THE SURREPTITIOUS NATURE OF INFLUENCER MARKETING REVIEWED IN THE LIGHT OF THE MEDIAWET AND UCPD

Emergence of Influencer Marketing

The emergence of social media platforms created a unique opportunity for marketeers to promote their services and products. The global market value of influencer marketing increased by 700% from 2016 to 2021, reaching 13.8 billion US Dollars.1 The algorithmic design of social media platforms enables a personalized experience, designed based upon the users’ preferences. This creates a segmented product or service market, which can be effectively exploited by the marketeers.2 Influencer marketing adds a new dimension to this specific targeting of potential buyers, by exploiting their ‘influence’ over the targeted audience. Influencers build a brand around their persona, also with non-commercial content, and establish a fan-based audience.3 The combination of posting pictures and a sense of authenticity, trustworthiness, and familiarity with the influencer, are proven effective methods for engagement with the advertising brand.4 Influencers use these methods of ‘influencing’ their audience for the purpose of increasing online engagement for the endorsed product or service in exchange for renumeration of some sort.5

Risks to consumers of influencer marketing

However, influencer marketing opposes risks for (vulnerable) consumers. The main risks are lack of transparency of advertising content, lack of separation with ‘normal content’, misleading messages and targeting a vulnerable consumer group. A behavioral study found that consumers were not able to correctly identify advertising content, even when they were confident it was advertorial content.6 In my opinion, the unidentifiable and sometimes even misleading nature of influencing marketing, in combination with a vulnerable targeted audience attributes to the need of consumer protection. Effective legislation around (misleading) omissions about commercial interests or surreptitious advertisement is needed to effectuate this goal. I will research the following question: Is the Dutch legal framework, concerning the omission of commercial intent or surreptitious advertisement of influencer marketing, fit for purpose in, seen in the light of the main instrument of European consumer Protection law: the Unfair Commercial Practices Directive? I have provided a short review of the problematic aspects of influencer marketing and consumer protection law. Hereafter, I will provide a sketch of the relevant provisions of the Unfair Commercial Practices Directive (hereafter: UCPD).7 Then I will elaborate on relevant Dutch legal framework: the Media Wet Finally, I will address the fitness of both legal frameworks in comparison with each other and look at possible shortcomings of the legislation around wrongful omissions and surreptitious advertisement by influencers.

Legal framework of the UCPD

The UCPD provides the main legal framework for the issue of misleading influencer marketing practices.8 Article 5 states that unfair commercial practices shall be prohibited. Practices are unfair, if the practice is listed in Annex 1 of the Directive, according to article 5 (5). A practice can also be unfair if it is contrary to the requirements of professional diligence, and distorts, or is likely to distort the economic behaviors with regard to the product, of an average consumer, or the average member of the group when the commercial practice is directed to a particular group of consumers.9 In particular if the practice is misleading, or aggressive in the sense of article 6-9 UCPD. For the applicability of the UCPD-articles framework, 3 criteria must be met. The influencer must fall within the scope of trader, article 2 (b): “a natural or legal person (...) is acting for purposes relating to his trade, business, craft or profession (...) or on behalf of.” This is the case when an influencer is acting upon an agreement with the trader, to promote the traders’ products. The influencer can then be perceived as acting ‘on behalf of the trader.’10 In this case the traders’ activity is of a commercial nature, according to the definition of commercial nature.11 The commercial nature of the act or omission is the second criterium for applicability. It is not evidently clear from the literature that the influencer’s activity, performed on a self- employed basis, will constitute a commercial practice and that the influencer could be considered a “trader”, withing the meaning of the UCPD, article 2 (b & d).12 The European Commission ended the uncertainty about if an influencer can be qualified as a trader, by stating that influencers could qualify, if: “they engage in such practices on a frequent basis, regardless of the size of their audience.”13 The CJEU ruled that this must determined in the light of all relevant circumstances in the individual case.14 However, if the activities cannot qualify as commercial practices, some forms of influencer marketing will still fall outside of the scope of the UCPD.15 Lastly, there must be a causal link between the misleading omission, and the transactional decision of an average consumer, that he would otherwise not make.16 It can be hard to prove the causal. However, article 7 (2) UCPD does not require strictu sensu causality; not the actual distortion, but the potential to have distortion, matters. Therefore, it is necessary to look at the deceptive nature of the omission.17 If the above-mentioned criteria are fulfilled, article 7 UCPD will apply to misleading omissions of influencer marketing, which is then prohibited. The other route of consumer protection is the annex I of the UCPD. This contains practices which are blacklisted, these practices are considered unfair under all circumstances. Point 11 of the Annex I, considers: ‘Using editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer’'. The Court of Justice of the European Union has ruled that point 11 is without prejudice to the Audiovisual Media Services directive and that the exemption also covers newspaper public.18 Therefore, it cannot be ruled that point 11 would not be applicable to editorial content of influencer marketing.19 In accordance with point 11, there must be a payment of a trader, to (in this case) the influencer, for producing editorial content, without clearly identifiable as an advertisement. The Court stated in Peek & Cloppenburg that a payment can be considered as ‘a consideration with an asset value for the publication.’20 ‘Publication’ covers the affiliate marketing, endorsement and barter of a product.21 It is debatable if the advertising content of an influencer can be considered ‘editorial content.’ Editorial content adds the dimension of authenticity and/or creativity to plain advertorial content.22 If the influencer adds his opinion or another form of ‘creativity’, the content could be considered ‘editorial.’ Editorial content needs a mass media character of communication. According to Luzak & Goanta, this is not problematic, since the content is ‘open-accessible’ and not only meant for their existing followers, but also to attract new followers.23 Therefore, it has a mass media character. I agree with the authors that influencing marketing can be considered ‘editorial content’ in the light of point 11. Although, there are situations imaginable, where the content is not clearly editorial, but still consumer protection is desirable, like a scripted advertisement.

