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Vic Domen 00:00
But you know Kim Kardashian is probably the most obvious example of someone who had to pay real money and real prices. It wasn’t just simply an injunction to stop her from making the endorsement. She had to pay real money to kind of get out from under the liability that she had potentially created.
Andrew McCoomb 00:19
You’re listening to Disputed, a Norton Rose Fulbright podcast. In this episode, we’re talking with Erin Brown and Vic Domen about deceptive marketing practices, and in particular, misleading advertising by influencers on social media. Advertising has come a long way since the days of driving down the highway and seeing billboards. Influencer advertising is quickly becoming one of the most pervasive and effective forms of marketing out there. The Canadian Competition Bureau and the US Federal Trade Commission are concerned with ensuring that posts by influencers are not misleading, including as to whether they have a connection with the brand in question. Erin and Vic provide us with their takes on key areas that regulators are concerned with, penalties for influencers who engage in misleading practices – like not disclosing brand connections – and also talk about regulatory similarities and differences in the US and Canada. And of course, they also share best practices for influencers and companies alike. Erin Brown is a senior associate in our Ottawa office whose practice focuses on a wide variety of regulatory issues, including competition and antitrust law, international trade, economic sanctions and export controls, as well as customs and procurement, and she’s an avid consumer of social media herself. Vic Domen is a partner in our Washington, DC office, a government and antitrust investigations and prosecutions lawyer. As a former enforcer, Vic has a unique perspective into the priorities of government agencies, as well as the challenges clients may encounter. Regarded as a top 3 US antitrust enforcer, Vic previously worked for the Tennessee Attorney General’s office, where he served as its senior antitrust counsel. And if you’re looking for more information, check out our episode notes where we’ve linked to the FTC’s guidelines for social media influencers and to the Competition Bureau’s guidelines for influencer marketing. In fact, in March 2023, after this episode was recorded, the FTC issued orders to social media and video streaming platforms regarding their efforts to address the skyrocketing claims of fraud by consumers in this space. The Commission also made clear that it is concerned with ensuring social media and video streaming platforms are taking measures to ensure that consumers are able to more easily identify advertising as such, which is a key theme of the discussion in this podcast. We hope you enjoy.
Ailsa Robertson 02:43
Erin, Vic, welcome to the podcast. Thank you very much for joining us.
Erin Brown 02:47
Thanks for having us.
Vic Domen 02:48
Oh, my pleasure. It’s great to be here.
Ailsa Robertson 02:51
Okay, let’s start off high-level basics. Why listeners should need to pay attention to this episode. Can you explain to us what is influencer marketing? And why it’s caught regulators attention in the recent years?
Erin Brown 03:04
Absolutely. So I mean, I think that people should be listening because influencer marketing is in my opinion, at least as a consumer, one of the most pervasive forms of marketing that has ever existed. And when I think about this, you know, I often think about driving you know, down the highway or, you know, this is a—a cross-border panel so, I will say the freeway, I guess, Vic, driving down the highway or the freeway, you see that big billboard for a, you know, a pop or a soda, I have never seen that billboard and then driven directly to the corner store to purchase the, you know, the pop that was advertised there. But, on social media, I do the equivalent all the time, right? I see an influencer on any of the social media platforms that we think of, you know, typically we’re thinking Instagram, Twitter, YouTube, but of course, new platforms are popping up all the time, us, you know, non-Gen Zers can’t keep up with all the new platforms, but we see, you know, we see this happen all the time, where an influencer that we follow, posts a recommendation of a product, and then before we know it, it’s click, click, add to cart, and it’s on my way to my house before– before I even really think about what I’m what I’ve done, right?
Ailsa Robertson 04:27
So there are five things that I bought this week, just…
Erin Brown 04:31
So– so you’re, you’re a perfect example of this trend, Ailsa. And so this is just such a pervasive form of marketing, in my opinion, it is– it is such an effective form of marketing. So I think it’s really interesting, you know, if you’re listening either as a consumer, to be aware of these things that are going on ,or as a brand, that is marketing to consumers through social media channels, this is a really relevant area to be considering and to be seeing stuff. And, you know, one of the– the things that I think is the most interesting from a competition law perspective, is that we’ve long talked about misleading advertising as an area that our regulators are seized up, right, if an ad is misleading, is it providing a representation to consumers that is inaccurate that we’re concerned about. But when we– when we get to influencer marketing, we actually have a whole other threshold question of misleading advertising before we even get into the actual nature of the advertisement itself. And that threshold question is, Is it even clear that we’re consuming an advertisement? So if I go back to my billboard example, we all know, when we see a billboard that we are a–, we are the target of a paid advertisement that a company or an organization has paid to put that advertisement in front of us, that’s not always, that line is being blurred on social media, we’re not always sure is this a bonafide legitimate product endorsement by somebody that I trust that has used this product, that thinks it works great, and I’m buying this product based on their good faith, the same way that I would a friend recommends a product to me. So we’re not sure if that’s the case, or if they’re being paid to rep– to represent that product to us to– to promote that product to us. And if they’re getting paid, you know, there’s a whole range of potentials there. Is it that they’re getting a kickback if I purchase the product, is it that they got the product for free, and they don’t want to, you know, stop that, that sugar train from a brand that’s sending free products out, or is it that it you know, it is a fully paid advertisement, the same way as that billboard. So it’s a pervasive form of advertising that consumers and brands need to be seized of. And it’s also a really interesting legal area that is emerging when we’re thinking about misleading advertising.
