Influencers: Disclose or Pay the Price

Yet another marketing law reminder this week of the need for influencers to disclose their incentives.

Kim Kardashian, who has about 225 million followers, has endorsed many products as a social media influencer but her latest crypto-promo cost her $1.26 million dollars when she failed to disclose that she had been paid $250,000 to post. The SEC intervened and the matter was settled with Ms Kardashian's agreement to pay a civil penalty of $1 million and disgorgement of the $250,000 fee, plus interest. (Because the promotion involved a security Ms. Kardashian was required by law to disclose the nature, scope, and amount of compensation received in exchange for the promotion.)

Failure to disclose incentives for social media promotions remains a serious concern for regulators - not surprisingly, since the UK's Advertising Standards Authority found in 2021 that just 35% of the 24,000 influencer posts it monitored were correctly disclosed as ads.

The UK's Competition and Markets Authority (CMA) also took up the issue after investigating hidden advertising on Instagram "over concerns that too many social media influencers are posting content about businesses without making clear where they have been paid or incentivised to do so, and that the platform was not doing enough to tackle the problem."

This resulted in Instagram committing to a package of changes to tackle hidden advertising, including prompting users to confirm if they have been incentivised in any way to promote a product or service and, if so, require them to disclose this fact clearly. Tik Tok, You Tube and Snapchat are reported to be in discussions with the CMA over the application of similar measures to their respective platforms.