Mediawet

The new Dutch ‘mediawet’ is based on the Audiovisual Media Services Directive (AMSD).24 This directive was revised to create a level playing field between online media service providers. This enables national legislators to regulate influencer on video platforms, as YouTube, under national media law. The directive opposes minimum harmonization, so it possible to adopt stricter rules under national law.25 The new “mediawet” (=Media law) came into force on 1 november 2020. The new mediawet enables “Het Commissariaat voor de Media (hereafter: CvdM),” the supervisory administrative body for compliance with the mediawet, to also supervise social media and influencer content. The Minister confirmed that article 3.29a Mediawet, about Commercial Media Providers on the Demand (hereafter: CMPD), also applies to social media content, and therefore the ‘channels’ of the influencers. The Dutch legislator is thus ahead of the legislation from Brussels.26 Based on the AMSD, CMPD’s have an obligation to make advertisement recognizable as such.27 The CvdM is responsible for further policies relating to, and compliance with the mediawet.28 The Beleidsregel contains a minimum threshold for active monitoring of ‘professional influencers, who have 500k followers, more than 24 video’ a year, make economic profit, on TikTok, YouTube or Instagram.29 Amateur content creators are excluded of the scope of active supervision. However, the CvdM will lower this threshold in the future. Influencers have to comply with three additional policies, concerning three different types of advertisement, the rules differ between each form of advertisement, a brief overview:30

• The first type is advertisement, where the public is clearly, persuaded to buy a certain product or service.31 The influencer should provide information in the description of the video, that it contains advertisement, and should mention it beforehand, or during the advertisement.32 While hashtags are not mentioned, ‘#Ad’ is allowed, but ‘#partner’ is not clearly noticeable enough, and thus explicitly excluded as notion33

• The second type is sponsoring: a third party contributes to the influencer to establish certain content.34 For example, a free holiday or product. In this case, the influencer should put “this video is sponsored by...’ in the description of his content. He should also mention this at the beginning or end of the video. The sponsored content may not incite to buy the product or service. Therefore, tagging the brand in an Instagram post is no case allowed: the CvdM deems this too ‘recruiting’ of the product or service.35

• The last type of advertisement covered by the policy is product placement. The product is then part of the storyline, without a scripted text. This type of advertisement seems neutral, and therefore must be neutral. The product may not receive too much attention, since it is hard to note that the product is being advertised. Also, the influencer must notice in the description: “this video contains product placement” and mention it at the beginning and end of the video.3

If the influencer does not disclose this information, it is assumed to be surreptitious advertisement, which is prohibited. The video platform has obligation to disclose this information if they are aware, it contains advertisement. 37 Furthermore, the influencer must provide relevant contact information and a statement, which clarifies that he is supervised by the CvdM.38

