, how to exit the arrangement if necessary and who’s in charge of the creative chaos.

4. The Age-Old Challenge: Mastering the Influencer Game when Marketing to Children

Stricter rules apply to advertising to children as of 1 December 2023, when the new Children’s Advertising Code came into force.

Advertising to Children must not contravene prevailing community standards, including by promoting products or services unsuitable or hazardous to children or encouraging unsafe practices. Advertising to Children that encourages bullying or promotes unhealthy ideal body image may also breach this rule.

AANA CEO Josh Faulks has said the new Code recognises the distinct vulnerability of children and provides a robust framework for the advertising industry:

“The Code is no longer limited to advertising for children’s products and will provide critical protections around any advertising directed at children,” Faulks said.

“It places a clear ban on directing advertising of hazardous products to children such as vapes, kava or highly caffeinated drinks. It also prohibits the encouragement of unsafe practices, including bullying or promoting unhealthy body image, and the use of sexual appeal or imagery when communicating to children.”

The new Code pays special attention to the rise of ‘kidfluencers’ and influencer advertising directed at children.

“The rules go beyond Australian Consumer Law recognising the subtle, embedded nature of influencer advertising directed at children which research says lowers children’s ability to recognise it as advertising. It must now be immediately clear to a child that they are interacting with advertising content,” Faulks said.

The new Children’s Advertising Code complements AANA’s Food & Beverage Advertising Code which already bans advertising of occasional food and beverages to children. This applies to all advertising, across all media channels at all times of the day.

Complaints about advertising that raise issues under the Children’s Advertising Code are handled by Ad Standards and are determined by the independent Ad Standards Community Panel, whose members are representative of the Australian community.

Keep it legal, keep it real, be sensitive and remember, kids are the toughest critics.

5. Endorsement Etiquette: Honesty is Punk Rock

Fake reviews are so 2010. Let your influencers be the punk poets of authenticity. Real talk, real opinions, and maybe a little rebellion in the mix – that’s the influencer code.

A 2022 ACCC analysis of more than 130 online businesses found 37% were manipulating reviews to have fake positive reviews published or negative reviews scrubbed. The ACCC found the sectors with the highest proportions of potential fake or misleading reviews were household appliances and electronics, beauty products, and home improvement and household products.

Misleading endorsements are a breach of the ACL and a no no.

6. The Data Dilemma: 

In this crazy world of tweets, snaps, and double-taps, we’re all navigating a sea of personal information. Remember, you’re not just posting pics – you’re the captain of your data ship! ⚓️ 

So influencers have certain responsibilities! 🕵️‍♂️ To stay on the good side of the Privacy Act 1988 (Cth), here’s the lowdown:

  • uncheckedHave a clear Privacy Policy: Lay it all out – how you scoop up, use, and share personal data. Your followers need to know what’s up, so keep it real.
  • uncheckedLock it down with ninja-level security: Fortify that data fortress with strong encryption, secure data storage, No unauthorized peeping, no sneaky business. Use Fort Knox-level storage, unbreakable encryption, and multi-factor authentication.
  • uncheckedSound the alarm on data breaches: If the ship’s got leaks, don’t keep it quiet! Tell your customers ASAP and take all reasonable steps to mitigate any harm.
  • uncheckedStay in the privacy policy loop: The Privacy Act is like a constantly updating playlist – you’ve gotta stay tuned. Be in the know about the latest reforms and keep your privacy game strong.

The evolving landscape of consumer protection laws and influencer regulations suggests that influencers must tread carefully in the #instaworthy realm. 

So, next time you see your favorite influencer promoting paradise on Earth, remember: the law is watching, and the party might just be a legal minefield. Stay savvy, stay legal, and keep scrolling!

🤘😎

If you’d like help setting up your legal foundations as a product-based business, or influencer, here at Law Quarter, we advise clients on all areas of business, marketing and consumer law, and our lawyers work with clients involved in beauty, healthcare and wellness throughout Australia. 

We also run a sister business, Compliance Quarter, so we’re set to help you build a big glowing business empire with the strongest of foundations 🙂

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

What is the difference between an Australian Financial Services Licence and an Australian Credit Licence?

What is the difference between an Australian Financial Services Licence and an Australian Credit Licence?

Business Sale, Regulatory Updates

What is an AFSL?

An Australian Financial Services Licence (AFSL) is a licence issued by the Australian Securities and Investments Commission (ASIC) that allows a company or organisation to provide financial services to clients. 

This can include a wide range of services such as:

  • Providing financial advice to clients, including advice on investment products, superannuation, and insurance.
  • Dealing in a financial product, such as buying and selling shares or derivatives on behalf of clients.
  • Making a market for a financial product, such as trading shares or derivatives on behalf of clients.
  • Operating registered schemes, such as managed funds or superannuation funds.
  • Providing traditional trustee company services, such as acting as a trustee for trusts, estates and other securities.

To obtain an AFSL, a company must meet certain requirements and comply with certain regulations, such as having sufficient capital and insurance, and maintaining proper records and reporting. As an AFSL holder, you have a general obligation to provide efficient, honest and fair financial services. You must comply with the conditions of your AFS licence and the Corporations Act 2001.