Ailsa Robertson 07:04
Yeah, gone are the days of the kind of madman—Madman–, Mad Men, engaging a commercial advertising agency that is presumably more up to speed on the regulations and the laws that govern what they can and can’t do. As you said, this is not just pervasive in the amount of people that it reaches, but it’s also the type of people who are advertising is way more diverse. And it’s—it’s presumably a bit of a, not just in line before consumers and brands but also from regulators as well in trying to monitor and think about how to manage this.
Vic Domen 07:36
No, and just– and just building on what Erin said. I mean, we know that that social influencers–, social media influencers now have reached an all new high-level, just because Netflix has created a show about it, right? Emily in Paris is all about an influencer. I mean, if there’s if there’s anything else that tells you that influencers are now primetime, that’s the case, I think if you also ride on a– ride on a train, ride on a bus, ride on a plane, everyone has their phones open, and they’re on any one of the number of social media platforms. And I know none of us would ever do this, but if you happen to peek across the aisle, you can notice people scrolling through and half of the time they’re looking at videos, the other half of the time, they’re seeing advertisements from those platforms. So it is so pervasive in just daily life, much more than, say, the billboard on the side of the road, or the television with the periodic advertisements. Now, as you scroll through your phone, it’s coming to you constantly, it’s really almost difficult to get away from it. And with that, there really are probably some new, I guess, oversight that’s necessary from the agencies or the feeling from the agencies that we should have more oversight over social– social influencers, social media influencers.
Ailsa Robertson 08:43
I always say, it’s not necessarily a bad thing, right? It’s actually quite helpful having all these products like direct your attention– directed to products that you’re interested in and to see somebody that you already follow or that you’re already a fan of try something out before you buy it. That in itself is not is not necessarily unhelpful. So I think we need to still keep in mind that this, this has potential to be a very valuable advancement in progress in the digital economy, but it’s just how it’s managed and how its regulated, and to ensure that the risks to consumers are minimized. So I think with that Erin alluded already to certain competition laws and regulations in place already. Can you outline, or do a kind of compare and contrast, the legal landscape across the US and Canada? In particular, looking at the legal frameworks through which regulators are looking at online advertising and digital commercial activity.
Vic Domen 09:44
Let’s talk a little bit about the US just to get started. And– and you know, it’s certainly similar in Canada, I know Erin can speak to that too. But here in the States, the Federal Trade Commission is the agency with– with the majority of enforcement authority over consumer protection violations, right. And so under the FTC Act, there are various things that fall into– into that– that trap and– and so what you’ll typically see is when there is any attempt to unfairly influence or deceive someone, then the Federal Trade Commission will probably step in and say, wait a minute, we’ve got– we’ve got an issue here. And through that, what they’ve done is they’ve– they’ve issued a number of guidelines and rules that try to help, not only consumers, but also the advertisers themselves, and anyone else who might think about giving an advertisement or being an influencer of some sort. And so, thankfully, for–for, I think people on all sides of this, of the platforms themselves, the FTC has actually put out some very handy guidelines that can help the average influencer, or the average advertiser understand exactly what’s– what’s okay, and what’s not okay, and what should or what might subject you to some level of penalty. And, you know, if you take a quick look on their website, you can actually find this very quickly, you do– you do a quick Google search, I hate to say it, and you can find it, just like that. But – but I think that, you know, one of the things to consider is that, use some common sense. Use some common sense, if you’re just if you’re a social media influencer, think about exactly what you’re saying and why. And so the FTC has really made it clear that, for example, if you’re getting paid for it, you need to let people know about it. If you haven’t used the product, you probably shouldn’t be making statements about how wonderful and terrific it is. But if you have used the product, be honest, and tell the truth about what you feel about it. I mean, these kinds of influences have gone back, you know, for hundreds of years, it’s just that on social media platforms now it’s very, very different. And I think that, you know, I– in the US, and I’m sure in Canada, too. I mean, the old snake oil salesman has always been the example, right? There’s someone who has a product that they’re promoting, that they don’t even think probably works the way it should, but they sure are going to tell you how wonderful it is because they’re getting paid to do it. And with that there are certain dangers that consumers unwittingly or unknowingly may step into. And the FTC wants to make sure that everyone knows the ground rules before you step into that world.
