DCMS explores regulatory gaps in influencer marketing

The question

Is the regulatory framework surrounding influencer marketing sufficient?

The key takeaway

The continued growth of influencer marketing continues to bring new opportunities and new challenges. The DCMS inquiry and report may well trigger legal change to regulate the rapidly developing influencer economy.

The background

Influencer culture is now a fully-fledged and booming subsection of the creative industry. According to Vuelio’s UK Influencer Survey 2020, 49% of influencers have channels that provide them with income, and MarketsandMarkets estimate that the global influencer marketing sector is expected to grow from $6.0bn in 2020 to $24.1bn by 2025. According to a DCMS survey conducted as part of its report, 32% of children said that they would consider becoming an influencer, whilst the BBC reports that children are three times more likely to want to be a YouTuber than an astronaut.

The DCMS report defines “influencer culture” as “the social phenomenon of individual internet users developing an online community over which they exert commercial and non-commercial influence”. It defines an “influencer” as: “An individual content creator who builds trusting relationships with audiences and creates both commercial and non-commercial social media content across topics and genres”.

Although the industry projections are encouraging for creators and the agencies, brands and platforms facilitating influencing practices, DCMS Committee Chairman Julian Knight has said: “If you dig below the shiny surface of what you see on screen you will discover an altogether murkier world, where both the influencers and their followers are at risk of exploitation and harm online”.

The development

Three specific challenges are identified in the report, along with recommendations on how to meet those challenges:

1. the protection of children as influencers and viewers
2. the provision of employment support and protection for influencers, and
3. the current low rates of compliance by influencers with advertising regulations.

Children

The DCMS recommends that the government better supports children in developing media literacy in the context of digital technology. It suggests that this could be achieved through its Online Media Literacy Strategy and by ensuring Ofcom promotes this under its statutory obligations to promote media literacy and to conduct research into media literacy matters (as set out in ss. 11 and 14 of the Communications Act 2003). The DCMS also recommends that the Committee of Advertising Practice (CAP) updates its UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) to include mandatory enhanced disclosure standards for ads targeting child audiences, to ensure that children can identify and evaluate when content they are viewing is advertising. The final recommendation in relation to children aims to protect them in their capacity as influencers themselves. It includes amendments to child labour and performance regulations in relation to working hours, conditions and protection for earnings. The DCMS has also encouraged CAP to review the use of under-16s in marketing with a focus on its impact on child influencers (the last review of this nature focused on the use of under-16s as brand ambassadors and took place in 2012). 

Employment rights

The DCMS asks the government to commission an influencer marketing “code of conduct”, which details best practice guidelines for deals between influencers and brands or talent agencies and recognises influencers’ rights to trade representation. It acknowledged that the Incorporated Society of British Advertisers’ (ISBA) published its Code of Conduct for Influencer Marketing last year. However, it described it as a “starting point” and found that it had not adequately considered employment rights and support issues such as pay rates, pay gaps or pay inequalities affecting influencers.

Advertising regulations compliance

The report recommends that the remit of the CAP Code is extended by removing the requirement for an advertiser to exert editorial “control” over an influencer or their content to determine whether a piece of content constitutes an ad. For example, the report makes it crystal clear that content concerning brand “gifts” to influencers where there is no prior agreement in place should be disclosed as an ad (even for as long as a year following the gifting). 

The DCMS also recommends that the government gives the ASA statutory powers (and the appropriate funding required) to enforce the CAP Code. At present, the ASA operates as a self-regulation system which involves the participation of a range of legal backstops and partner organisations (for example referring non-compliant advertisers to Trading Standards who can apply sanctions up to and including legal action). The report also endorses the idea of increased consumer protection law powers for the CMA, including the ability to make decisions directly, without having to go to court and stronger powers to enforce compliance, including the right to issue turnover based fines directly to a business found to be in breach.
The DCMS also recommends that the ASA monitors influencer compliance annually to better understand how compliance rates develop over time and reports annually on the scope, capabilities and risk management protocol for its monitoring technology. 

The report also notes that the CMA has, to date, focused its enforcement action relating to undisclosed advertising on securing undertakings from the platforms facilitating the publication of influencers’ content. But it questions how effective this mechanism can be, given the time and costs involved in securing undertakings and their current questionable level of efficacy given there is no clear mechanism (with effective sanctions) in place for enforcing these. It asks the CMA to keep the DCMS updated on the success of this approach.

The government will consider the recommendations proposed to tackle the issues raised in the report. A response is expected in July 2022. 

Why is this important?

The DCMS report has highlighted the key areas that demonstrate why creating adequate regulatory infrastructure that keeps up with the evolution of the sector is difficult. It highlights that the power of influencer marketing to shape and impact children as well as adults should not be underestimated. This area of advertising and marketing may need an increasingly bespoke legal and regulatory framework as it continues to develop, inevitably creating unique and novel issues. 

As the effectiveness of the ASA’s “naming and shaming” approach to addressing non-compliant influencers in deterring malpractice is unclear, granting increased powers to the ASA and the CMA is seen by some as a positive step, provided adequate funding is made available to them to facilitate enforcement. In the meantime, guidance surrounding best practice should be promoted as a priority and frequently consulted by players in the market, particularly in an industry with a constant flow of new entrants given the low barriers to entry. 

Any practical tips?

Whatever the regulatory framework, it’s clear that brands, advertisers and agencies have a significant role to play in helping educate the influencer community about the importance of disclosure rules and actually implementing them. Without a sea change in behaviour, don’t be surprised if the regulators start sharpening their regulatory knives.