Perceived by consumers as closer, more authentic and more trustable than traditional advertising or celebrity endorsement, content creators are attracting more brand investment than ever: in 2022 alone, influencer marketing spend jumped from 3.69 billion to 4.14 billion in the U.S., according to data released by American inbound marketing platform Hubspot. The amount of cash trading hands pushed authorities to set standards for the Influencer marketing industry early on. So much so that, in the USA, influencer marketing is considered regulated since 2009, when the Federal Trade Commission (FTC) published for the first time a set of endorsement guides on sponsored content posted by content creators on behalf of brands – including influencers being required to disclose their relationships with companies in a clear way.
Over to Europe, the rules are not as clear.
Unlike traditional advertising, which is subject to very strict rules, influencer advertising can fall through the cracks of ad disclosure. The commercial nature of influencer posts is not always identifiable, with ads featuring alongside similarly styled, but independent editorial content. Companies using influencers as ambassadors for their products and brands also have greater freedom than in conventional advertising.
Now the European Economic and Social Committee (EESC), a consultative body of the European Union, is trying to reduce the lack of transparency often seen in influencer marketing by proposing that the EU should set specific obligations for both, the administrators of the video-sharing platforms and social media networks on which influencers operate, and for content creators and influencers themselves.
The basic principle of the proposal is that advertisers should leave consumers in no doubt that what they are engaging with is advertising. And they should not mislead consumers or cause serious offence.
“EU already has some mechanisms in place to deal with influencers, which are covered by legislation on both advertisers and sellers/traders. However, we think it would be desirable to have a comprehensive approach given the fast rise of this phenomenon.”, says Bernardo Hernández Bataller, a councilor of the European Economic and Social Committee since 1994. “We would need specific regulation to cover the rights and obligations of the people involved, so that all legal operators and consumers know exactly what is and what is not acceptable.”
Some Member States have gone it alone (France, Spain and the Belgian region of Flanders). But, accord to the recent proposal, a “hard core” of EU rules would be more effective. The EESC argues that it would leave no loopholes allowing different Member States to take a softer line.
The list of suggestions to be adopted by influencers in all 27 member states of the European Union includes it being mandatory for content creators to include a prominent label upfront to highlight that a post is a marketing communication. They would then be liable if they fail to make it sufficiently clear when they are being paid to endorse or promote a product or service.
The proposal highlights that platform administrators and social media networks should also be liable for content published by the content creators and influencers they host, as well as have an obligation to take down illegal content and report illegal activity.
Other issues surrounding influencer marketing featured throughout the report includes the frequent use of child influencers. Concerns regarding content creators as a trade and if their position should be covered by employment laws are also mentioned.
“What about the tax issues raised by influencer advertising? How should we tax influencer income and the profits influencers generate? How should we tax the added value they create?, asks Stefano Palmieri, co-rapporteur.
Even if approved, a new set of rules doesn’t necessary mean that brands and content creators will follow them. In France, in a study of 60 influencers and influencer agencies from January 2023, the French General Directorate of Competition, Consumer Affairs and Fraud Control (DGCCRF) showed that 60% did not respect the regulations on advertising and consumer rights.
And in the UK, compliance with labelling requirements when it comes to Influencer Marketing remains low. In 2021, the Advertising Standards Authority (ASA) published an analysis of more than 24,000 Instagram Stories. Of the 5,700 it considered to be marketing material, nearly two-thirds were not clearly identifiable as such.