Erin Brown 12:10
Yeah, so it sounds like it’s– it’s, there’s a lot of similarities to the– the landscape in Canada. In Canada, really, we think, in terms of misleading advertising, we’re normally looking at the Competition Act, which is enforced by the Competition Bureau. And similarly, the Competition Bureau in Canada has released its own influencer marketing guidelines. And it’s really sort of like that same, you know, common sense perspective that Vic was talking about, it’s really kind of like that gut– that gut reaction test, right? So specifically, what the Canadian Competition Bureau has really focused on is disclosing all material connections, is the way that they put it and so, if you have any type of, you know, if the influencer has any type of material connection with a brand, that needs to be disclosed to consumers, to followers, to subscribers, whatever the, you know, to consumers, essentially. So, that could look like a lot of different things that– that material connection, it can be anything from your personal or a family relationship with the brand, could be free event tickets, free trips, it could be discounted products, or free products or services. You know, it seems brands send a lot of free products to influencers, to get them to, you know, to encourage them to post about it. So if an influencer even is just getting free or heavily discounted products from a brand, you know, discounts outside the regular discounts that consumers would get, that is a material connection to a brand, as far as the Bureau is concerned, and then of course, any money that’s paid. So if it’s a full on, you know, brand partnership with paid sponsored content, where, you know, it’s more similar to our billboard example where you have a photo shoot, and all of that, you know, everything that goes along with that, and it’s really a, you know, a monetary advertisement opportunity, that’s obviously a material connection, and then commissions as well. So, you know, if you are going to get a cut of the– the, you know, the pie every time that a consumer is clicking on that link on your story, and, you know, as Ailsa said she purchased some things in the last week, well did that to the influencers that posted those links get a cut of Ailsa, you know, purchases. So that’s a– that’s a material connection, as far as the Bureau is concerned as well. And there’s a couple of you know, the Bureau has gone a little bit more in detail. I mean, it’s not incredibly detailed, but it does provide some high-level guidance on what it would like to see in terms of what these disclosures of material connections look like. So they want these disclosures to be visible. So, you know, anybody who’s been on Instagram recently knows that, you know, some influencers might post you know, 15 or 50 hashtags on a– on a static post. You can’t just have one #ad buried at the very end of that, you know, sequence of 50 hashtags, that’s not going to be visible and clear, it should be prominent. You know, the Competition Bureau specifically says it can’t be just, you know, one in a long caption and group of hashtags. It needs to be visible on all devices, specifically, they would say, without having to click or tap a button to expand the post. And, you know, as Vic was saying, I think there’s a– there’s a common sense or a gut–, a gut test here, as we see the platforms and the nature of platforms start to evolve, we need to reconsider what a prominent and visible disclosure is. So on a static story, or sorry, I’m sorry, a static post on Instagram, which used to be the norm, what is clear and visible in that context, might be very different– different from what’s clear and visible now, when really stories have taken off on Instagram. And that, you know, that gets into some of the other point, which is that it should be the disclosure should not be separated from the– the content. So if you have a story that spans three or four different slides, and you just put #ad on the first one, but it’s open to your followers, or to consumers to share that those other stories, that other content that doesn’t have the disclosure, then — and that, you know, is shared a lot of times on social media, and you lose the initial disclosure, that can become a problem as well. So it’s really that gut check. And, you know, making sure that the disclosures are clear, contextually appropriate. And as Vic said, really thinking about it from a common sense perspective, What would a consumer who’s viewing this post or this YouTube video, etc., think is my connection to this brand?
Vic Domen 16:51
Yeah, and picking up on that too, in the US, I think it’s– it’s, it’s important to recognize that that Federal Trade Commission uses the same term, right, material connection, that is it. And I think that that’s really what you have to keep in mind. One of the things that– that Erin was touching on too is that, you know, if you’re an influencer, just don’t assume that your followers, or that they know about your brand relationship, just because they may think you work for a certain brand doesn’t mean they have to, and that doesn’t get you off the hook, in trying to issue that disclosure, right? You cannot assume that your– that your folks already know it. And second, you know, even if you think you’re as an influencer, that your opinion is kind of unbiased, you still have to make the disclosure, right? You just can’t say, Well, I’m completely objective. And I just think it’s the best product in the world. So I’m going to use it anyway. And because it’s the best product, I don’t need to tell my consumers that I’ve gotten paid to promote it, that’s not good enough, you actually do have to disclose that relationship too. And I think that’s something very important to keep in mind, you may know everything about the product, your consumers don’t, they’re looking at you for some advice. And you do need to really let them know that in fact, you have received some kind of material, you have some material connection to that product, not just simply you picked it up off the shelf and think it’s wonderful.
Andrew McCoomb 18:06
It’s interesting, it seems like these regulations address at least two things, two sort of principle concepts. One is making sure that influencer marketing is regulated like any other advertising and marketing would, like a Subway commercial or a movie trailer, or, you know, commercials between– between segments on TV. So that’s one piece of it. And then the other piece is, is getting over this idea that people on social media might be deceived into thinking that someone, you know, that they follow who’s holding a product just so, and going on about its virtues isn’t doing that for compensation is doing that because they just genuinely believe that it’s valuable. And it strikes me that it has the effect or potentially has the effect of just making all influencer type marketing, very much consistent with sort of traditional endorsement deal style marketing, where everyone is supposed to be completely in on the joke that of course, you’re being paid to do this. Of course, this is a commercial thing and it has nothing to do with your genuine love of the product. But I guess that’s okay. One just wonders whether it defeats the purpose to some extent of so–, of so-called influencer marketing in the first place, but that’s more of a commercial question, and a speculative one, than anything legal.
