Influencer marketing is big business, with everyone from Boohoo to Marks & Spencer turning to social media titans. But what are the risks?

Celebrities and social media influencers, big and small, have become an important marketing channel for retailers.

Many have millions of followers who are eager to see into the influencers’ lives – where they go on holiday, how they dress and the products they use.

But while brands reap the benefits of reaching target audiences and boosting sales through reality stars, YouTubers and Instagrammers, the rules about such marketing are being strictly enforced.

social media smartphone

The CMA is investigating concerns social media stars are not properly declaring when they are paid for posts

The Committee of Advertising Practice (CAP) and the Advertising Standards Authority (ASA) are clamping down on posts that are not easily identified as adverts and have released a guide for influencers about the rules.

Content from stars – including Made In Chelsea’s Louise Thompson, for beauty brand Vanity Planet, and Geordie Shore’s Marnie Simpson, for teeth whitening product Diamond Whites – has fallen foul of regulators because it was not made clear they were ads.

With every other post on Instagram sometimes seeming to come from social stars promoting branded products, could consumers lose trust?

Here we look into how businesses can navigate the world of influencer marketing – and stay within the law.

What are the rules?

In August, the Competition and Markets Authority launched an investigation into concerns that social media stars were not properly declaring when they had been paid to endorse goods or services.

Under consumer protection law it must be made clear if influencers are paid or rewarded to promote, review or talk about a product on their social media accounts.

Last month, Love Island star Olivia Buckland’s Instagram post promoting a make-up brand was banned.

The post showed Buckland discussing an eye shadow from cosmetic brand W7 along with a caption that included the words “can’t wait to see what you guys create #BucksBeauty” (a hashtag she uses for her makeup tutorials).

The ASA ruled it was not clear it was an advert and told her to ensure future adverts were “obviously identifiable”.

What do you need to know about working with influencers?

Dan Smith, director and head of advertising law at legal firm Gowling WLG, says the use of influencer advertising has exploded in the past few years, involving personalities at every end of the scale, from the Kardashian clan to micro-influencers with a small but enthusiastic following.

“In that context it’s not surprising many are ignorant of the rules around making it very clear an advert is an advert,” he says.

“The risks range from negative publicity to criminal prosecutions. The Federal Trade Commission in the US, for example, imposes significant fines for this sort of issue. There is plenty of risk there.”

According to CAP guidelines, influencers should clearly label their content with #ad, #advert or other variants on the theme.

It urges them to avoid labels such as sponsorship, sponsored content, in association with, thanks to (brand) for making this possible, (brand) partnership, and just mentioning the brand. Such terms do not make it clear that the advertiser has editorial control over the content, the ASA says.

“If consumers believe the content they’re seeing is not what it purports to be they’re going to feel cheated”

Dan Smith, Gowling WLG

Smith says: “The ASA takes the view that sponsored content doesn’t necessarily signify to the audience the brand is controlling the content.

“You can sponsor a football club without picking the team and you can sponsor content without controlling the message.

“Even if it’s just signing off, control is widely interpreted. Having a veto or sign-off on content is control, but the ASA would also say things like requiring a certain number of posts a day to be control, or simply having an agreement in place to not promote a competitor.”

The ASA typically finds against anyone who doesn’t use #ad, #advertising or a variant, he says.

Rob Morrison, investigations manager for the ASA, says the new guidelines have been produced because people are spending more time on social media platforms and there is an increasing amount of commercial relationships between marketers and influencers.

“There is also increasing amounts of confusion around disclosing the relationship.”

He observes that response to the guidelines has been “generally positive” among the influencer marketing community.

Influencers and brands must be aware of issues surrounding where and when ad content labels appear.

In June, an Instagram video featuring Made In Chelsea’s Millie Mackintosh showed her doing yoga in a gym.

The ASA said it was not obvious to viewers it was an advert for Britvic because the branding only appeared at the end of the video.

The watchdog argued that consumers need to be aware that they are viewing marketing content before watching it.

How can you avoid the pitfalls?

Smith advises advertising companies and marketing teams to implement training about the regulations, especially for staff who write contracts for influencers, and introduce an appropriate oversight process.

But he thinks asking a lawyer to assess social media posts is difficult because of the volume of content.

“There is potentially a need for do’s and don’ts setting out what’s expected of each influencer,” he says.

The lawyer also warns against thinking the volume of content and the fleeting nature of social media allows for wriggle room on the regulations.

“I think it would be easy to think this doesn’t matter as you’re putting out a lot of content and it will slip through – that would be a mistake,” he says.

“If consumers believe the content they’re seeing is not what it purports to be, and is in fact disguised advertising, they’re going to feel cheated. That’s going to affect the value of the message.”

“If influencers fail to comply they risk prosecution. We don’t tend to see repeat offenders. A letter from the ASA can be quite a big shock”

Rob Morrison, ASA

James Erskine, a director at influencer marketing agency Social Circle, agrees there has been a lack of education.

He says: “I think it’s up to agencies and brands and talent managers to have an understanding of the rules. The rules are incredibly strict. They’re a lot stricter than any other medium.”

He  adds that if rules for product placement in films were as strict as the guidelines for influencers the ‘P’ logo commonly seen at the start of TV programmes would float around the screen whenever James Bond has a drink of Heineken.

“#Ad covers a lot of sins,” he says.

Morrison says influencers cannot use naivety about the regulations as an excuse.

“If you have got the knowledge to spend time building an audience, you should know on some level that it is built on trust,” he says.

“If you take payment for messages, you need to be clear about that. It’s not a complex idea. There are going to be those who choose not to, and when they don’t they are brought to our attention.

“If they fail to comply they risk prosecution. We don’t tend to see repeat offenders. They aren’t necessarily coming from a place of media familiarity and a letter from the ASA can be quite a big shock.”

What are companies doing to help influencers stay on the right side of the law?

Instagram has implemented community guidelines asking Instagrammers and brands in the UK to comply with ASA guidance on sponsored social media posts.

Last year the company introduced the branded content tag, a sub-header on posts that shows when a creator is in a paid partnership with a business.

A spokesperson for online fashion retailer Boohoo, which makes extensive use of influencers in its marketing strategy, says: “We work with a widespread variety of influencers to help engage and communicate with our millennial audience.

“In doing this, we are aware of legislative and regulatory requirements for social media advertising and influencer marketing as a whole.

“Our dedicated influencer team at Boohoo manage our marketing techniques confidently in the correct manner by working closely with our legal team.”

Is influencer marketing still effective?

Despite the inflexibility of the rules, Erskine says influencers are still a vital part of the marketing toolkit.

“It’s hugely effective because the audience is trusting,” he says. “When they’re fed something less than transparent is when things don’t work.

“There are a few people looking to break the rules and get away with it. I think transparency is the absolute key.”

Smith maintains: “I think it might reduce the effectiveness but ultimately regulators aren’t going to be concerned about that. They’re not going to be sympathetic.

“While consumers may pay less heed to messages that are marketed as advertising, I don’t think that’s a reason not to use them.

“[Advertisers] need to rely on content significantly creative and compelling to draw the attention of the audience without having to pretend it is something other than advertising.”