Consumer watchdog rings alarm bells over influencer endorsements, online reviews

The Australian consumer watchdog has found an alarming percentage of influencers surveyed are "taking advantage of consumers’ trust through hidden advertising" in social media posts by failing to adequately disclose brand relationships.

Australian Competition and Consumer Commission (ACCC) acting chair Catriona Lowe said the regulator was scrutinising the sector with plans to develop strong guidelines for online operators so they know what to expect before a "renewed focus on enforcement".

"Influencers and businesses need to review their practices and improve compliance with the Australian Consumer Law to ensure consumers can trust the information they find online," Lowe said.

In the regulator's sweep of 118 social media influencers on Instagram, TikTok, Snapchat, YouTube, Facebook and Twitch - the majority of whom have large followings - 81 per cent were found to be making posts that raised concerns under the Australian Consumer Law for potentially misleading advertising.

The sweep reviewed influencers across seven sectors, with most influencers in each sector making concerning posts.

This ranged from 96 per cent of fashion influencers reviewed making concerning posts to 73 per cent of gaming and technology influencer posts raising concern.

"Influencers often cultivate an image of themselves as being relatable and genuine, which can create an element of trust with their followers when it comes to recommendations,” Lowe said.

"Based on the findings of our sweep, we are concerned that influencers, brands and advertisers are taking advantage of consumers’ trust through hidden advertising in social media posts by influencers."

The most common issue identified in the sweep was influencers not disclosing brand relationships in their posts.

“Many of the influencers we reviewed did not make adequate disclosures in their posts where it appeared they were receiving payment, gifts or other incentives to promote brands, products or services,” Lowe said.

Another common issue was influencers using vague or confusing language to disclose advertising, such as ‘sp’ and ‘spon’ instead of ‘sponsored’.

"We found that many influencers were formatting their posts to hide their advertising disclosure or make it difficult for consumers to notice it," Lowe explained.

“Under the Australian Consumer Law, businesses must not mislead or deceive consumers. This applies to influencers engaging in trade or commerce, as well as brands and marketers using influencers to advertise online.

“Influencers and brands may break the law if they do not take reasonable steps to ensure consumers are not misled to believe that sponsored posts are genuine.”

The ACCC will release guidance in early 2024 for influencers and businesses to remind them of their obligations under the Australian Consumer Law to disclose advertising in social media posts.

"The influencer industry is complex and constantly evolving, with many parties involved that may not be fully aware of good practice," she said.

"We will engage with the industry on our upcoming guidance to ensure they are informed of their obligations and have no excuses for failing to make adequate disclosures.

"The ACCC will continue to monitor influencers and businesses and where we see continued non-compliance we may take enforcement action."

Influencers are reminded that they should:

• Ensure they clearly disclose a promotional post in a way that is immediately obvious to consumers. This includes instances where the influencer has received free products, tickets or any other gifts or incentives.
• Never make misleading claims about a product. This means that influencers cannot misrepresent their experience with a product.
• Not use manipulative or deceptive advertising practices.

Similarly, businesses should:

• Ensure influencers are aware of their Australian Consumer Law obligations when promoting their products or services.
• Be careful when providing influencers with scripts to follow when making posts. Scripts should never require influencers to misrepresent their experience or views on a product.

ACCC finds businesses manipulating online reviews

In a separate sweep to identify fake or misleading online reviews, the results were not as damning as in the influencer industry but still worryingly high, with 37 per cent of the 137 businesses investigated having engaged in concerning conduct.

"Our sweep indicates that some businesses are manipulating online reviews to present a more favourable impression of their business to consumers,” Lowe said.

“Misleading reviews cause considerable harm to consumers who increasingly seek out and rely on online reviews to help them make a purchase.”

The sectors with the highest proportions of potentially fake or misleading online reviews were household appliances and electronics, beauty products, and home improvement and household products and services.

Those with the lowest proportion of potentially fake or misleading online reviews were health products, and food and restaurants.

The sweep found a prevalence of businesses using third-party professional reviewers and review removalists as a tool to manage their online reputation. 

The ACCC reviewed 24 of these businesses that offer services to create fake reviews, remove negative reviews and prevent or edit negative reviews.

The sweep found that some third-party review management services enable review manipulation by encouraging businesses to choose which reviews to publicly display. This includes directing customers with positive experiences to post a public review, while referring those with negative experiences directly to the business.

“Businesses that seek to create fake reviews or edit or remove genuine negative reviews, with the intention of inflating their own ratings, lowering their competitors’ ratings, or hiding genuine negative reviews from the public, are in breach of the Australian Consumer Law," Lowe said.

"Whilst it may be important to businesses to manage their online reputation, they need to ensure that in doing so they are not misleading consumers.”

“The ACCC will continue to monitor businesses that offer services to facilitate the manipulation of consumer reviews, including the removal, blocking or prevention of legitimate consumer reviews about a product, service or business.”

The sweep also found that most businesses and third-party review platforms were not disclosing whether reviews were incentivised and did not require reviewers to disclose whether they had received a benefit or incentive for submitting a review.

“Businesses that do not disclose incentivised reviews are likely to mislead consumers as it presents incentivised reviews as impartial when they are not,” Ms Lowe said.

“Many businesses reviewed also appear to have fake positive reviews on their website or third-party review platforms, which is in contravention of the law.”

Some signs for consumers that positive reviews may be fake include:

• A spike in highly positive reviews about the business over a short period of time
• Multiple reviews written by the same reviewer
• Generic reviews without individualised or specific details about the business or product
• Reviews written in similar language as other reviews for the same business or product
• Reviews on the business’ website being overwhelmingly positive while on third-party platforms there’s a mix of reviews for the business

“The findings of our online reviews sweep will inform our education, compliance and enforcement activities with businesses, including producing updated guidance material for businesses and review platforms," Lowe said. 

“We will also develop educational material for consumers to help them identify potentially fake or misleading online reviews."