Erin Brown 19:25
Yeah, but I think your point and touching in on, I had some similar thoughts coming from what Vic was saying is, I think, you know, we– we sort of think about it in two different ways, right? I think that the new aspect here with influencer marketing is we have this threshold test of whether it’s clear that it’s even an advertisement to begin with, and then, we still have the normal misleading advertising, is the content misleading? So if I, you know, if I’m an influencer and I’m promoting a skincare product and I say, this skincare product is revolutionary, it will make all of your acne or your blemishes disappear for sure in, you know, a matter of days. Well, that is, you know, even if I’ve made clear that I, you know, have a material connection to the brand, and I’ve disclosed that, we still have the question of the content of my actual advertisement. And of course, you know, as with all advertised, you know, as– as with the normal course of misleading advertisement, the– the– the advertisement, if you’re– if you’re making performance claims, for example, it needs to be based on adequate– adequate and proper tests, and all of those sort of normal rules apply to the actual content of the advertisement, but I think you’re right, Andrew, I think we’re moving from a space or a time when people, you know, follow these lifestyle influencers and really thought that they were just sort of giving these unbiased, you know, genuine, well, I don’t want to say not genuine but– but unbiased, or, you know, objective, just like the–the– just like the type of recommendation that your best friend would give you after they used a product that they liked, you know.
Andrew McCoomb 21:12
That’s a real category, right? Like, that’s a real online influencer category, which is YouTube reviews of video games, gaming products, or clothing lines, or anything, that’s a real thing that exists and differentiating between that, and the one that’s got a “spon con tag” is actually pretty subtle to do.
Erin Brown 21:32
Right, and that’s why that disclosure of the material connection is so important, because there still are people out there who may be making YouTube videos, reviewing a bunch of power tools, and they’re just going to the store and buying those power tools and trying each of them and giving you their unbiased opinion. But if you don’t have that material disclosure for the other types of advertisements, then you know, that’s where it starts to muddy the waters. I’m not really sure what the YouTube videos on power tools are about, that’s– that’s not where I typically spend my social media time. I can tell you a lot about the fashion influencers on Instagram, personally.
Ailsa Robertson 22:10
I think that– I actually do use YouTube reviewers a lot, particularly for board games, actually.
Erin Brown 22:19
That’s another conversation, Ailsa!
Ailsa Robertson 22:21
And the way, it seems to me that so much of the risk is particularly when thinking of brands in particular, is that we’re relying on the judgment of individual influencers here to determine, you know, is this a material connection? Have I made a sufficient disclosure? And I think that is, that is particularly from a brand perspective, how do you not say I’m making the right judgment call? They’re not well versed in what constitutes material connection. They’re not well versed in what constitutes sufficient disclosure for misleading advert– for advertising purposes. So whose responsibility is it to educate the influencers on the requirements, and by extension, where does the liability fall with that responsibility?
Erin Brown 23:07
I definitely don’t think that brands should just be relying on influencers to make these determinations. I think brands need to be taking an active role in shaping this. So for brands that are involved in social media marketing, that work with influencers, particularly consumer facing companies, I think, you know, this is the time if not already to develop and maintain those influencer marketing policies and guidelines, work those into your contracts with influencers. When you–, you know, to the extent that you are sending out free products, or heavily discounted products or loaned products, include, you know, if you’re including a specific hashtag that you would like them to use, make sure that the guidelines are clear there, that you expect them to be disclosing that this product was provided, for free or for a discounted rate, whatever the case may be, you know, if you’re sending free products include an insert with exactly, you know, the guidelines to the influencer, about how you want to see that represented on social media. That you want that disclosure to be clear, to the extent that you’re working with marketing companies or with influencers directly, make sure that that’s clear in their contracts, what you expect of them in terms of the clarity of their posts, the clarity of those disclosures of material connections, send them reminders about that, send them updates every time you update your policy, and then a big part of this as well is going to be track that. Make sure that you are then going back and checking what is being posted by influencers that you work with, or by, you know, brands may want to be searching via, you know, common hashtags that are used with their brand to take a look at how this is actually playing out on social media, is it clear? Try to put those objective glasses on and say Okay, if I am a consumer that doesn’t know, that doesn’t have the details of this relationship, can I discern from what’s available on social media that this product was free or discounted or borrowed, or that the event tickets were given freely or that this is, you know, a paid sponsorship. So I think– I think companies need to be– companies in the influencer marketing space, and companies in, you know, consumer products need to be taking an active role on this, they cannot and should not be relying on influencers to, you know, to make sure that they– that this, you know, that there’s no compliance risks here. Influencers come in all different shapes and sizes, there’s many, many very sophisticated influencers that may have their own legal teams that are, you know, seized of these issues that, you know, may regularly make connections very, very clear. But it’s a, you know, it’s a spectrum right now, where other influencers that are just entering the space may not know these rules yet. Hopefully, they’re listening to this podcast, and they will know the rules soon. But I think brands need to be taking the bull by the horns.
