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Are stricter regulations needed to curb influencer marketing?

European consumer rights groups are calling for stricter regulations of social media influencers and their powerful product marketing practices, which are currently almost completely unregulated.

Since 2019, it is estimated that the market value of influencer marketing practices has more than doubled, according to a report from the European Consumer Organisation (BEUC), a group that represents the interests of consumers in 32 EU countries.

The massive rise of social media platforms like Instagram, YouTube and TikTok aided in creating the concept of “influencers” in the digital age, and this was accelerated by the pandemic. Users with big followings have been able to make money on social media largely by collaborating with brands to recommend and sell products, including food, drinks, and alcohol, to their followers.

“Influencers have become an essential part of modern marketing in the European Union and worldwide. So much that it is considered the most effective form of online marketing,” BEUC said.

However, the influencer marketing industry is almost completely unregulated and growing unchecked worldwide, putting consumers at risk of falling victim to scams and other harmful commercial practices.

Blurring advertisement lines

As of 2023, the influencer marketing market in the US is valued at $21.1 billion, according to data from Statista. The report from BEUC discussed key pillars of how modern influencers operate, including content creation, commercial intent, monetization, and trust and authenticity established with their audience.

Many brands have had to navigate a transition away from traditional marketing to working with influencers to sell products and services. This can lead to success but also challenges. Without regulation online, influencers are able to engage in practices like hidden advertising, dropshipping, marketing to minors, and promoting risky financial products.

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“Influencer marketing has revolutionised marketing campaigns. Traditionally, advertising was very controlled and regulated. Consumers could easily identify when they were facing an advertisement,” BEUC said. “Now, with influencer marketing, anyone can advertise. The line between editorial content and advertised content is more and more blurred for consumers.”

With people spending more of their lives online, it has been a necessity for brands to advertise on social media. But the foundation of “influencing” requires building a relationship with followers, so when an influencer promotes a product, the consumer is more likely to trust that recommendation than a traditional ad they might see in their feed.

That opportunity of a guaranteed sale draws brands to collaborate with influencers. If the market continues to grow this way, it can oversaturate the internet and turn much of the content consumed online into a never-ending stream of advertisements.

“Influencer marketing is now part of our digital environment and our daily life,” BEUC said. “This sector is growing exponentially and forecasts indicate that companies will invest even more in this advertising mode in the coming years.”

Regulation recommendations for the EU

First and foremost, the consumer organization wants the EU to settle on a legal definition of “influencer marketing” under the Unfair Commercial Practices Directive, which BEUC named as the most relevant tool for the EU to tackle problematic influencer practices.

Next, they are asking that the EU address hidden advertising from influencers, including the insufficient disclosure of commercial content. On platforms like Instagram and TikTok, it is not typically clear when an influencer is being paid to promote a product.

Users are supposed to disclose sponsored content with certain hashtags and captions, but these rules are not always followed. This is misleading to an influencer’s followers, particularly young followers or those unfamiliar with social media and how influencing works.

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BEUC also wants to ensure that all participants in the influencer “value chain” are held liable for any existing or future legislation. This includes the influencers themselves, as well as influencer agencies and brands. And online platforms like social media play a major role in influencing, so that role needs to be clearly defined in legislation.

Special attention should be paid to protect consumers in the most risky sectors, such as the promotion of food and financial services. BEUC wants influencers to be prohibited from marketing unhealthy food to children, alcohol products, gambling, and medical products and procedures.

“The current EU legal framework already provides for tools to tackle several unfair practices conducted in the influencer marketing sector (hidden advertising etc.). But their interpretations vary across the different Member States leading to different approaches from enforcement authorities and different levels of protection for consumers,” BEUC said.

“Despite influencers mostly being active ‘nationally’, the problems are identical in the whole EU. A coherent enforcement approach is therefore needed.”