What is an ACL?

An Australian Credit Licence (ACL) is a licence issued by ASIC that allows a company or organization to engage in credit activities, such as:

  • Providing credit assistance, such as helping clients apply for a loan or mortgage.
  • Brokering credit, such as arranging loans or mortgages on behalf of clients.
  • Providing credit advice, such as giving advice on the best type of loan or mortgage for a client’s needs.

Credit activities include providing credit assistance, brokering credit, and providing credit advice. For example, a mortgage broker would need an ACL, but the bank providing the mortgage would need an AFSL.

To obtain an ACL, a company must also meet certain requirements such as training and compliance and be able to demonstrate its ability to conduct the credit activity and how it will engage in good credit practice.

You have general conduct obligations that include:

  • acting efficiently honestly and fairly
  • being competent to engage in credit activities, and ensuring your representatives are competent and
  • being able to ensure your clients are not disadvantaged by an conflicts of interest that you or your representatives may have in relation to your credit activities
  • ensuring you and your representatives comply with the credit legislation
  • having appropriate dispute resolution systems (including both internal systems and being a member of an external dispute resolution scheme) 
  • having appropriate compensation arrangements in place (which for some will include holding professional indemnity insurance) 
  • having adequate resources (including financial, technological and human resources) and risk management systems
  • having appropriate arrangements and systems to ensure compliance.

The applicable legislation is the National Consumer Credit Protection Act 2009 and the National Credit Code. The credit legislation also contains more specific obligations and requirements, including:

  • the responsible lending requirements (ascertaining and verify a consumer’s financial situation and assessing whether the credit contract is not unsuitable) 
  • requirements in the National Credit Code dealing with precontractual disclosure and conduct in relation to the terms of credit contracts and consumer leases
  • maintaining trust accounts (if you hold money on behalf of another person while providing a credit service).

The above list, however, is not an exhaustive list of your obligations. 

In summary, AFSL allows the holder to provide financial services, including credit services, while ACL allows the holder to engage in credit activities only.

An Authorised Representative (AR) of an AFSL is a person or entity that is authorised by an AFSL holder to provide financial services on their behalf. The AR must be appointed by the AFSL holder in writing and must meet certain requirements, such as having the necessary qualifications and experience to provide the financial services offered. The AR must also comply with the conditions of the AFSL and with all applicable laws and regulations. They essentially act as an agent of the licensee, providing financial services under the licensee’s AFSL and conducting responsibilities on behalf of that licensee.

If you’re receiving either credit or financial advice, you need to ensure that the company or person is authorised and properly licensed to provide the advice. 

We’ve represented clients who have encountered problems when they’ve been dealing with an unauthorised or unqualified professional and have lost a significant amount of money as a result.

Check the Registers

You can check if a company or organisation holds an Australian Financial Services Licence (AFSL) by searching the Financial Advisers Register on the Australian Securities and Investments Commission (ASIC) website.

To check if a company or organization holds an AFSL, follow these steps:

  1. Go to the ASIC website: https://www.asic.gov.au/
  2. Click on “View All Registers” on the top right menu
  3. Under “Financial Advisers”, click on “Financial Advisers Register”
  4. Search for the company or organisation using the name or Australian Company Number (ACN)
  5. The search results will provide information about the company or organisation, including whether it holds an AFSL and the scope of the licence.

It’s important to note that the Financial Advisers Register only includes information about companies and organisations that hold an AFSL for providing financial advice and related services, not for credit services.

If you want to check if someone holds an Australian Credit Licence (ACL), you can look it up on the National Credit Licence Register, which is also available on the ASIC website. You can search by the name of the company or individual, or the credit licence number. The register will show you the type of credit activities the licensee is authorised to conduct, the expiry date of the licence, and other related information.

Contact Us Now

If you’ve received poor professional advice from an adviser, or you’re looking to obtain an AFSL or ACL in order to provide advice to clients and consumers, please contact us at info@lawquarter.com.au or call us on (02) 8318 5962

Energy Retail Law Key Definitions

Energy Retail Law Key Definitions

Energy Law, Regulatory Updates

There are some key definitions contained in the Energy Retail Law which need to be understood.  Chapter 10 of the National Electricity Rules (NER) contains the Glossary and it covers 114 pages. Often the definition of the word or phrase will contain words which also need to be defined.

Embedded Network

For example, the definition of an Embedded Network is:

distribution system, connected at a parent connection point to either a distribution system or transmission system that forms part of the national grid, and which is owned, controlled or operated by a person who is not a Network Service Provider.

Each of the phrases in italics has a separate definition within the Glossary. To understand all the meanings, you may watch a short presentation I created. Each phrase which is defined also has defined terms within it. You may need to go up to three steps within the definition to find the meaning of that phrase.

Distribution system

Let’s look at the phrase ‘distribution system’ which is contained in the definition of Embedded Network.