Vic Domen 26:09
Yeah and just to– just to kind of build on that, I think, to go to your question too, Ailsa, is that, you know, I think when it comes to who might be responsible or liable, I think it, it could be the, you know, the producer of the product, it could be the influencer, and it could be the platform, and all of the above. I think that that’s the big thing. So this responsibility really falls on everyone. And I do think that, as Erin said, some influencers wouldn’t know this more, the sophisticated ones certainly do, and they make sure it’s on there. But some of the tech platforms themselves have taken, you know, kind of this– this to heart as well. And so for example, Instagram, you know, if you’re on Instagram, you’re gonna see something like ‘paid partnership with’, some of the tech platforms have tried to get out in front of this too, because they recognize that they can be held responsible as well. And they’re trying to avoid that as much as they can. They’re–, they’re in the crosshairs for so many other things that this is one less thing they have to worry about, they’ll be happy. But as I said, to answer your question, I think everyone in that chain of delivering that message could potentially be liable, at least as far as the FTC is concerned. And I’m sure in Canada as well, competition authority.
Andrew McCoomb 27:13
So Vic, that’s a perfect jumping off point to talk about consequences, right? What are the consequences if you’re an influencer, or you’re a platform, or you’re a consumer packaged goods or any other developer, seller, maker of something, that’s going to try to disseminate it through influencer marketing. What are the consequences of a foot fault here or worse than a foot fault? What’s going to happen?
Vic Domen 27:35
In the US, of course, you know, there are all kinds of things. And one thing we haven’t really mentioned yet is that, you know, we’ve mentioned the Federal Trade Commission, but there are other agencies that can get involved as well. For example, the SEC, you know, when you when you have some kind of violation, for example, in the crypto world and Kim Kardashian was a perfect example of this. She– she was advertising without revealing, you know, the fact that she had been paid by– by the cryptocurrency firm to represent them or to promote them. So she was fined $1.26 million, plus she had to disgorge any profit she made plus interest and she had to cooperate in an ongoing investigation. So, it’s not just the Federal Trade Commission, which typically would issue some kind of injunction or penalty for this. And that’s, that’s really the–, the– the extent of their authority, but it’s other agencies as well, that have real hammers to really drop on an influencer or someone such as a Kim Kardashian. You know, I think, you know, crypto is probably the best example now, because, you know, you’ve had people like Tom Brady and LeBron James and Matt Damon and Larry David, all doing ads for cryptocurrency and we see what can happen with that, right? I mean, I guess Tom was doing some of that for FTX, and we know, we know what’s happened–, what’s happened there, but and you’ve kind of seen a quieting of those. I don’t know if we see quite as many of those right now in the crypto world. But you know, Kim Kardashian is probably the most obvious example of someone who had to pay real money and real prices. It wasn’t just simply an injunction to stop her from making the endorsement, she had to pay real money to kind of get out from under the liability that she potentially created.
Erin Brown 29:11
Yeah, and I think we’re gonna, you know, we certainly have the potential for big money to be on the line in Canada as well. Actually, there are fairly recent changes to the Competition Act that came into effect last June that actually increased the fines and penalties, including for deceptive marketing practices. So, you know, we now have maximum penalties that range in– in the range of $750,000 for individuals, a million dollars for subsequent violations. And, sorry, it’s the greater of $750,000 or a million dollars for each subsequent violation, and three times the value of the benefit derived from the deceptive conduct, if that amount can be reasonably determined. And then you know, the maximum penalty for corporations, we see a maximum of $10 million, or $15 million for each subsequent violation, and three times the value of the benefit obtained from the deceptive conduct, and if that amount cannot be reasonably determined the maximum penalty is 3% of annual worldwide gross revenues. So, you know, there’s some pretty big dollars on the line here. Previously, before the– these changes to the log penalties were capped for corporations at $10 million, but we’re certainly seeing at least the ability to have some pretty significant teeth come into, you know, to help regulate, to help, you know, the Competition Bureau enforce misleading advertising, including in the social media space.
Vic Domen 30:42
And, you know, one thing I haven’t mentioned too which I should have given– given, you know, my past, is that in the US, in addition to the Federal Trade Commission, we also have the States Attorneys General. And so all of the State AGs also have, typically they have a Deceptive Trade Practices Act too, it’s kind of a mini FTC Act. And under all of those in different states, there are all kinds of different penalties ranging from say, you know, $1,200 per violation all the way up to a million dollars per violation. And what’s a violation? Is it– is it every single time that your post is viewed by consumer in California, or in New York, or in Florida, or in Texas, or is it just you know, once you did it once you’re done. But that’s another– another addition to all of this, we really focus on the FTC who’s kind of leading all this, but every state has a consumer protection law too. And if, for example, California, or New York decide to join the Federal Trade Commission, which they do sometimes, in an action, you could see additional penalties and fines, which vary wildly from State to State. And it’s just something that– that you don’t want to forget, as the states continue to become more and more active in this world.
Ailsa Robertson 31:47
And I think that point touches on another point about jurisdiction and these– these issues, and these claims, because this is online, it’s pervasive, it’s global, it’s everywhere. And I think that is something that is particularly important for brands and influencers to be aware of is that you could be facing regulatory action and civil claims in multiple jurisdictions. So say, for example, you– you’re, we take the example of an Ontario incorporated company, an influencer that’s based in let’s say, California, and the audience, or perhaps a consumer buys a product from that company marketed by a California influencer, but the consumer himself is based in– in England, you’re potentially engaging three different or maybe even four, if you want to add federal on top of state jurisdictions there, and who knows how many regulators and then on top of that, you’ve got the products, the nature of the product itself, and influencing who the regulator might be. So for example, even it’s, and I think in that situation people might not actually be aware of the– the– the types of laws and regulations that that can engage and the securities is an example, with Bitcoin, and the whole debate around to what extent a cryptocurrency is a security in itself, and the extent to which it engages the SEC, but also something like even a skincare product might attract the attention of the FDA, for example, and I don’t think that’s something that the individual influencers who aren’t legally trained in most cases would you be aware of.
