Influencer Posts Found to Be 81 Percent Misleading, Australian Regulator Says

Social media apps on a smartphone in this file photo. (Chandan Khanna/AFP via Getty Images)

A new report by the competition regulator reveals that many Australian social media influencers’ posts have been found to be potentially misleading.

The Australian Competition and Consumer Commission (ACCC) noted in its March 2023 Digital Platforms Services Inquiry report (pdf), released on April 28, that a range of potentially harmful practices occurred to consumers and small businesses on social media platforms. The report followed the ACCC receiving over 150 tip-offs from consumers about potentially misleading posts.

“Influencers often aim to present themselves as real, ordinary people, and as such, their followers may trust their opinions and recommendations more than those presented through traditional media advertising,” read the March report.

The report did a sweep of over 118 social media influencers and their sponsored content between Jan. 23 and Feb. 3, aimed at identifying misleading endorsements and testimonials.

The competition regulator identified 81 percent of influencers’ posts—such as endorsements and testimonials—as potentially misleading.

Social media influencers use social media platforms to reach their audiences so they can develop and earn revenue by promoting brands and products, including receiving donations or subscription funds from their audiences.

As the social media influencer market continues to grow, research from MarketsandMarkets shows that the influencer marketing sector is expected to rise from $9.07 billion (US$6 billion) in 2020 to $36.43 billion (US$24.1 billion) by 2025.

The ACCC report stated that social media influencers often have incentives not to disclose endorsement deals or be transparent in their advertisement posts as their “advertising influence largely relies on their authenticity.”

Social media posts with integrated advertising material create incentives for brands and influencers not to label advertising clearly, “because a feed with multiple obvious advertisements may be considered ‘inauthentic’ and off-putting to followers.”

Although consumers have been used to the exposure of advertising via endorsements by celebrity individuals for a significant period, the expansion of influencer advertising on social media poses “additional challenges when compared to more traditional advertising media.”

Influence of Social Media Influencers on Consumers

The inquiry noted from a 2022 Consumer Policy Research Centre report that 85 percent of Australians found difficulty determining whether certain online content was advertising.

This is because influencer advertising is integrated with an “influencer’s non-commercial editorial content,” often making it harder for consumers to distinguish.

“Advertisers have raised concerns about being unable to choose the best services to suit their needs because of the lack of transparency and accuracy of advertising performance data provided to them by social media platforms,” ACCC Chair Gina Cass-Gottlieb said.

“Consumers are unable to make informed choices about purchases when endorsements and sponsored posts are not clearly disclosed,” Cass-Gottlieb said.

The ACCC targeted seven sectors where consumers most commonly rely on social media influencer endorsements to make purchasing decisions, including fashion, beauty and cosmetics, food and beverage, travel and lifestyle, health, fitness and wellbeing, and gaming and technology.

“These harms to consumers and small businesses are exacerbated when coupled with what many users consider a lack of effective dispute resolution mechanisms with social media platforms,” Cass-Gottlieb said.

The report also argued that regulators are undertaking important work to address influencers giving unlicensed financial advice, promotion of therapeutic goods and cosmetic surgery, and a lack of disclosure of gifts as taxable income.

Losses to Social Media Scams

The report from the ACCC comes after Australians lost over $80 million (US$52.9 million) to scams via social media platforms in 2022, an increase from reported losses of $56 million (US$37 million) in 2021 and A$27 million (US$17.8 million) in 2020.

However, the actual sum of money lost to scams is likely to be much higher, given estimates that only 13 percent of scam victims report their experience to Scamwatch.

“It is clear that social media companies are not doing enough to stop their own users from falling victim to scammers on their platforms, especially as we understand only a fraction of people scammed ever report it,” Cass-Gottlieb said.

Recommendations for Social Media Marketing

The industry itself has worked on addressing the issue, forming the Australian Influencer Marketing Council (AIMCO) and creating a Code of Practice (pdf), published on Aug. 11 2021.

The Council recommends the routine and consistent use of hashtags like “#Ad, #Advert, #Advertising, #PaidPartnership, #PaidPromotion or #Sponsored” in videos and posts.

“An influencer who promotes any product without disclosing it, whether it be an alcoholic beverage or hair straightener, is misleading their followers,” AIMCO chair Sharyn Smith told the Australian Financial Review.

Following findings from the sweep, various education, compliance and potential enforcement activities are to be conducted by the ACCC on the issues identified.

The ACCC’s Digital Platforms Branch has been conducting a five-year inquiry since 2020 into the markers for the supply of digital platforms in Australia and their impact on competition and consumers.

The ACCC is required to report findings to the Treasurer every six months, with the March 2023 report being one of many reports required. Each report builds on the ACCC’s previous work in relation to digital platforms in identifying competition and consumer harms in relation to social media platforms such as Facebook, Instagram, Twitter, Snapchat and Twitter.

“We continue to support reforms to address the harms we’ve observed, including an economy-wide prohibition against unfair trading practices, targeted consumer protections and service-specific codes of conduct that would apply to designated digital platforms,” Cass-Gottlieb said.

Cindy Li contributed to this report.