Stiff fines for influencers not disclosing partnerships

  • The new rules aim to bring transparency into the murky world of influencer marketing, the practice of paying popular people on social media to promote products

Ravi Dutta Mishra, Prasid Banerjee
Updated8 Sep 2022, 08:26 AM IST
While brands have been increasingly turning to influencers to promote goods and services, the influencers often do not disclose they were paid to do so.
While brands have been increasingly turning to influencers to promote goods and services, the influencers often do not disclose they were paid to do so.(HT)

The government is set to introduce rules to regulate social media influencers, including penalizing them by as much as 50 lakh for failing to disclose financial ties with brands, Central Consumer Protection Authority (CCPA) chief commissioner Nidhi Khare said.

“Guidelines for social media influencers are ready and will be released shortly. Influencers will have to disclose their ties while marketing a product, failing which they will be fined up to 10 lakh,” Khare said on the sidelines of a press conference. “For a subsequent offence, it will be 20 lakh, and it can go up to 50 lakh.”

The new rules aim to bring transparency into the murky world of influencer marketing, the practice of paying popular people on social media to promote products.

While brands have been increasingly turning to influencers to promote goods and services, the influencers often do not disclose they were paid to do so.

The problem has come under particular scrutiny after it emerged that influencers took money to promote crypto tokens that have since become worthless.

According to some estimates, the Indian influencer marketing industry is valued at nearly 900 crore and could surpass 2,000 crore by 2025. Companies in personal care, fashion and jewellery, mobile and electronics are among the largest spenders on influencer marketing.

Khare said that many social media influencers subtly insert brand names into their posts, making them appear authentic.

Of course, the brands and influencers have agreements with each other, but just because the influencers are not celebrities, these things go unnoticed, she added.

However, this is not the first time that an attempt has been made to rein in such dubious marketing tactics.

In July last year, the Advertising Standards Council of India (ASCI), the self-regulatory body of the advertising industry, started monitoring digital and social media platforms for violations of its influencer advertising guidelines about labelling paid promotions by influencers.

However, industry executives said that these guidelines hadn’t made much of an impact on how the industry operates.

Shudeep Majumdar, the founder of influencer marketing firm Zefmo, said that regulation of the sector is the right step to turn the industry into an organized industry.

Majumdar added that the unorganized sector could be in trouble if the government enforces such rules, but it’s good news for the organized side, which includes influencers with mass follower-base, brands and influencer marketing firms.

“If this becomes a law, it will push the trio (brands, influencer marketing companies, and influencers) to ensure that the guidelines are adhered to in the form of collective responsibility,” he said.

Further, social media platforms may have to take note as well, as there aren’t adequate disclosure methods.

The ASCI, for instance, accepted the ‘paid partnership’ tag offered by social media platform Instagram as adequate disclosure for influencer advertising companies.

However, it’s unclear whether the Central Consumer Protection Authority’s guidelines will require newer and clearer methods.

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First Published:8 Sep 2022, 08:26 AM IST
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