Influencers should not get away with false advertising

The collapse of cryptocurrency Exchange FTX— a digital currency exchange platform — in November and the subsequent arrest of the founder, Sam Bankman-Fried, shook the crypto industry.

Bankman-Fried is accused of wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. Additionally, the Securities and Exchange Commission has accused him of orchestrating a massive, years-long fraud. 

But he is not alone in the suit. A pack of ambulance chasers have joined the lawsuit accusing celebrities, including NBA star Steph Curry, NFL legend Tom Brady, Shaquille O’Neal, and four-time Grand Slam champion Naomi Osaka of betraying public trust.

Bankman-Fried and his co-founder Gary Wang utilised lucrative celebrity endorsements to bring new users to the site. The suit claims that the celebrities engaged in deceptive practices to sell FTX yield-bearing digital currency accounts.

The lawsuit has unnerved influencers worldwide. It, however, begs the question, to what extent should celebrities be held liable for the brands they represent? What are the rules surrounding influencer marketing, and who is regulating it?

Globally, there has been a gradual change in the way products and services are marketed. Brands use celebrities as brand ambassadors.

In Kenya, influencer marketing has become potent for promoting brands, from blue-chip companies to college student-owned Instagram shops. Ads on digital platforms are becoming more accessible to consumers. Influencers’ opinions on these items might convince or deter people from buying a specific product, placing a significant responsibility on influencers.

Even the slightest mention can cause product sales to go into overdrive. Such is the power of these modern-day lifestyle evangelists.

Interestingly, social media is still very much the wild-west when it comes to advertising. It is a fertile ground for misleading and blatant false promotion.

Take, for instance, a recent case of a false advertisement on Instagram. An influencer-turned-entrepreneur made her followers believe her shop was shutting down through emotional and psychological manipulation. Her followers thronged her shop, leading to a massive sale.

A few days later, she reappeared in a different shop on bigger premises. She casually explained that she needed to sell the stock before relocating.

In a separate instance, a popular TikToker has been accused of misleading her millions of followers on the effectiveness of a  skin care product to prevent acne.

Unfortunately, there are tens of similar cases where influencers abuse the trust factor to promote, sometimes even medical services and health products to followers. 

While it may be argued that these endorsements are more of moral than legal issues, it should be noted that brands engage these influencers based on their huge number of followers, perceived credibility, and their interactions in terms of likes, shares and retweets as opposed to the influencer’s expertise. While consumers, rely on the trust factor, believing that if a celebrity or an influencer has used a product or service, then it must be good.

Article 46 of the Constitution requires Parliament to enact legislation that provides for consumer protection and fair, honest and decent advertising.

The underlying ethos of consumer protection law requires that ads must not be misleading. The penalty for those found guilty of false advertising is a fine of Sh1 million or a prison term of up to three years.

Given the growing audience exposed to promotions by influencers and celebrities, it is essential that advertisements on social media comply with the provisions of the law. 

It’s essential, therefore, to review legislation on advertising, emphasizing and placing responsibility on the influencers. And due to the huge attraction of influencer marketing, regulators, communications agencies and brands must step up and define ethical limits they can stretch and ensure influencers do not fall foul of advertising rules.

For a start, influencers must make it clear that their content is an advertisement if they have been paid or given a freebie. Influencers also need to ensure they back up claims made.

These changes will drastically change how contracts are discussed and written between celebrities or influencers and these brands.

Since the celebrities will now have greater responsibility/liability, lawyers representing celebrities must insist on detailed representations from the brands in terms of product quality and compliance with advertisement-related regulations.

Influencers must also seek robust indemnity provisions from brands to cover the potential penalties and legal costs they may incur.

—The writer is a corporate consigliere operating at the intersection of finance and communications —Donald.kogai@oxygene.co.ke