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Article · 03.09.2021

Companies liable for covert advertising

The use of influencer marketing has become quite common. However, many companies do not realise that they may be liable under the Danish Marketing Practices Act if an influencer does not label a post as advertising. Our entertainment law specialist recommends that companies secure a proper contractual framework to avoid being fined.

Influencer marketing is here to stay. It is now common knowledge among most companies that influencer marketing makes really good sense in a commercial context and can provide a valuable boost for a company in terms of reaching its target group. Influencers are public figures who have used social media to build groups of “followers” who follow their lives. Platforms such as YouTube and Instagram, in particular, are popular among influencers, and companies will often pay a substantial amount to get influencers to promote their products in the influencers’ posts or stories.

The Consumer Ombudsman is watching

Section 6(4) of the Marketing Practices Act stipulates that a trader must clearly identify the commercial intent of any commercial practice, including advertising.

The provision is intended to ensure that advertising is always identifiable as such and to prevent covert advertising. This means that all influencers must clearly state if a post contains advertising.

The Consumer Ombudsman has drafted several publications to guide influencers on how to avoid covert advertising.

Posts containing advertising must be labelled at the beginning of the post

Assistant Attorney Morten Jessel is based at our Copenhagen office. His field of expertise lies in the marketing law aspects of influencer marketing and advises influencers and companies on compliance with the applicable guidelines.

“Generally, the biggest influencers in Denmark know quite well how to comply with the law, and some of them even go beyond the legal requirements in their advertising,” says Morten Jessel.

However, there is a large group of influencers with fewer than 100,000 followers who are not sufficiently aware that consumers must be informed from the moment they first look at the message that what they are looking at is advertising. More specifically, the notice of advertising must not be placed at the end of the text or in the text. The solution is to write “advertisement” or ”ad” at the very beginning of each post.

Morten also advises his clients against using the term “sponsored”, as this is not always sufficient on social media. He also warns clients that, currently, the Consumer Ombudsman has not approved the term “paid partnership”.

Companies and influencers targeting children and adolescents should be particularly careful to comply with the provisions of the Marketing Practices Act. Generally speaking, the younger the target group, the stricter the requirements.

Companies responsible when contacting an influencer

Morten recommends both companies and influencers to sign a valid contract or collaboration agreement that clearly specifies the details of the collaboration and the expectations of both parties. Companies in particular should ensure that they are protected contractually to the widest possible extent.

Some companies choose to send free products to influencers at their own initiative, hoping that the influencers will mention their products in positive terms.

“In such cases, the company is responsible for the influencer’s compliance with the Marketing Practices Act,” Morten assesses.

When the Marketing Practices Act was last revised, the provision “commercial intention” was inserted, thereby extending the scope of companies’ liability. As a result, companies that hire influencers are jointly liable for compliance with applicable law.

Film and music industries lagging behind

Morten, who has a background in the entertainment industry, has seen examples of record companies’ SoMe teams not having the requisite knowledge of the law when inviting influencers to attend concerts arranged by the record companies.

“In this situation, the commercial intention also lies with the record company, as the purpose of the invitation is considered to be the influencer mentioning the artist or the concert. In order to prevent liability, the record company should make every effort to inform the influencers of the rules on covert advertising on social media,” Morten stresses, adding that the same requirements apply to the film industry when inviting influencers to attend film premieres.

The film industry has for many years used product placement, with companies benefitting commercially from their products being featured in a film sequence – for example, the actor Daniel Craig enjoying a Heineken in a James Bond movie, or the Danish musician Christopher driving a Mercedes-Benz in a music video.

Product placement is also subject to the rules on covert advertising, and film and production companies are often not sufficiently aware of the requirements, including the requirement to clearly label ads as being ads.

Learn more:

Influencers need legal protection