ACCC sounds alarm as report finds 81% of influencer posts potentially misleading

Inadequate disclosures of sponsored content by influencers and a lack of advertising transparency are among the key concerns included in the Australian Competition and Consumer Commission’s (ACCC) latest analysis report into the nation’s use of social media services, as it continues to support reforms to protect consumers and businesses.

The sixth interim report of the Digital Platform Services Inquiry, which was released at the end of April 2023, focuses on examining competition and consumer issues associated with social media services in Australia and analyses how social media is used by consumers, businesses, advertisers, and influencers across the country.

The report’s analysis of social media services has identified a range of competition and consumer issues, which can have a significant impact on Australian consumers and businesses, including inadequate disclosures by influencers, a lack of advertising transparency, harm to Australians caused by scams, the significant market power of Meta, data collection and use practices and a lack of effective dispute resolution mechanisms for consumer and business users.

In its report, the ACCC also highlighted the growth of the influencer marketing industry and raised concerns about the inadequate disclosure of sponsored posts by influencers and brands.

In January this year, the ACCC commenced a sweep of social media posts to identify misleading testimonials and endorsements by influencers, examining content from more than 100 influencers after receiving more than 150 tip-offs from consumers about potentially misleading posts.

The ACCC has since identified 81% of influencer posts as potentially misleading endorsements and testimonials. Based on the issues identified from the sweep, the ACCC says it will conduct various education, compliance and potential enforcement activities.

Influencers who are in breach of the Australian Consumer Law can face penalties of up to $2.5 million.

Growing industry

According to the ACCC’s report, the influencer marketing industry is growing significantly and estimates suggest the global influencer marketing sector is expected to grow from US$6 billion in 2020 to US$24.1 billion by 2025. The ACCC also noted in the report that other Australian regulators are undertaking work to address influencers giving unlicensed financial advice, promotion of therapeutic goods and cosmetic surgery, and a lack of disclosure of gifts as taxable income.

ACCC Chair Gina Cass-Gottlieb said the report reinforces the need for reform, including specific mandatory processes for consumers and businesses to report and social media platforms to remove scams, harmful apps and fake reviews, and establishing an external Digital Ombuds Scheme.

“Consumers are unable to make informed choices about purchases when endorsements and sponsored posts are not clearly disclosed,” Cass-Gottlieb said.

“Social media services are an essential part of our daily lives and have provided many benefits to society. But we are concerned about the level of influence social media platforms hold over users and their position as critical intermediaries for businesses to reach customers. Limited competition in these services can lead to poorer outcomes for consumers and small businesses.”

The report also states that as the influencer marketing industry continues to grow, new issues are emerging, including influencers facing high rates of online harassment and bullying and child influencers becoming susceptible to greater harms online, including from online harassment, privacy breaches, and a lack of labour protections.

When it comes to marketing arrangements between influencers and brands, the ACCC found there is a broader lack of understanding and consensus about the standards for determining pay rates. 

Social media platforms actively attract and encourage influencers to monetise their presence on their platforms through content creator programs and bonus funds; however, changes to platform algorithms and platform influencer partner programs can have a considerable impact on an influencer’s ability to reach their followers and earn revenue. 

The ACCC will continue to examine digital platform services in its next report, which will focus on the expanding ecosystems of digital platform service providers.