Erin Brown 33:22
Yeah, I think there’s certainly a lot to unpack there, Ailsa. It’s interesting that you mentioned, you know, skincare products, that– that gets me thinking about health products. And certainly, you know, health claims have been something in Canada that are especially sensitive. Particularly, because, you know, that’s a heavily regulated area, with Health Canada involved. And during COVID-19, the– the Competition Bureau worked closely with Health Canada, for example, to crack down on unlicensed and unsubstantiated claims relating to COVID-19 prevention and treatment. So you have, you know, some specific dynamics there around the healthcare industry. But, you know, with respect to your question of jurisdiction in terms of geography, I mean, my sense is that these are really consumer protection laws. So if you have a consumer that is located in the jurisdiction, I don’t think as a– as a business, you can– you can wash your hands of it, if, you know, the paper trail shows that, you know, these advertisements were reaching a consumer in their jurisdiction and I think that, you know, my sense from a general standpoint is that it is going to, you know, potentially lead to these very international, you know, situations and you can’t just sort of wash your hands with liability as a company because you have a consumer in a different jurisdiction. I think, you know, Vic is maybe well-suited to talk about some of the enforcement given– given his past, but I do think we will see and we have to some extent, seen, you know, some cooperation between the competition enforcers across different jurisdictions.
Vic Domen 34:57
Yeah and really, just to– just to pick up on that, I think when you think about it as an enforcer, they absolutely think they have authority. So don’t– don’t ever forget that and they will test the bounds of what that authority might be. In fact, the– the guidance that the Federal Trade Commission gives says that they do have it and the guidance they’re giving you is beware because if you send something, it bounces from Canada to London, to California or Washington DC, you can guarantee the FTC is going to say you are– you’re under our jurisdiction now and we’re going to do it. And the states are no different, right? If you’ve got that social media advertisement or post in California, you can imagine the California AG is gonna say, Tt’s affecting my consumers and even if the Federal Trade Commission doesn’t do anything about it, I will. So that’s the way that’s really the way to think about it. If you’re an influencer, or a product producer of any kind, just think about the way a– an enforcer is going to think that they have the authority to bring you in, attack you and they will see how far they can push their statutory authority, and– and so you don’t want to get caught up in that if you can avoid it. And I think, you know, that’s one of the things to really consider. The other thing to point out, tagging on to what Erin was saying, is that, absolutely the enforcers talk. I mean, so the Department of Justice, the Federal Trade Commission, the EC, Canadian Authority, the State AGs, they’re always talking, whether it’s a competition issue or a consumer protection issue. They have regular meetings, regular discussions, they’re sharing information, so that if it may not be helpful for someone at the EU, or the CMA, it may be helpful for someone in Washington, DC. And– and so don’t ever think that there aren’t as many lines of communication as possible. I know, when I was with the enforcers it was a regular thing. We had regular calls, regular discussions with other enforcers around the country and around the world. That’s just what’s going on.
Erin Brown 36:51
That’s globalization for you, right.
Andrew McCoomb 36:53
And the classic, I like how you refer to these agencies as enforcers, Vic ,the classic enforcer tactic of aiming for the head, aiming for Kim Kardashian to send the most public visible message about what can go wrong for you, if you run afoul. I mean, that would have more impact than 100,000 micro cases against people doing, you know, travel influencing on Instagram or whatever it is just to have the maximum reach and sort of the irony of the– the advertising reach itself is how much the message from– from the enforcers lands when you land it against someone with that much public availability, let’s say.
Ailsa Robertson 37:39
So I think I– taking Andrew’s point about the regulators gonna go ahead and making an example of somebody. But we’ve also the rise of cancel culture too, and actually, we see a big movement amongst followers at the moment where there is an influencer that hasn’t made appropriate disclosures. There’s a kind of cancel culture or the cancellation movement towards, or with regards to that individual. And I’m thinking most recently, I don’t know if you’ve heard about ‘mascara gate’ and what happened. There was a TikTok influencer who failed to disclose her connection with the brand L’Oreal about this mascara that she was using, and she claimed it was wonderful, but then there were lots of people saying that she was wearing false eyelashes in the video where she was demonstrating that product. And rather than, I don’t think there’s been any kind of regulatory action, per se, with regard to that comment, but actually what we’ve seen is a lot of consumers refusing to follow her or cancelling her effectively, because of the misleading advertising that she’s, so it’s having it’s having a kind of cultural impact. It’s, you know, it isn’t just the regulators coming down, you know, with the with the hammer on it, we’re actually seeing a kind of grassroots movement against misleading– misleading advertising too here, which I think is really interesting.
