Influencer marketing: Legislation, regulation and standards

As businesses tune in to the opportunities presented by social media for marketing and brand promotion, evolving business models are creating new challenges and risks. But what is the legal position of online influencers and the companies that are hiring them?
Safeguards: There are fewer direct regulations around social media and the use of influencers in the Middle East.
By Dino Wilkinson
Wed 05 Jul 2017 11:53 AM

The growth of social media has seen the rise of a new generation of celebrity: the online stars with thousands of followers hooked on their Instagram, Twitter, YouTube or Snapchat feeds. The instant nature of social media allows fans to follow and interact with their favourite personalities. Many channels are focussed on a specific field — for example, food, fashion or beauty — and the stars of these channels are hot property. The business world has quickly realised the potential for association with this new generation of social media personalities, who have the power to influence their large, often youthful, following.

While the use of an influencer to promote a product can be an effective way for companies to reach their target audience, these deals do come with an associated risk. In many countries, the law has not developed rules that are specifically adapted to this type of marketing and existing advertising or other laws might be applied.

Leading influencers can earn substantial amounts from sponsorship and advertising revenues, so many individuals now consider this type of activity as a legitimate career choice. Again, this will largely have to be considered in the context of existing employment, company and tax laws that may not easily fit the new working model.

The issue of brand protection is important for any company that wishes to associate with a celebrity. The informal and natural style of many social media feeds can be part of the attraction for followers, but poses a potential reputational risk to brands that are more used to strict controls over advertising output and sponsorship.

A common question that arises in the context of promotional social media posts is the existence of any legal or regulatory obligation to identify the item as an advertisement or promotion. The US has specific rules on the disclosure of sponsorship relationships that are enforced by the Federal Trade Commission. These rules require that consumers be informed of any material connection between brands and influencers. It is now relatively common practice to see posts that include #ad or #sponsored to indicate where the author is being paid to promote a product.

In the Middle East, there are fewer direct regulations around social media and the use of influencers. The UAE legal landscape for advertising comprises a patchwork of federal laws in addition to certain free-zone regulations, including:

• Federal Law No.15 of 1980 (the Publications Law);

• National Media Council Decision No. 20 of 2010 (the NMC Content Guidelines);

• National Media Council Decision No. 35 of 2012 (the NMC Advertising Standards);

• Federal Law No. 2 of 2006, as amended by Law No. 5 of 2012 (the Cybercrimes Law);

• Dubai Creative Clusters Authority Codes of Guidance; and

• Media Zone Abu Dhabi Content Code.

The NMC Advertising Standards apply nationally to all advertisements across any media. Arguably, a paid promotional post on social media could be construed as an advertisement for these purposes and would therefore have to abide by the Standards. In addition to the requirement to respect the culture, leadership and policies of the UAE, an advertisement must not be “vague, ambiguous or without clear indication” and it must be “clearly identified and shown independently from other editorial and media materials”. Accordingly, it would be advisable for brands using influencers in the UAE to adopt a similar approach to the US model of disclosing promotional posts or tweets to avoid falling foul of the National Media Council’s requirement to clearly identify an advertisement.

An influencer that is paid for promoting a brand is engaging in a business transaction. If this takes place in the UAE, the influencer should only be carrying out this type of service under an appropriate commercial licence. Generally speaking, this would require them to establish a company that is licensed to carry or the relevant activities.

In the current early stages of the influencer concept, it is also possible that many individuals are running blogs or feeds in their spare time while maintaining other employment. The UAE labour law framework does not readily adapt to the concept of part-time or casual working outside an individual’s main employment. The individual may also be in breach of their employment contract if they are engaging in paid work without their employer’s knowledge or consent.

All of the above issues create potential hazards for a brand and it may be damaged by sanctions arising from breaches of advertising or employment laws. These sanctions could ultimately include fines and/or imprisonment for serious violations, so it is vital to consider all possible steps for mitigating the risks.

In using any third party as a promoter or ambassador, a carefully considered and well-drafted contract can help to establish boundaries and set expectations on both sides.

Such agreements are commonly put in place for more traditional forms of advertising or sponsorship, but should equally be considered for newer models.

Dino Wilkinson, Technology, Media & Telecoms Partner, Clyde & Co

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