Influencer Marketing: A Legal Update for the Direct Selling Industry

What is ‘Influencer Marketing’?

To answer that question, we first need to know what an ‘influencer’ is.

‘Influencer Culture: Lights, Camera, Inaction?’, the House of Commons’ Digital, Culture, Media and Sport Committee Report (April 2022) is a good starting point:

“an ‘influencer’ is an individual content creator who builds trusting relationships with audiences and creates both commercial and non-commercial social media content across topics and genres.”

The report also offers some interesting insights into the Committee’s difficulties in formulating that definition.

“We define Influencer Culture as ‘the social phenomenon of individual internet users developing an online community over which they exert commercial and non-commercial influence’. In the broadest sense, ‘influencer culture’ is not a new phenomenon. For centuries, people of influence such as actors, politicians or intellectuals have had the power to affect the opinions, decisions, and actions of others. In recent years the advent of social media platforms has democratised media access and rapidly increased the accessibility and reach of these individuals … Defining the term ‘influencer’ in this landscape has been notably challenging. There is no established basis in law and little consensus among industry stakeholders … Yet the primary focus of most definitions was the commercial element of influencing. Consumerism and advertising are often linked to influencing, since most influencers provide their content free to platform users and must therefore find ways to generate revenue from their work. An influencer can generate revenue from their work through brand advertising and sponsorship, platform revenue sharing models, fan subscriptions and the sale of their own merchandise.”

This definition, and the surrounding commentary, is very relevant to direct selling: there is no legal definition, and ‘influencer’ is no more than a descriptive title for ‘a person who influences.’ Although in practice this tends to be in the context of using a non- commercial influence to then influence for a commercial purpose.

A Direct Seller as an Influencer
A direct seller can also fit very readily into the description of ‘a person who influences.’ A direct seller will seek to build a trusting relationship with their customer base and seek to generate revenue from the supply of products and services to those customers, including by using social media and other electronic communications such as email and WhatsApp.

This might be a surprising conclusion because many direct sellers would not see themselves as “influencers” in the classic sense of a high-profile celebrity endorsing a fashion brand or similar product, say in the style of Love Island’s Mollie Mae or reality star Jodie Marsh (both of whom have been determined to be influencers by the ASA), and so it is important to understand that regulators do not restrict the meaning of an ‘influencer’ in that narrow way.

The Demarcation of ‘Influencer’ in Advertising
The Advertising Standards Agency (ASA), which administers the UK’s advertising code (known as the ‘CAP Code’) confirms that “A social media user doesn’t need a particular number of followers or a particular occupation to count as an ‘influencer’ – in practice the ASA defines an influencer as anyone who has been paid by a brand to advertise a product on their own social media, because of their social media influence.”

The ASA provides guidance as to when content posted on social media counts as ‘advertising’ (ASA’s ‘Recognising Ads: Social Media and Influencer Marketing’):

• When a brand gives an influencer a ‘payment’ (i.e., any form of monetary payment, free loan of a product/service, any incentive and/or commission or a product/service has been given free), any resulting posts promoting the brand become subject to consumer protection law enforced by the Competition and Markets Authority (CMA).
• When a brand also has editorial control over the content, the ASA can apply the CAP Code as well.
• Both brands and influencers are responsible for ensuring that ads are obviously identifiable, so both need to ensure that the ads they create can be easily distinguished from the influencer’s independent posts.

Controlling the Message Content

What counts as ‘editorial control’ is very wide – ASA’s ‘Influencers’ Guide to Making Clear that Ads are Ads’:

“The simplest way for a brand to ‘control’ the content is by telling you what you have to say, e.g., if there are particular words, phrases, themes or ‘key messages’ you need to include, or you have to use a particular hashtag … Requiring you to post a specific number of times, on certain dates or at particular times could also count as ‘control’. If a brand reserves the right to check/approve the content before it’s posted and/or to ask you to change it, this could similarly count as ‘control’. They don’t need to actually ask for changes – if they could, and you would have to do it (e.g., the contract means they could stop you from posting it), that’s enough.”

A direct seller will receive payments from the company under the compensation plan, and even where the company does not provide the advertising content to the direct seller, the terms of the contract between the company and the direct seller are likely to grant rights to the company or impose restrictions on the direct seller which amount to ‘editorial control’ over the direct seller’s advertising within the scope of the ASA’s guidance.

The Difference between a Direct Seller and an Influencer?
The difference between a direct seller and an influencer has traditionally been transparency as to the commercial relationship with the ‘brand’. A direct seller generally describes themselves as a ‘distributor’ or ‘consultant’ for the company and displays the brand as part of their marketing, particularly on their own website. Whereas an influencer normally posts on social media about other matters and then includes content about the brand which does not make clear that the influencer has a commercial relationship with the brand.

But that traditional difference is increasingly breaking down. Direct sellers demonstrate ‘authenticity’ and use social media to post their thoughts and opinions and about aspects of their lives, as well as to post about the products and business opportunity they are involved in. This can lead to a lack of transparency about their commercial relationship with the brand when they act like a ‘classic’ influencer: for example, “Took the kids to school. Got ready for the meeting. Put on my [brand] makeup. Felt like a million dollars” … may be true, but is a form of advertising if the post is by a direct seller of that cosmetics brand.

#Ad: Make it clear it’s Advertising
It is important for direct selling companies to appreciate that the company and the direct seller are jointly responsible for the direct seller’s advertisement. This is regardless of whether or not the commercial relationship between the direct seller and the brand is clear from the published content.

By way of illustration, in 2021 the ASA upheld complaints against Pruvit Ventures for a number of CAP Code breaches in relation to the website content and Instagram posts of some of its promoters. The ASA’s ruling emphasised that “as the direct beneficiaries of the marketing material … [Pruvit was] jointly responsible for the ads and their compliance with the CAP Code.”

This joint responsibility of the company and the direct seller for the direct seller’s advertisements (including on social media) harks back to the Amway case in 2008 where the High Court said that “the point is not whether Amway is vicariously liable for statements made by independent IBOs, or whether such statements are constructively Amway’s statements … Amway cannot reap the benefit of such misstatements or misrepresentations without accepting the proper consequences flowing from the means by which that benefit was obtained.”

And finally …
It is important for direct selling companies to make clear to their direct sellers that all content which promotes the brand, whether the products or the business opportunity, must be clearly identifiable as an advertisement, and its content must comply with the CAP Code. Where the content itself is not clearly recognisable as an advertisement then the direct seller must identify it as an ad by applying the same ASA rules as an influencer.

Disclaimer: We at Memery Crystal (and our parent company RBG Holdings plc) support and encourage free/independent thinking in relation to issues which are sometimes considered to be controversial subject matters. However, the views and opinions of the authors do not necessarily reflect the opinions, views, practices and policies of either Memery Crystal or RBG Holdings plc.