Consumer Protection on Social Media – Influencer Marketing

Consumer protection in the digital space is one of the major challenges for lawmakers both at the EU level and at the national level. The key document regulating the protection of consumers from unfair commercial practices is the Unfair Commercial Practices Directive, which was amended in 2019. The aim of these amendments was to provide a broader scope of protection to consumers from unfair practices in the digital environment, with consumer protection against unfair commercial practices in social media advertising highlighted as an important area.

The purpose of this text is to point out how consumers should be viewed in the digital space and to emphasize the greatest risks they face in the context of influencer marketing.

Consumer law distinguishes between two categories of consumers – average consumers and vulnerable consumers. An average consumer is reasonably well-informed, reasonably observant, and circumspect, taking into account social, cultural, and linguistic factors. On the other hand, vulnerable consumers are those who, due to mental or physical weakness, age, or gullibility, have a lower ability to protect themselves in relation to a particular commercial practice or product and therefore require an additional level of protection.

The principle underlying consumer protection law is full information, which means that the consumer must be informed about all essential circumstances that influence their decision to purchase or not to purchase a particular product. Consumers in the digital space are often unaware of the mechanisms used by traders, as well as the type of information they share about themselves, with whom they share it, and how it is used. With the continued advancement of technology and the growing digitalization of everyday life, the line between average and vulnerable consumers is becoming increasingly blurred. Digital asymmetry can make all consumers vulnerable in the digital environment, as it implies limited or non-existent bargaining power on the part of consumers. This is further aggravated in some cases by a lack of digital literacy, cognitive biases, and overwhelming and excessive exposure to information. All of this highlights the need for additional consumer protection.

It is difficult to imagine a modern person without access to social media, even for a single day. Platforms such as Instagram, Facebook, TikTok, and YouTube have replaced traditional communication channels, creating favourable conditions for businesses to promote their products. One of the most common ways companies promote products is through collaborations with influencers. Such collaborations may take various forms – payment of a fee for promotional services, agreements awarding a percentage of sales made using a coupon linked to a particular influencer, or the provision of free PR packages. The biggest issue in the trader – influencer – consumer relationship is that influencers often fail to disclose that the content they post involves paid product promotion.

The current legislative framework in Montenegro does not contain explicit provisions regulating influencer behavior in the domestic market, leaving significant room for improvement when it comes to protecting consumers from unfair commercial practices on social media. There are several possibilities – amending the existing Consumer Protection Act to introduce provisions on influencer liability, or adopting a special law regulating influencer marketing and consumer protection.

A simpler approach would be the adoption of a by-law that would set out the obligations influencers must follow when posting sponsored content on behalf of traders. For example, one such obligation could be the explicit disclosure of paid product promotion in a manner that is clear, unambiguous, and understandable to every user. This requirement could be considered fulfilled when the influencer uses two-level tagging – by selecting the sponsored content tagging option provided within the platform itself and by indicating the sponsorship in the accompanying text of the post. A relevant factor in assessing the existence of a relationship between the trader and the influencer is the level of influence the trader has on the content created by the influencer. For instance, providing instructions on how the post should be created or influencing the accompanying caption indicates the existence of a relationship that may be relevant for establishing the liability of both the trader and the influencer.

Legislative efforts to regulate consumer protection from unfair commercial practices in social media advertising and influencer marketing are still in their early stages. A European pioneer in this field is France, the first EU country to adopt a special law regulating influencer marketing. The Influencer Marketing Act prohibits influencers from directly or indirectly advertising certain products. These include, for example, the promotion of aesthetic surgery techniques and procedures, as well as nicotine-related products (such as electronic cigarettes, IQOS, and similar products). Additionally, the law requires influencers and traders to conclude a written cooperation agreement once they reach a certain threshold of monetary compensation or in-kind benefits. These agreements must contain mandatory clauses, including provisions on the scope of entrusted activities and payment terms. A step further is the introduction of joint liability of influencers and traders for any harm caused to consumers.

Finally, the message to consumers – and that means all of us – is to take a few minutes before accessing a website to read what is written above the “accept all” button, and to pay attention on social media to whether the post is sponsored or simply reflects a personal opinion in the form of a review of a particular product.

By Mina Coguric, Associate, JPM Montenegro