CMA publishes guidance on social media endorsements

On 3 November 2022 the CMA published guidance for social media platforms, brands and content creators setting out how they should approach online advertising in order to ensure they comply with the relevant UK consumer protection legislation.  Social media platforms have a duty to prevent and address unlawful practices such as hidden advertising that are facilitated through their services and businesses can be held liable for non-compliance by content creators that promote their brands. 

The CMA’s latest guidance signals its intent to tackle these practices and platforms, brands and content creators are advised to take the necessary steps to ensure they comply with the rules.  This is particularly important in light of the Government’s proposals to increase the CMA’s enforcement powers for consumer protection legislation, bringing them in line with its competition law powers under which the CMA takes direct enforcement action and can impose fines of up to 10% of worldwide annual turnover of an infringing business.  The proposals will be included in the Digital Markets, Competition and Consumer Bill which has now been moved forward to the current parliamentary year.

Background

The issue of hidden advertising on social media platforms has been on the regulator’s radar for some time.  In 2018 the CMA launched an investigation into influencers’ advertising practices over concerns that they were not declaring when they were being paid or otherwise rewarded for endorsing goods or services.  The investigation resulted in a number of key influencers giving undertakings aimed at improving disclosure in their social media posts and making it clear when they have been paid or otherwise incentivised to endorse a product or service.

The CMA also investigated Instagram over concerns that it was not taking sufficient steps to prevent users from endorsing brands without making it clear that they had been paid or received free gifts to do so.  In October 2020 Meta (formerly Facebook) offered undertakings which include a range of measures to prevent hidden advertising being posted on its Instagram platform and to make it easier for users and the businesses they promote to comply with the relevant consumer protection legislation.

Summary of the latest guidance

Principles for social media platforms

Building on the undertakings offered by Meta in 2020, the CMA has developed six key compliance principles for social media platforms in order to ensure they meet their obligations under the relevant consumer protection legislation.  Under the Consumer Protection from Unfair Trading Practices Regulations 2008 (CPRs) platforms have a duty to prevent and address unlawful practices such as hidden advertising that are facilitated through their services and the principles set out a number of practical steps platforms can take in order to comply:

• Inform users that incentivised endorsements are required to be clearly identified as advertising and clearly distinguishable from other content.
• Provide content creators with tools so they are easily and effectively able to label any content as advertising.
• Take appropriate, proportionate, proactive steps and use available technology to prevent hidden advertising from appearing on their site.
• Make it simple for users to report suspected hidden advertising easily and effectively.
• Facilitate legal compliance by brands.
• Enforce terms and conditions and take appropriate action when breaches occur.

Guidance for businesses

Businesses have a duty to ensure that paid-for endorsements which promote them or their products or services are properly labelled as ads.  There are a number of steps businesses can take to help their brand and the content creators they work with, comply with the law:

• In contracts with content creators (whether formal or informal) businesses should work with them to make sure they understand their legal obligations to disclose upfront that any content posted for the band is an ad.
• When sending free gifts businesses should include clear instructions that any content posted as a result must be labelled as an ad. This applies even if the business does not ask for anything in return.
• Businesses should have a policy setting out the brand rules on conduct to be followed by content creators.
• When contacting content creators through an intermediary, businesses should make sure that the intermediary understands its legal obligations.
• Businesses should check content that refers to their brand or business to ensure it is correctly identified as advertising. Where they identify content that has not been correctly labelled they should work with the content creators in order to rectify this immediately.

Guidance for content creators

Content creators should avoid misleading their audience by posting about brands, products or services without labelling them as an ad or by making false or unsupported statements.

The guidance makes it clear that all posts that in any way promote a brand or product in social media content must be clearly identifiable as an advert.  This applies to formal agreements but also to more informal arrangements where the content creator has been incentivised to promote, endorse or review a product.  It also includes businesses sending products or invitations to events without asking for anything in return.

All ads must be easy to understand and easily defined, they should be clearly shown in posts and should be obvious from the first interaction.

Enforcement

The CMA works closely with Ofcom and the Advertising Standards Authority (ASA) to deal with the issue of hidden advertising on social media platforms.

The ASA enforces the Code of Non-broadcast Advertising and Direct Promotional Marketing (The CAP Code) which contains rules on how adverts should be obviously identifiable as adverts and rules for advertisers in order to avoid misleading advertising.  This is a self-regulatory regime but the ASA can refer cases to Trading Standards where a breach of the CAP Code is also likely to be a breach of consumer protection legislation.

Under the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) it is a banned practice to use editorial content in the media to promote a product where a trader has paid for the promotion without making this clear in the content or by images or sounds clearly identifiable to the consumer.  The CMA and Trading Standards can seek an enforcement order from a civil court in the event of a breach of the CPRs and failure to comply with the court order will be treated as contempt of court and can result in a fine or imprisonment.

In addition Ofcom regulates UK-established video-sharing platforms under the Communications Act 2003 (CA03).  Under the CA03 video-sharing platforms are required to take such measures as are appropriate to protect users from harmful material, including in relation to the transparency of advertising and Ofcom can impose penalties for breach of the legislation of 5% of the applicable qualifying revenue or £250,000, whichever is the greater.  In December 2021 Ofcom published guidance on advertising harms and measures for video-sharing platforms in order to ensure they have a full understanding of how the video- sharing platform framework is applied in relation to advertising.

Under the Digital Markets, Competition and Consumer Bill, the CMA will have new powers of direct enforcement for the “core pieces” of consumer legislation, which includes the CPRs.  Instead of having to apply to the courts for an enforcement order it will be up to the CMA to determine whether a business infringes the rules and it will be able to impose fines of up to 10% of annual worldwide turnover for infringing businesses or fines of up to £300,000 where an individual is in breach of the legislation.

*This article was originally published on our Competition Notes blog.