Canada: #InfluencerMarketing: What Advertisers Need To Know About Disclosure

Last Updated: April 9 2019
Article by Jamie-Lynn Kraft and Emily Miller

It has been said that Instagram, YouTube and blogging represent the height of creative self-expression on the Internet. However, if a brand has sponsored an individual's content, then the claim to self-expression has its limits.

The past decade has seen incredible growth in social media as a primary means by which information and entertainment is consumed. This movement away from traditional forms of media and the rise of social media has given individuals a platform on which to establish a vast following of fans, oftentimes numbering in the thousands or even millions.

Today social media 'influencers' are ubiquitous. Most people are familiar with one or more influencers: people who have built a loyal following by reason of their passion, their personal or professional interests or simply by virtue of their personality. An audience consumes an influencer's content because they are entertained and informed. Over time, the audience develops a relationship with the influencer and begins to trust the influencer's opinion. The power and influence held by these individuals has led to the creation of an industry known as "influencer marketing".

Simply put, advertisers who employ influencer marketing seek to harness the relationship and trust between an influencer and an audience in order to promote a product or brand. It does not matter how many followers a person may have in order to qualify as an influencer. What matters is the influencer's credibility and ability to encourage the market behaviour of their followers. While many consumers, influencers and advertisers are familiar with the methods of influencer marketing, advertisers need to be familiar with and abide by the laws that apply to this form of marketing.

In Canada, influencer marketing is regulated by the federal government under the Competition Act (administered by the Competition Bureau) as well as the self-regulatory body, Ad Standards Canada. According to guidelines set out by these bodies, advertisers should abide by two "Golden Rules" when using influencer marketing.

Golden Rule #1: Disclosure of a Material Connection

If an influencer talks about a product, service or brand, and there is a connection between the influencer and the product/service/brand which may affect the weight or credibility of that statement, then the connection must be disclosed. This is known as a "material connection". Of course, the most obvious form of material connection is payment. But a material connection can also include such arrangements as gifts, contest entries, event invitations, family relationships, employment relationships and ownership stakes.

As soon as there is a material connection between the influencer and the product/service/brand, the influencer must disclose it in a meaningful way.

Hashtags are a disclosure tool that everyone can easily understand, but influencers and advertisers should make sure that they choose an appropriate hashtag. Acceptable and widely recognized hashtags include #ad, #sponsored, #[brand]_partner and #[brand]_ambassador. Unacceptable hashtags are generally those that are too ambiguous, such as #Spon, #Collab, #Ambassador, #Promo and #[brand].

The disclosure must be clear, prominent and inseparable from the content of the post and must be specific to each sponsored post (rather than a blanket disclosure in an influencer's bio).

There is no exact formula for disclosure, and the door may be open for influencers and advertisers to get creative. What ultimately matters, and will determine compliance, is that the consumer is not manipulated and clearly understands that a connection exists and that the content is sponsored.

If there is inadequate disclosure, then the influencer's content could be considered false or misleading, contrary to the Competition Act.

Golden Rule #2: No Misleading Marketing

As with all forms of advertising, any statements made in the course of influencer marketing must not be false or misleading. It is important that all parties involved ensure that any statements made by an influencer about a product/services/brand are:

  • Genuine opinions based on experience;
  • Claims based on facts;
  • Performance claims based on proper and adequate testing.

Consequences for breach

So far in Canada, there has been limited action by the authorities for failure to follow the Golden Rules of influencer marketing. That said, there has been one significant case. In 2015, Bell was fined $1.25 million by the Competition Bureau for directing Bell employees to write favourable reviews of Bell products on various websites and web application platforms without disclosing their employment status. It remains to be seen if the Competition Bureau will continue with this penalty-focussed approach against individual influencers and advertisers.

In the United States, where influencer marketing is regulated by the Federal Trade Commission (FTC), the FTC sent more than 90 letters to advertisers and high-visibility mega influencers, such as, Victoria Beckham, Naomi Campbell and Scott Disick; as well as corporate personnel such as Mark King (President, Adidas Group North America) and John Galantic (President & COO, Chanel) in 2017.  The FTC letter reminded recipients of the requirement to clearly and conspicuously disclose any material connection in influencer posts. This type of focus on education rather than punishment is another way in which we may see future action by the Canadian authorities.  

Proper and lawful marketing is viewed as a shared responsibility. When the regulators review influencer marketing, they look at all entities involved and hold everyone accountable. This includes not only the influencer and the advertiser, but also intermediaries such as the advertising agency and the social media platform.

By observing the Golden Rules, advertisers and influencers ensure both compliance with Ad Standards Canada and the Competition Act and the maintenance of audience trust. Proper disclosure of sponsorship or promotion demonstrates advertiser and influencer integrity. Even if the Competition Bureau is unlikely to go after a particular breach, implementing the Golden Rules promotes consumer confidence.

Best practices

Advertisers can take steps to adhere to the Golden Rules of influencer marketing by putting in place strong agreements with the influencers they engage. These agreements should clearly set out what type of content is acceptable and what type of content is unacceptable, including the requirement to disclose a material connection and to only make claims about a product which are truthful and based on adequate testing.

To ensure compliance, advertisers should have the right under their influencer agreement to remove an influencer's posts for any reason, as well as provisions which limit the advertiser's liability if the influencer "goes rogue" and does not follow the Golden Rules.

In light of the potential pitfalls in influencer marketing, it is crucial that all those engaged in such activity seek legal advice from their advertising counsel to ensure that they abide by the Golden Rules. If you have any questions or would like further information, please contact a member of our firm's Marketing and Advertising group.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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