Erin Brown 38:55
I think it might partly be adver–, or I’m sorry, consumers becoming wise to this, right. And consumers realize that, there was a slow sort of trend, where at the beginning, you know, there was a sense that, oh, maybe people are just promoting things without having any sort of like, kickback to them, it’s just their bonafide review of this product. And now, I think consumers are realizing that that’s not the case. And they do want transparency. And I think, you know, anecdotally, I think influencers that are very clear, and are very transparent with their followers and say, I am getting paid by these brands, but I’m only going to promote things to you that I actually do fully endorse, I just happen to also, you know, have a great partnership with that brand. I think we’re going to see people vibe more, and identify more with those influencers who aren’t– who aren’t misleading them. So I think, you know, we all as lawyers come at this from a legal perspective of, you want to avoid liability, but I think that there’s also a reputational thing here too, for influencers and brands, you know, to be– to be in a– in a positive relationship with consumers where you’re, you know, where consumers are trying assisting these influencers too, because they really are promoting brands that they–, that they–, that they identify with, that– they use themselves, products that they like themselves.
Vic Domen 40:10
You know, picking up on that Erin. I think one of the concerns though, too, is, you know, we focus on, you know, say some of the sophisticated, you know, consumers out there, but– but children are on this all the time, too, right? I mean, if you look around the average 12 year old has a phone and she or he are scrolling through things and–, and I know we try not to be a parent, but we are in a way, and I think that’s part of what the Federal Trade Commission is really trying to do too. And they’ve given guidance, certainly about, you know, targeting ads to children and– and everything else like that. But your average 12 year old, even if they see the advertisement logo or not, they just scroll right through it, right. And they’re just like, wow, you know, so and so did this, I’ve got it buy it. I’m gonna– I’m gonna use mom’s credit card and I’m buying it right now. And so there–, there are certain things I think that–that, you know, can there’s certain consumers of this of the social media influencing that, that probably need a little, you know, maybe a little oversight, and so—and so– the FTC puts out these rules to try to help at least limit some of that, you know, that influence that gets past the average 12 year old or 13 year old.
Ailsa Robertson 41:21
I do think that raises an interesting legal question as well when we’re thinking about the objectivity standard. So for example, if your– is your disclosure, would it come across to the reasonable consumer that this is an ad, but if your reasonable consumer isn’t The Man on the Clapham Omnibus as the English judges like to say, it’s actually a 12 year old girl, to what extent can– can the brand be held to the same kind of objective standards, determining they’ve had sufficient disclosure in their advertisements, and I think that’s a really interesting legal question. I’m not sure it’s been tested yet.
Vic Domen 41:53
That’s true. I don’t know that it has. But I think you know, once again, you talk about the reasonable consumer. And I think that Federal Trade Commission does recognize that, if we go back to the beginning of this– of this discussion, really, in talking about common sense, there are ways that you just are open and upfront about the fact that this is a paid advertisement. The Federal Trade Commission gives you language that you can use, right? It’s–, it’s not, they’re not necessarily doing a gotcha, it’s more of, alright, if you’re paid for it, just make it known. And if you do, you’re probably okay. You know, if you try to hide it, you try to be tricky with it, you try to use some tiny, you know, font in a different language, it’s not gonna work. I mean, you need to–, you need to be upfront and honest about it. And I think that that’s how you can protect yourself from– from getting into some hot water with Federal Trade Commission, in the US or with the State AGs. And you have– you have a cognizable defense to it. If you just if you just say ‘paid by advertiser’ or you know, just– just don’t try to be too tricky, and you’re probably okay, even with kids.
Erin Brown 42:58
Yeah, agree. And I was gonna, you know, I think that was a great, great point to bring up the– the, you know, the potential to be advertising to all different ages. I think, you know, the– the Canadian Competition Bureau, the guidelines, in terms of making those disclosures, talk about disclosures being contextually appropriate. So it may be that if an advertisement is really targeted towards younger people, that they be– what is contextually appropriate in that case is, you know, as Vic said, it’s, you know, can be a fairly clear formula, but maybe in that case, it needs to be, for example a verbal, if you’re dealing with children so young they can’t read, for example, or, you know, that what is contextually appropriate might change if you’re dealing with children. And you might need to make it even clearer if you know, if the ad is truly targeted to–, to young people. So I think you know, that contextual appropriateness point, I think, is important to keep in mind. But it goes back to, you know, as Vic said, the common sense and that gut check in every case to say, is this appropriate in the circumstances?
Andrew McCoomb 44:01
And the targeting piece is an interesting part of this, that’s probably fodder for a deeper future conversation, given the way that you can incisively target on social media now in a way that, you know, previously that if you’re targeting kids, it’s like breakfast cereal commercials during Saturday morning cartoons, but now on social media, you can certainly do a lot more than that to make sure that your content gets in front of the age demo that you’re interested in, or the social demo otherwise, that you’re interested in, which raises in litigation, potentially other questions about what you were going for, when you put something out of the world. And in that bracket of what you were in, the group you were intending to reach, how clearly you– you know, adapted what you were doing for that audience. You guys have given us some really good, some really good parameters and bumpers around sort of best practices and thoughts on what people can do to protect themselves from enforcer action in this– in this space.
Erin Brown 45:05
And maybe I can give a little plug to anybody who’s interested in that, I believe there will be a future disputed podcast episode dropping on that topic.
