LIABILITY OF SOCIAL MEDIA INFLUENCERS FOR SPONSORED CONTENT AND ENDORSEMENTS

ABSTRACT

Social media influencers are a new class of digital entrepreneurs brought out by the quick ascent of social media platforms. Because these people have the power to influence the purchases of their followers, companies looking to penetrate particular markets can benefit greatly from having them on their team. With this authority, though, also comes the need to make sure sponsored material and endorsements adhere to legal advertising requirements. The responsibility of social media influencers is examined in this article, which focusses on sponsored content laws, court rulings that have influenced the legal system, enforcement strategies, and new advancements in this quickly changing profession.

KEYWORDS

Social media influencers, liability, sponsored content, endorsements, advertising regulations, consumer protection, FTC guidelines, enforcement mechanisms

INTRODUCTION

Social media influencers have become important participants in the advertising sector in the current digital world. Influencers, who have millions of followers on various platforms such as YouTube, Instagram, TikTok, and others, have immense potential to alter consumer trends and behaviour. Using these influencers’ genuine connection with audiences and personal appeal, brands are working with them more and more to sell their goods and services. However, this type of marketing has made it difficult to distinguish between sponsored commercials and genuine content, which raises questions about consumer protection and transparency.

Legal and regulatory scrutiny has increased in response to the growth of influencer marketing, especially with relation to the disclosure of sponsored material and endorsements. Influencers who fail to disclose to their audiences that they are being paid or otherwise compensated to advocate a product may be held legally responsible for misleading advertising in several jurisdictions. Influencers must explicitly identify their affiliation with companies in accordance with particular criteria established by the Federal Trade Commission (FTC) in the United States. Other nations are also enforcing similar laws, all aimed at shielding consumers from deceptive or fraudulent advertising.

This article explores the legal obligations of social media influencers regarding sponsored material. It does this by looking at the definition of endorsements, pertinent court rulings, methods of enforcement, and the changing legal landscape that governs this area. Given the growing impact of social media on contemporary business, it is critical for influencers and the firms they represent to comprehend the responsibility attached to influencer marketing.

DEFINITIONS AND CRITERIA

People who have built up a sizable following on social media sites like Twitter, Instagram, YouTube, TikTok, and others are known as social media influencers. These influencers have the power to affect the attitudes and purchase decisions of their audience by endorsing, endorsing, or reviewing goods and services. Influencer marketing is a common practice for brands, who work with influencers to promote their products through paid sponsorships, free merchandise, or other rewards.

Any article, video, or other media in which an influencer has a paid agreement with a business to endorse its goods or services is considered sponsored content. Because of the blurring of the lines between sponsored adverts and personal thoughts in such content, regulatory control has been implemented to maintain transparency.

There are several factors which are taken into consideration when evaluating whether an influencer’s material is sponsored or subject to endorsement duties. First of all, a material relationship is created when an influencer gets paid, receives free merchandise, discounts, or any other type of remuneration in exchange for endorsing a good or service. Disclosure is required for non-cash benefits including presents, invitations to private events, and affiliate commissions.

Influencers must also tell their audience in a clear and concise manner about any sponsorship or compensated arrangement. This information has to be clear and prominently displayed for customers to see. For instance, finishing a lengthy caption with a succinct hashtag like #ad might not be enough; the disclosure needs to be obvious and not hidden among other material.

Influencers must also make sure that the things they say about a product or service are accurate and not deceptive. Endorsements ought to represent the influencer’s actual thoughts, convictions, or life experiences. It is improper for an influencer to indicate differently if they haven’t utilised the product themselves.

Furthermore, this requirement to reveal sponsorships extends to all media. The same standards for openness hold true whether the endorsement is provided through a TikTok video, YouTube video, or Instagram post. It is necessary to modify disclosures for various platforms in order to guarantee audience understanding.[1]

LEGAL OBLIGATIONS AND KEY ISSUES

When social media influencers promote sponsored content or endorsements, their duty to disclose material links with sponsors is the main legal problem. The main concern is that if influencers don’t make explicit that they are part of compensated agreements, there might be misleading or deceptive advertising. Since transparency is essential to preserving consumer trust, influencers are required by law, including the FTC’s Endorsement Guides in the US, to disclose to their audience when they receive payment for endorsing a good or service.

