Influencer Marketing and Competition Law in Canada: The Basics

The world of marketing and advertising has evolved – last year, U.S. companies spent an estimated $13.5 billion on social media marketing alone.¹ How are lawmakers and enforcement agencies responding to the change? The Competition Bureau has recently clarified how competition and advertising law in Canada applies to social media marketing tactics in its latest volume of the Deceptive Marketing Practices Digest. Here are the highlights:

• What is Influencer Marketing?
• What is Misleading Advertising under the Competition Act?
• I’m an Advertiser – What do I need to know?
• I’m an Influencer – What do I need to know?
• I’m a Consumer – What do I need to know?

Influencer Marketing

“Influencers” are online personalities who share opinions and advice about products or services. Advertisers often pay or otherwise compensate influencers to create and share social media content that features their products or brands. The Competition Bureau wants the relationship between influencers and advertisers disclosed to consumers and warns of “serious consequences” for failing to adequately disclose these relationships as well as for misleading representations made about the products they promote.

Any representations made by an influencer who has received some kind of benefit from the advertiser are subject to the same standards as other types of marketing, including the misleading advertising and deceptive marketing provisions of the Competition Act.

Misleading Advertising under the Act

Under the Competition Act, a misleading or deceptive advertisement is any representation made to the public for the purpose of promoting a product or business interest that is false or misleading in a material respect. A representation is “material” when an ordinary citizen would likely be influenced by the false or misleading impression created by the ad in deciding whether or not they would purchase the product being offered. It is not necessary to prove that anyone was actually deceived or misled by the advertisement – the fact that a representation is found to be materially false or misleading is sufficient to attract either civil or criminal consequences under the Competition Act.

A breach of the misleading advertising and deceptive marketing provisions of the Competition Act could land both advertisers and influencers with fines of up to $10 million, and can even result in jail time.

I’m an Advertiser – What do I need to know?

Companies who use influencers to market their products or brand may be found liable for the misleading representations of the influencer, even if the company had no involvement in the wording or format of the post.

Advertisers should therefore be careful to ensure that influencers comply with the deceptive marketing practices and misleading advertising provisions of the Competition Act. That includes ensuring that influencers clearly communicate any “material connection” that they may have with the company. The Competition Bureau also recommends verifying that influencers aren’t making performance claims on behalf of the company – an influencer can speak to their own experience with the brand or product, but they cannot make claims that haven’t been adequately tested.

Even gifting promotional products to clients can put an advertiser at risk – consider including a note with the gift asking recipients to disclose the material connection with your company if they decide to review or post about it online.

I’m an Influencer – What do I need to know?

There are two key points to remember when posting:

1 – Disclose connections

Influencers should clearly disclose any “material connection” they have with the advertiser. That means disclosing any relationship that may affect how consumers evaluate the influencer’s independence – and it’s not just about money. A material connection also includes discounts, gifts, contest or sweepstake entries, and free products with no conditions attached.

Why? Because if you have a connection with an advertiser and you don’t disclose it, people seeing the post can’t properly evaluate the truth, accuracy or fairness of your opinion. This is a form of deceptive marketing under the Competition Act and the Consumer Protection Act, and has serious legal consequences.

2 – Don’t mislead or stretch the truth

Consumers expect truth in advertising – and this applies to influencers who have a connection with the product or brand they are promoting. When you express an opinion online that isn’t genuine and based on actual experience, you risk misleading consumers.

You can also mislead followers by not being clear about your relationship with an advertiser. For instance, using hashtags like “partner” or “collab” are ambiguous and may not be understood to those unfamiliar with industry terms. Likewise, simply tagging the brand may not be enough to clearly communicate a material connection.

These standards are also legally enforceable under the Competition Act or the Consumer Protection Act, meaning that breaching those standards can result in litigation, fines or jail time.

For more guidance on the do’s and don’ts of influencer marketing, check out the Disclosure Guidelines created by Ad Standards, and the Influencer’s Checklist created by the Competition Bureau.

I’m a Consumer – What do I need to know?

Advertisers often pay or otherwise compensate influencers to create and share content that features their products or brands. Before you take a social media post at face-value, consider the following:

• Just because an online personality doesn’t have 100k followers, doesn’t mean that they aren’t being compensated for their opinions. Advertisers also look to mid-level and micro influencers who attract an engaged following to promote products and brands.
• An #ad isn’t the only kind of ad. There is no mandatory way for influencers to communicate that they are receiving a benefit to promote a brand – use of hashtags like #collab, #spon, or #promo are not recommended by industry organizations, but are frequently used.
• Influencers should disclose any product or brand relationship, but there is no law that requires them to in every instance. Merely failing to disclose a relationship with the advertiser may not alone be actionable – under the Competition Act, the ad must be materially false or misleading, such that a consumer would likely be influenced by the misrepresentation in deciding whether or not they would purchase the product being offered.

\ For more information on legal developments in deceptive marketing and misleading advertising under the Competition Act, check out The Litigator and the Competition Bureau’s Deceptive Marketing Practices Digest.             

^{1 – https://www.statista.com/statistics/276890/social-media-marketing-expenditure-in-the-united-states/ (accessed on November 14, 2018)}