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.