Being sure that any statements made in endorsements are accurate and not overstated is a big part of influencer responsibility. Influencers are not allowed to mislead their audience by exaggerating the advantages of a product or making false claims about their own usage. Adding ambiguous or difficult-to-find disclosures (such as ones buried in the caption or hashtags) is also insufficient. A noticeable and understandable disclaimer that goes along with the endorsement, such “#ad” or “Sponsored by [Brand],” must be included.

Influencers risk legal repercussions from corporations, customers, and regulators alike if they misrepresent their ties or make false statements. When influencers break advertising regulations, brands may try to remove themselves from them, and authorities may punish or fine influencers who repeatedly fail to disclose material information. Influencers must abide by these guidelines in order to safeguard their reputation and stay out of trouble with the law as influencer marketing develops.

KEY JUDICIAL DECISIONS IN INDIA

The legislation in India governing social media influencers and their responsibility for sponsored material is still being developed, but a number of legal and regulatory advancements have set the stage for more stringent enforcement. In contrast to nations with well-established structures like the Federal Trade Commission (FTC) in the United States, advertising regulations in India are based on more general consumer protection concepts, including those found in the Consumer Protection Act, 2019.[2] To combat deceptive advertising, the Advertising Standards Council of India (ASCI) has released rules designed especially for social media influencers.

One of the earliest cases in which an influencer was sued for spreading false information about a product was Marico Ltd. v. Abhijeet Bhansali,[3] in one of his videos, YouTuber Abhijeet Bhansali claimed that Parachute coconut oil, a Marico Ltd. product, poses health hazards. The business launched a lawsuit, claiming he was making unfounded, derogatory statements about their goods. By directing Bhansali to remove the video, the Bombay High Court established a significant precedent for influencers who disseminate uncorroborated commercial information. This case emphasises the need for influencers to make sure that their claims are truthful and not deceptive, particularly when they pertain to items connected to health.

The manufacturer of Horlicks, GlaxoSmithKline (GSK), lodged a complaint with the ASCI in 2020 after an influencer made up a story claiming that Horlicks was too expensive and didn’t provide any health advantages.[4] This case demonstrated the increasing obligation influencers in India have to make sure that the statements they make about products are factual and supported by proof, even though ASCI handled the complaint instead of the legal system. Influencers who participate in derogatory campaigns without supporting evidence may be subject to legal action or regulatory complaints from companies.

Furthermore, it is crucial to talk about the Patanjali Ayurved Ltd. (Various) case.[5] One of the biggest domestic consumer goods firms in India, Patanjali, has fought several court fights over the truthfulness of statements it has made in its ads. Even though the firm is usually the target of these lawsuits, they nevertheless show how closely advertising techniques are being scrutinised in India. Under the Consumer Protection Act (2019), which holds endorsers liable for fraudulent advertising, influencers who promoted such items with false claims may also be subject to legal repercussions. These incidents highlight the necessity for influencers to thoroughly investigate product claims before endorsing them to their audience.

Influencers’ dependability and trustworthiness while promoting goods—especially ones that include hazardous materials—have grown to be a major source of worry. Influencers who endorse detox and weight reduction pills, for instance, frequently make claims about their products that are not supported by science. The risks of endorsing drugs that have not been confirmed have been brought to light by the FTC’s warnings directed against influencers who support items with false health claims.

Influencer Amanda B. faced backlash in one instance for endorsing a detox tea company that made weight loss claims. The influencer’s endorsement enhanced product sales even though there was no scientific proof to back these claims. The repercussions from this occurrence made many wonder if influencers had an ethical obligation to fully research items before recommending them.[6]

RECENT DEVELOPMENTS IN INDIA

India has made great strides in regulating social media influencers, particularly in light of the fast growth of influencer-driven promotions and digital marketing. Authorities have been concentrating more effort in recent years to hold influencers responsible for false endorsements, sponsorships that aren’t declared, and misleading information. Consumer protection and internet advertising transparency are the goals of these efforts.