Andrew McCoomb 45:14
We just recorded it with Chris Hersh.
Erin Brown 45:16
Amazing. So that’ll be definitely a, you know, a must– a must listen to episode for anybody in this competition space who’s, you know who’s concerned with the wage-fixing and no-poach agreements, that’s really a substantial change to the competition law in Canada.
Andrew McCoomb 45:31
So looking ahead, get out your crystal ball, what do you see are the trends looking– looking into the year ahead, the years ahead, what do you expect on the horizon?
Erin Brown 45:43
Well, I do wish I had a crystal ball, Andrew, it would make life and practice easier. I mean, I think in Canada this year, you know, we have a major change on the horizon coming into effect in June 2023, which is, you know, the– the changes to the competition law governing wage-fixing and no-poach agreements. So I think that we’re going to see, at least for the first half of this year, I mean, the– the Competition Bureau only has so many resources, in addition to the, you know, the normal merger review that it has to do, it has guidelines out right now, draft guidelines on that wage-fixing and no-poach agreements piece, it’s consulting on that piece, my sense is that, for at least the next couple of months, we’re going to see a little bit more momentum in that space than we will in the misleading advertising space. Now, that could change, you know, if we had a case like the Kim Kardashian case in Canada, who knows, we could see the Bureau take decisive action, you know, to, you know, as Vic was alluding to before, maybe so that– set an example, you know, crack down on that type of action. But, you know, barring any– any big events like that happening, I see maybe a little bit more focus on, at least in the short-term in Canada on that wage-fixing and no-poach piece, which I think actually cut– makes now a great time for brands to take a little bit of time to look at this social media piece, and, you know, get their ducks in a row. Because I think at, you know, at a certain point, once the wage-fixing and no-poach issues have been, you know, sort of ironed out, we may see the, you know, the Competition Bureau come back to, you know, looking at this, this digital space.
Vic Domen 47:18
I think that, you know, we do have to keep in mind, though, that– that tech– tech companies are certainly concerned for the enforcers. And as I said it you know, Andrew, you know, you mentioned the word enforcer versus regulator, I do think here in the US, they really view themselves as enforcers not, they don’t want to be regulators, they don’t want to regulate everything go on, if they see something, they want to enforce the law. And so they have a very different mindset with it. And the tech companies, you know, outside of health care, you know, both the DOJ and the FTC view the tech companies as the– as the biggest targets. And so they do that. But as Erin said, too, they have limited resources, and they can’t tackle everything all at once, they’ve kind of brought a lot of their cases on the tech platforms now. And I think, you know, there may be another defendant here, or there. But otherwise, social media influencing maybe not so much. As Erin alluded to, I mean, here in the States too, wage-fixing, no-poach agreements, the elimination of non-competes by the Federal Trade, or the attempt to eliminate non-competes in all contracts in the United States has got, everyone really worked up. And of course, I know, the agencies are still supposed to be presenting new merger guidelines, and in the US, and that’s supposed to happen probably within the next month or so, I think. So with those priorities in line, and having already brought several tech cases, I think that the agencies might be– might be stretched a little thin to try to bring too many things on against, you know, social influencers or anything else like that. But–, but once again, they have just released this guidance so there’s someone in the FTC right now, who is keeping notes and is keeping track. And when they have an opportunity, they’re gonna say, you know, so and so just said this, and we know that’s a problem, and let’s make an example of them. You know, and that’s–, that’s certainly possible. I just think that it’s going to be difficult right now, because they have so much on their plate.
Andrew McCoomb 49:10
Well, and at minimum, if they take nothing else away from this podcast, they know that when that phone call comes from the FTC, their next phone call is either to Vic, or to you, depending on which side of the border they’re sitting on.
Erin Brown 49:21
Maybe both depending on, you know, the jurisdictional question.
Andrew McCoomb 49:27
Conference call, bring it all together. And that’s what– that’s what it’s all for. I’m now wondering, Erin, who the Canadian equivalent of Kim Kardashian is going to be, is it Justin Biebers, is it Ryan Reynolds, I don’t know. These are questions for a future discussion, which I hope we can have because this has been so, so, so useful. So thank you guys very much.
Erin Brown 49:49
Thank you for having us and I do also want to thank everybody who’s listening to this podcast right now, because I never expected in my professional career that I would get to talk about something called ‘mascara gate’, or use all of my time spent scrolling social media and call it research. So, you know this– thank you to everybody who’s made this podcast happen.
Vic Domen 50:10
Absolutely very enjoyable. And you know, I think that it’s, it’s just, it’s always fun to talk about this and just kind of a little bit lighter at times, than some of the other conversations we have. So I– I enjoy, thank you very much for– for the invitation.
Andrew McCoomb 50:23
We hope you enjoyed this episode of Disputed. If you’d like to find out more about this topic or how to contact our guests, please visit nortonrosefulbright.com/disputed. We’ll be taking a hiatus for the next short while the previous episodes of Disputed are always available on Apple podcasts and Spotify or wherever you get your podcasts. As always, if you have any questions, feedback or topics that you’d like us to cover in a future episode, please do email us at [email protected]. Thanks very much.