A consequence of the meteoric rise and dependence on social media, traditional celebrities have been cast aside as of late being replaced by the newly crowned “influencer” or “content creator”. Such a rise has caused confusion due to misleading advertisement, where many countries are now rushing to clear the matter up and protect all parties involved.
An “influencer” as the word implies has the possibility of influencing their following on social media, therefore large companies have used such influencers to their advantage. The European Council state that influencers play a critical role in shaping public opinion and disseminating information across various social media platforms. When businesses use “influencers” or “content creators” to promote or advertise their products to their large-scale following Influencers are used as a tool a sort of middleman between the business and the follower. So, what are the legal implications of the influencer world? And what truly is an influencer from a legal standpoint?
There is no specific definition for an influencer for now, therefore the closest definition one can use is that of a trader. The Consumer Affairs Act Chapter 378 of the Laws of Malta, which aligns with EU consumer protection directives, defines a trader specifically in article 2 of the Consumer Affairs Act as;
“any natural or legal person who, in relation to a contract, is acting for purposes relating to that person’s trade, business, craft or profession.”
The Court decided that whether a person sells items online or offline, they can still be regarded as a trader if they do so with a professional motive. In addition to this, The European Court of Justice (ECJ) went on to prove the categorization of a “trader” under EU consumer protection legislation in the Kamenova case (C-105/17). The European Court of Justice (ECJ) established a number of essential requirements to establish a person’s eligibility as a trader, including the existence of a structured sales structure, the desire to turn a profit, knowledge of the products being sold, legal standing to conduct business, and whether the person is subject to VAT or receives any kind of compensation or incentives. The Court also took into account whether the transactions were of a professional nature and the regularity of the sales activity. In this instance, Kamenova was categorised as a trader by the ECJ due to her regular and organised internet sales that were intended to make money. This decision made it apparent that those who carry out these routine business operations are governed by EU consumer protection regulations, which mandate that they give customers clear and accurate information and follow ethical business practices.
As of today, there has not been a legislation around the world that has defined the terms “influencer” or “content creator”. If one looks at the recent guidelines published by the The Malta Competition and Consumer Affairs Authority (MCCA), that influencers should adhere to, it is undeniable that the intent of such guidelines is to protect the consumer which in practical terms would be the follower who is exposed to the promotional posts of such an influencer. Furthermore, the MCCA guidelines make it clear that if influencers do publish a promotional post, it must be known to the followers, so that the follower (consumer) will be aware of what is going on and also this will discourage and deter the marketing tactic “disguised advertising” from being used.
In order to safeguard consumers and promote fair competition, the European Union (EU) has put in place extensive regulations to control advertising tactics. The Directive on Misleading and Comparative Advertising (2006/114/EC) and the Unfair Commercial Practices Directive (UCPD) (2005/29/EC) are two important directives in this regard.
The UCPD aims to harmonize laws across EU member states concerning unfair business-to-consumer commercial practices. Its application focuses on any unfair commercial practice occurring before, during, or after a commercial transaction. Article 5 of the UCPD, defines a commercial practice as unfair if;
- it is contrary to the requirements of professional diligence, and
- it materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers.
Moreover, Article 6 prohibits providing false information or deceiving consumers regarding product characteristics, such as availability, benefits, or endorsements and Article 7 continues in this fashion by focusing on misleading omissions, emphasizing the importance of providing material information that the average consumer needs to make an informed decision.
The Directive on Misleading and Comparative Advertising addresses business-to-business relations, aiming to protect traders against misleading advertising and to set the conditions under which comparative advertising is permitted. Article 2(b) defines misleading advertising as “any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor;”
Comparative advertising, as defined in Article 2(c) as “any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor;”
Both of these directives collectively establish a framework to ensure that advertising practices within the EU are fair, transparent, and do not mislead consumers or businesses. Therefore, by having these directives available, Malta can use them to cross reference and create guidelines of their own.
Since in Malta’s legal system there is no specific piece of legislation catered for ‘influencers’, Malta follows the EU’s footsteps who have outlined regulations and directives which can be interpreted as referring to influencers. If one analyses, the definition of unfair commercial practices in the UCPD compared to the one in the Consumer Affairs Act, one will conclude that Malta has done exactly that and focuses on the safeguarding of the consumer. In parallel with this Article 51C of the Consumer Affairs Act provides an extensive list of acts that are referred to as “misleading”, thus Malta’s legislation paints a clear picture as to what can harm consumers. In oltre, through the definition of trader as mentioned prior, ‘influencers’ must adhere to this article to avoid any penalties etc.
More work is being done to navigate through the obscured legal framework at present and arrive at a destination which is more comprehensible. An example of this is the creation of the ‘Influencer Legal Hub’, by the European Commission in late 2023. Due to having unclear guidelines, the Commission believed that the idea of centralising the laws governing influencer marketing has major benefits. As much as that is true, there are possible drawbacks for all parties involved too.
Clarifying the legal responsibilities of influencers and companies is a significant benefit that encourages openness and uniformity in influencer marketing. Influencers are better able to comprehend their responsibilities with regard to disclosure, contracts, and advertising standards when there are clear rules in place, which lowers the possibility of legal issues. Influencers usually sign contracts that impose legally enforceable responsibilities on them with companies or marketing firms. These agreements specify the influencer’s responsibilities, the kind of material to be produced, deadlines, conditions of payment, and other requirements. Legally speaking, these agreements have to abide by the fundamental rules of contract law, such as mutual consent and good faith.
Additionally, the ‘Influencer Legal Hub’ promotes more equitable corporate practices by ensuring that consumers are not duped by covert advertising. Furthermore, standardising regulations across several jurisdictions can make compliance easier, particularly for influencers who operate globally, lowering legal ambiguities and possible infractions.
The EU is also considering new legislation, such as the Digital Fairness Act, which aims to regulate dark patterns, personalized advertising, and influencer marketing more effectively. Germany is drafting regulations to ensure that online retailers, particularly those from outside the EU, comply with European product safety and consumer protection standards.
An impending law from the European Union called the Digital Fairness Act (DFA) aims to improve consumer safety online, specifically with regard to influencer marketing. Global estimates place the value of influencer marketing at €19.98 billion in 2023, making it a major part of the digital economy.
Lack of transparency in influencer promotions is one of the main issues the DFA addresses. It can be difficult for many customers to discern between sponsored marketing and sincere personal recommendations, which could result in false information and consumer manipulation. The European Commission has recognised this problem, pointing out that influencers engaged in routine business ventures, such brand collaborations, are regarded as dealers under EU consumer law and must openly declare their advertising.
In order to address this, the DFA suggests explicit rules for influencers to reveal commercial content. To make sure that customers can quickly recognise promotional content, disclosures must be clear, prominent, and at the start of postings or stories. Platform-specific labels like “paid partnership” or hashtags like “advert” or “advertising” are examples of acceptable disclosures. Words like “gifted,” “partner,” or “ambassador” are considered inadequate and might not adhere to the necessary criteria.
The Digital Fairness Act is an important step in protecting consumers in the digital era, especially with regard to influencer marketing. The DFA seeks to improve openness and inspire confidence in digital advertising practices by implementing explicit disclosure standards and harmonising rules among member states.
To resolve the disparity in national legislation pertaining to influencer marketing, the DFA also seeks to standardise rules throughout EU member states. The DFA aims to level the playing field in the EU internal market by instituting universal standards, guaranteeing uniform consumer protection throughout the Union.
Julian Mifsud
Legal Intern
Mifsud & Mifsud Advocates
For more information you can contact one of our Team Members at Mifsud & Mifsud Advocates.