It is defined in the National Energy Retail Law as:

(a) for a distributor who is a regulated distribution system operator within the meaning of the NEL—a distribution system within the meaning of the NEL; or

(b) for a distributor who is a service provider within the meaning of the NGL who owns, operates or controls a distribution pipeline that is a covered pipeline under that law—a distribution pipeline within the meaning of the NGL; or

(c) for a nominated distributor under s 12—the nominated distribution system that is specified under that section.

Therefore, you need to determine if you are a distributor and which type of energy you are providing. The NEL is the National Electricity Law and the NGL is the National Gas Law.

Distributor

Distributor, under the National Energy Retail Law means

(a) a regulated distribution system operator within the meaning of the NEL; or

(b) a service provider within the meaning of the NGL who owns, operates or controls a distribution pipeline that is a covered pipeline under that Law; or

(c) a nominated distributor, to the extent provided by section 12.

Under the National Energy Law the definitions are contained in the NER as:

Distribution System Operator

A person who is responsible, under the Rules or otherwise, for controlling or operating any portion of a distribution system (including being responsible for directing its operations during power system emergencies) and who is registered by AEMO as a Distribution System Operator under Chapter 2.

Distribution system

A distribution network, together with the connection assets associated with the distribution network, which is connected to another transmission or distribution system. Connection assets on their own do not constitute a distribution system.

Under the NGL the phrase ‘service provider’ is defined in s 8 of the National Gas (South Australia) Act 2008 as:

Service provider

(1) A service provider is a person who—

(a) owns, controls or operates; or

(b) intends to own, control or operate, a pipeline or scheme pipeline, or any part of a pipeline or scheme pipeline.

Note— A service provider must not provide pipeline services by means of a scheme pipeline unless the service provider is a legal entity of a specified kind: see section 131, and section 169 where the scheme pipeline is an international pipeline to which a price regulation exemption applies.

(2) If AEMO controls or operates (without at the same time owning) a pipeline or scheme pipeline, or any part of a pipeline or scheme pipeline, AEMO is not for that reason to be taken to be a service provider for the purposes of this Law.

Distribution pipeline

means a pipeline that is classified in accordance with this Law or the Rules as a distribution pipeline and includes any extension to, or expansion of the capacity of, such a pipeline when it is a covered pipeline that, by operation of an applicable access arrangement or under this Law, is to be treated as part of the pipeline;

Note— See also sections 18 and 19.

Section 12 of the National Energy Retail Law provides:

12 — Nominated distributors

(1) The regulations under an application Act of a participating jurisdiction may nominate an entity (being an entity that is licensed or otherwise authorised under jurisdictional energy legislation of that jurisdiction) to provide customer connection services as a nominated distributor for the purposes of this Law.

(2) A nomination of an entity may be made for any or all of the following:

(a) the whole or a specified part of the geographical area of a jurisdiction; or

(b) the whole or a specified part of a distribution system that is owned, controlled or operated by the entity.

(3) A nomination of an entity has the effect of applying this Law and the Rules (in whole or in part as specified in the regulations and with any specified modifications) to the entity as if it were a distributor within the meaning of this Law, and references in this Law and the Rules to a distributor are accordingly taken to include references to the nominated distributor.

What to do?

As you can see there are many steps to clarify the definition of words and phrases under the National Energy Laws. To understand a phrase the first step is to determine whether it has a definition under the relevant legislation.

If there is a definition then you should take note of the italicised words. This will indicate that the word or phrase has a defined meaning under the legislation. You should therefore also check these definitions.

Words can also be defined by judges when deciding cases. The term ‘explicit informed consent’ was considered by the Federal Court in Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274 at [70]:

‘Section 39 of the NERL SA and the NERL ACT provides that “explicit informed consent” is given where the retailer, or a person acting on the retailer’s behalf, has clearly, fully and adequately disclosed all matters relevant to the consent of the customer, including the purpose or use of the consent, and the customer gives consent. Consent by the consumer must be given in writing signed by the customer, verbally (provided it is evidenced in such a way that it can be verified), or by electronic communication generated by the customer’ (emphasis added).

As further cases come before the courts, a more detailed definition will be created. It is important therefore to be aware of any decisions which may come before the courts.

We have introduced a new section on our news page which will cover cases of interest. Our first decision will be Privacy Commissioner v Telstra Corporation Limited [2017] FCAFC 4. We have selected this decision as it contains important information for all businesses which collect personal information from customers which of course includes the energy retail sector.

The superannuation overhaul: seven areas of reform in the draft bill out for consultation

The superannuation overhaul: seven areas of reform in the draft bill out for consultation

Regulatory Updates

Today we look at proposed changes to regulatory obligations for those operating in the superannuation sector. Namely, the seven key changes contained in the draft Treasury Legislation Amendment

Today we look at proposed changes to regulatory obligations for those operating in the superannuation sector. Namely, the seven key changes contained in the draft Treasury Legislation Amendment

 

Today we look at proposed changes to regulatory obligations for those operating in the superannuation sector. Namely, the seven key changes contained in the draft Treasury Legislation Amendment

Today we look at proposed changes to regulatory obligations for those operating in the superannuation sector. Namely, the seven key changes contained in the draft Treasury Legislation Amendment