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The Power And Perils Of Influencer Marketing: Recent Developments, Competition Considerations And Best Practices – Media, Telecoms, IT, Entertainment – Canada – Mondaq News Alerts

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In a move to address concerns related to misleading influencer
marketing, the Competition Bureau announced late last year that it
had sent letters to nearly 100 brands and agencies across Canada,
advising them to take a close look at their social media marketing
practices.  This followed in the wake of a similar campaign initiated by the U.S. Federal
Trade Commission in 2017.

This is the first part of a two-part series. Next week, we will
look at what actions the Bureau takes after issuing
warnings like these to market participants (spoiler alert: the
Bureau took enforcement action, so these letters should not be
taken lightly).

The Bureau’s news release highlighted the responsibility of
influencers and businesses to clearly disclose any relationship
between influencers and the brands, products or services they
promote in their digital content. In it, the Bureau emphasizes the
need for influencers to post honest reviews and testimonials that
are derived from actual experiences with the products or brands
they are promoting. The Bureau’s news release also serves as a
reminder that businesses share a responsibility with influencers
when they post advertisements on social media, and that businesses
themselves may be liable for false or misleading content posted by
the influencers they hire.

The Bureau’s call for transparency was echoed in a recent speech by Josephine Palumbo (Deputy
Commissioner, Deceptive Marketing Practices Directorate of the
Competition Bureau). Citing an Ad Standards study, the Deputy Commissioner
remarked that “Canadians are spending a lot of money based on
the recommendations of influencers”, and that such a “significant impact on the buying habits of Canadian
consumers” makes influencer marketing a “key
consideration for the Bureau”.

In light of these recent developments, we have addressed a
number of key considerations related to using influencers for
marketing purposes:

What risk does misleading influencer marketing pose to

Influencers have established themselves as powerful marketers.
While it may be difficult to trust a brand, consumers can readily
relate to influencers as individuals who share their specific
tastes and niche interests.

Perceived authenticity leads followers to rely on influencer
choices as trustworthy proxies for their own preferences when
making purchasing decisions in the digital marketplace. The risk of
deception arises when influencers’ choices or opinions are not
independent – that is, when the influencer has a relevant
brand relationship that is not made clear in posted content.

What risk does misleading influencer marketing pose to
businesses and influencers?

Legally, influencer advertising is treated like any other form
of advertising under the Competition Act. This means that
businesses and influencers can each face significant civil and criminal penalties for
failing to comply with provisions against misleading and deceptive
marketing practices. The Competition Bureau has already taken
enforcement action for the related practice of “astroturfing” (i.e., posting fake reviews). In a recent
U.S. example, the Federal Trade Commission entered into a
settlement with Sunday Riley, a popular skincare company. The
allegation was that Sunday Riley directed its employees to post
positive online reviews without disclosing their connection to the
company. It is likely only a matter of time before the Competition
Bureau takes enforcement action in respect of influencers.

From a reputational standpoint, businesses risk losing consumer
trust – and influencers risk losing credibility among their
followers – for posting content designed to look genuine and
independent when in reality it is a paid promotion of a product or

How can businesses and influencers mitigate the Competition Act

The frenzied rush to leverage influencer platforms has shifted
towards a more wary approach from consumers and brands alike. The
lack of transparency, along with concerns about follower fraud and
the proliferation of click farms (i.e., paying people to click on
advertising links), have to some degree eroded trust on both sides
of the equation. That said, steps can be taken to curb legal

Clearly disclosing the
influencers have with the business, product
or service they promote is the most effective way to minimize legal
and reputational risks. Any influencer reviews must also be honest
and based on actual experience.

As discussed in our previous post on the subject, a “relationship” exists in a variety of
situations, including when the influencer receives any type of
payment, free product, service, trip, discount or tickets, or if
the influencer has a business or family connection with the
brand.1 In other words, a relationship exists whenever
an influencer has a connection to a brand that might affect the
consumer’s perception of the influencer’s

To help ensure effective disclosure, the
Competition Bureau provides a quick-reference checklist.3 All disclosures
(including hashtags like #ad or #sponsored) should be as visible as
possible and proximate to the related sponsored content/post.

Ineffective disclosures use ambiguous words
like #ambassador, #partner or #spon, or are displayed in minimized
text, buried in the middle of a blog (or vlog), comment or string
of other hashtags, or otherwise fail to make the relevant
relationship clearly apparent to viewers. 

What are other best practices for successful influencer
marketing relationships?

Beyond compliance considerations, when it comes to ensuring your
brand is adequately protected and your valuable marketing dollars
are generating the customer engagement you are paying for, there
are a number of practical measures you can take to reduce your

First, choose an influencer who closely aligns
with your brand message and identity – this may be a “microinfluencer” (having between 1,000 and 10,000
followers) or a major social media personality. Either way, ensure
they understand your product and the image you want to

Second, consider making compensation
conditional upon reaching certain measurable thresholds, whether
they are click-throughs or some other verifiable impression –
anything more than simple views or likes. 

Third, consider including penalties for the use
of paid followers in your contract to avoid your sponsored post
being disseminated to thousands of robo-accounts rather than real

Fourth, when drafting your termination
provisions, consider including a right to compel the influencer to
delete or remove any posts related to your brand in the event of a
breach of contract. This will provide you with a means of “scrubbing” your relationship with the influencer should
the influencer fail to comply with their contractual

Finally, institute audit initiatives and
measurement metrics in your influencer agreement to give you
greater visibility into the effectiveness of the influencer’s
posts. This will also ensure that your influencer partner remains
on track and on-message.

Influencer marketing can be a great way to boost brand
recognition and sales, and professional guidance can help structure
strategic partnerships that protect your brand while satisfying
your compliance obligations.


1 Competition Bureau Canada, “Influencer marketing:
businesses and influencers must be transparent when advertising on
social media” 19 Dec 2019 (online:

2 Competition Bureau Canada, “The Deceptive
Marketing Practices Digest – Volume 4” (2018) (online:

3 The U.S. Federal Trade Commission has also recently
released an easy-to-use guide: “Disclosures 101 for Social
Media Influencers” 5 Nov 2019 (online:

To view the original article
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Originally published 1 May, 2020

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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