Reflection and conclusion on the fitness of both legal systems

The rules concerning misleading omissions, or surreptitious advertisements of both legal systems cover marketing by influencers. The UCPD was not intended to cover influencing marketing when it came it to force. The requirements of ‘commercial practice’ and ‘trader’ can be problematic. However, as mentioned, with some creativity it is still possible to make influencers act according to article 7 UCPD. The Dutch Authority for Consumer & markets even punished a youtuber based upon the UCPD.39
The revision of the Mediawet, with dedicated policies about influencer marketing, and classification of influencers as CMPD’s are progressive steps in consumer protecting law. In my opinion, the differentiation between different types of advertising content is redundant. As all provisions have the intention of making the advertisements known. Simplicity will help effectivity: a simple mention before any form of advertisement in the content itself and noticing in the description seems sufficient for consumer protection. In conclusion, the new Dutch legal framework was built based on ‘older’ directives, with the implementation of new provisions that specifically apply to influencer marketing. Compared with the UCPD, this saves from legal hassle with (broadening) definitions and makes the legal framework more fit for the purpose of consumer protection. However, the distinction seems redundant for practicing law in action. Since, active control, warnings and punishments are the only way to effectuate consumer law, so it’s not merely law in the books. The characteristics of influencer marketing; authenticity, familiarity, and the surreptitious nature of the advertisement, are the main stumbling blocks in enforcement. (See annex provided below). Influencers and the advertising company, have a commercial incentive to not disclose this information, because of the effectivity of surreptitious advertisement. Consequently, it is hard protection authority to recognize and enforce upon the commercial nature of advertisement in daily produced content. As a solution, I would suggest an increased role of advertising companies: a private register of the CvdM, where advertising companies must disclose the advertisement campaign they have with an influencer, and a contractual obligation to the influencer to disclose the commercial nature of their content. This will improve the effectivity of enforcement and of the consumer protection nature of the Mediawet, which is not effective if it it’s mere legal theory that can’t be enforced; it must be brought to action.

Sources

1 Global influencer market size 2022 | Statista
2 Wright e.a., The Lasting Effects Of Social Media Trends On Advertising 2010, No. 11
3 Trzaskowski, Identifying the Commercial Nature of ‘Influencer Marketing’ on the Internet. p 83/84
4 Argyris e.a., The effects of visual congruence on increasing consumers’ brand engagement 2020
5 Goanta & Ranchordás, The regulation of social media influencers 2020, p. 4
6 Michaelsen, The impact of influencers on advertising and consumer protection in the Single Market, p 52-60 7 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market

8 Michaelsen, The impact of influencers on advertising and consumer protection in the Single Market, p. 63 9 Article 5 (2 a-b) UCPD
10 Michaelsen, The impact of influencers on advertising and consumer protection in the Single Market, p. 64 11 Article 2 (d) UCPD.

12 Trzaskowski, Identifying the Commercial Nature of ‘Influencer Marketing’ on the Internet,
13European Commission, 2021, Guidance on the interpretation and application of Directive 2005/29/EC of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the internal market, 2021/C 526/01
14 Case C-105/17 Kamenova [2018] ECLI:EU:C:2018:808, par, 2, 37- 40 and 45
15 Riefa, Towards Fairness in Digital Influencers’ Marketing Practices 2019
16 Article 7 (1/2) UCPD
17 Ducato, One Hashtag to Rule Them All? 2020, p. 11

18 RLvS Verlagsgesellschaft mbH tegen Stuttgarter Wochenblatt GmbH 2013, par. 45-46
19 Trzaskowski, Identifying the Commercial Nature of ‘Influencer Marketing’ on the Internet, p. 86
20 Case C-371/20 Peek & Cloppenburg ECLI:EU:C:2021:674, par. 49
21 Luzak & Goanta, #paidpartnership Means More than Money 2022, p. 1-4
22 Frager, What is Editorial Content? (Power Digital Marketing blog, 21 February 2020)
23 Luzak & Goanta, #paidpartnership Means More than Money 2022, p. 5-6
24 Directive (EU) 2018/1808 of the European Parliament and of the Council of 14 November 2018 s
25 Van der Louw, Intellectuele Eigendom en Reclamerecht, Reclame door grote influencers strikter gereguleerd | Navigator

26 Ibid
27 De Cock Buning, Social Media Influencers: liever door de hond of door de kat gebeten? 2019
28 Article 7.10, Mediawet 2008
29 Beslisboom, Beleidsregel kwalificatie commerciële mediadiensten op aanvraag 2022
30 Van der Louw, Intellectuele Eigendom en Reclamerecht, Reclame door grote influencers strikter gereguleerd | Navigator
31 Article 1.1, under 2, Mediawet 2008.
32 Article 8 (1-2), Beleidsregel reclame commerciële media-instellingen 2022
33 Van der Louw, Intellectuele Eigendom en Reclamerecht, Reclame door grote influencers strikter gereguleerd | Navigator
34 Article 1.1, under 2.B, Mediawet 2008.
35 Van der Louw, Intellectuele Eigendom en Reclamerecht, Reclame door grote influencers strikter gereguleerd | Navigator
36 Ibid
37 Article 3a.5 (3-4) Mediawet.
38 Article 3a.2 (2a-d) Mediawet

39 ACM legt last onder dwangsom op aan Bicep Papa voor gebruik nepvolgers en neplikes | ACM.nl 2021