The establishment of the Guidelines for Influencer Advertising in Digital Media by the Advertising Standards Council of India (ASCI) in May 2021 was one of the most significant recent events in India. The expanding power of digital content providers and the demand for transparency in sponsored content prompted the creation of these rules. As required by the standards, influencers must make any material link with businesses explicitly disclosed. Terms like “#ad,” “#sponsored,” or “#collaboration” need to be clearly marked and easily comprehensible to customers. Crucially, these disclosures shouldn’t be tucked away at the bottom of lengthy descriptions or concealed under hashtags.

An important step towards influencer accountability in India has been made with the passage of the Consumer Protection Act of 2019[7] and the creation of the Central Consumer Protection Authority (CCPA). Regulators have wide authority under the Act and the CCPA to take action against deceptive ads, including those created by social media influencers. Influencers are now subject to penalties under the Act if their promotions breach consumer rights or are found to be misleading. Influencer material may be subject to penalties and mandatory remedial activities under the CCPA, indicating that consumer protection extends outside its purview.

Furthermore, early in 2023, as part of a larger initiative to improve openness in digital marketing, the Ministry of Consumer Affairs released proposed standards for digital advertisers, influencers, and streamers. The aforementioned proposed standards underscore the need of disclosures in compensated relationships and caution against providing false endorsements. Additionally, they suggest stiff penalties for infringers, with fines for a first-time offender reaching ₹10 lakh (1 million INR) and increasing penalties for subsequent infractions.

Since regulatory organisations are particularly concerned about exaggerated or fraudulent claims regarding items linked to fitness, dietary supplements, and mental well-being, influencers pushing health and wellness products have come under heightened scrutiny. ASCI and CCPA sent notifications to a number of fitness influencers in 2023 for endorsing unproven health items without sufficient disclosures or scientific support. The Indian government is becoming more watchful to make sure that statements on health goods are truthful and not deceptive, particularly in light of the rising interest of consumers in the fitness and wellness sectors.

CONCLUSION

The way companies interact with consumers has changed dramatically as a result of social media influencers’ ascent to prominence as effective marketing players. But this impact also has legal obligations. In particular, when promoting items through sponsored content, influencers have to traverse intricate restrictions to maintain openness. Influencers and the companies they support run the risk of serious legal repercussions if they fail to disclose sponsored partnerships or make false claims.

Legal authorities such as the Central Consumer Protection Authority (CCPA) and the Advertising Standards Council of India (ASCI) are pivotal in moulding the legal landscape in India with regard to influencer marketing. Consumer protection and responsibility are receiving more and more attention, as seen by recent recommendations and draft policies. Influencers are held to a higher standard now than in the past due to tighter disclosure laws, partnerships with social media companies, and attention around health-related recommendations.

Influencers need to stay up to date on the most recent regulatory requirements as influencer marketing develops. Influencers who abide by these rules not only save themselves from legal action but also help create a more open and moral digital marketing industry. The secret to long-term success in influencer marketing in this ever-evolving environment is upholding audiences’ confidence and adhering to legal requirements.

REFERENCES

Goanta C & Ranchordas S (2019) The Regulation of Social Media Influencers: An Introduction. SSRN Electronic Journal 3,8.
Kelley, Michael & Schumann, Mark, The Federal Trade Commission and Social Media Influencers: An Overview of Recent Actions, 50 J. Advertising 77 (2021).
McCarthy, Andrew, The Impact of Influencer Marketing on Consumer Behavior, 49 J. Advert. 45 (2021).

[1] Catalina Goanta & Sofia Ranchordas (2019) The Regulation of Social Media Influencers: An Introduction. SSRN Electronic Journal 3,8.

[2] Michael Kelley & Mark Schumann, The Federal Trade Commission and Social Media Influencers: An Overview of Recent Actions, 50 J. Advertising 77 (2021).

[3] Marico Ltd. v. Abhijit Bhansali, No. COMIP (L) 319 of 2019 (Bombay H.C. 2020).

[4] GlaxoSmithKline (GSK) v. ASCI, Complaint No. 012/2020 (ASCI).

[5] Patanjali Ayurved Ltd. v. ASCI, Complaint Nos. 123/2019, 124/2019 (ASCI).

[6] Andrew McCarthy, The Impact of Influencer Marketing on Consumer Behavior, 49 J. Advert. 45 (2021).

[7] Consumer Protection Act, 2019, No. 35, Acts of Parliament, 2019 (India).

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