Can marketplaces be held accountable for influencer marketing that violates ASCI guidelines?

Influencer marketing has become a dominant force in the digital marketing landscape, and online marketplaces often collaborate with influencers to promote products on their platform. However, as this marketing tactic gains popularity, there is an increasing concern about ensuring that influencer promotions are transparent, ethical, and truthful.

In India, the Advertising Standards Council of India (ASCI) has established a set of guidelines to ensure that influencer marketing campaigns are honest and non-deceptive. The ASCI guidelines require that influencers clearly disclose any paid partnerships or sponsored content, and ensure that any claims made in promotions are substantiated.

This raises the question: Can online marketplaces be held accountable if an influencer marketing campaign on their platform violates ASCI guidelines? Let’s explore this in more detail.

Legal Responsibility of Marketplaces in Influencer Marketing:

• Influencer Marketing and ASCI Guidelines: The ASCI Guidelines for Influencer Advertising (introduced in India) are aimed at preventing misleading advertisements and ensuring transparency in the promotion of products via social media influencers. The key rules include:

Disclosure of Paid Promotions:

• Influencers must disclose when a post is sponsored or if they are receiving any form of compensation for promoting a product. This can include using hashtags like #ad or #sponsored or other clear statements.

Honesty in Claims:

• Influencers must not make false claims about products or services. All promotional content must be accurate and substantiated.

No Misleading Endorsements:

• Influencers should not endorse products they have never used or do not genuinely support.

Target Audience Considerations:

• Influencer promotions should not mislead children or vulnerable consumers.

Accountability of Marketplaces:

• While influencers themselves are primarily responsible for complying with the ASCI guidelines, marketplaces can also be held accountable under certain circumstances. The Advertising Standards Council of India (ASCI) guidelines apply to both influencers and the platforms facilitating these marketing campaigns.
• Platform Responsibility: If a marketplace facilitates or promotes an influencer marketing campaign that violates the ASCI guidelines (for example, by failing to disclose a paid partnership or promoting deceptive claims), it can be held accountable for non-compliance.
• Due Diligence: Online platforms are expected to conduct due diligence before allowing advertisements or influencer campaigns to be posted on their sites. This includes ensuring that advertisements comply with the ASCI guidelines and ensuring proper disclosures are made.

Marketplace's Role in Monitoring Content:

• Many online marketplaces host influencer-generated content directly on their platform, which includes product recommendations, reviews, or sponsored promotions. This means that the platform may play an active role in promoting the content and therefore has an obligation to ensure that influencer marketing complies with ethical advertising standards.
• If a marketplace is actively promoting influencer marketing campaigns or has a significant influence over the content posted (for example, through direct partnerships or commissioned influencer collaborations), it may be held liable for failing to ensure that the campaigns comply with ASCI guidelines.

Example:

• If a marketplace allows an influencer to post a product promotion but the influencer fails to disclose that the post is sponsored, the platform could be held responsible for failing to enforce transparency in advertising.

Liability Under Consumer Protection Laws:

• Under consumer protection laws (such as the Consumer Protection Act, 2019 in India), marketplaces are obligated to ensure that their listings, promotions, and marketing activities do not mislead consumers. Failure to comply with advertising standards (including the ASCI guidelines) can be considered an unfair trade practice.
• Unfair Trade Practice: If an influencer promotes a product without disclosing that it is a paid promotion, consumers may feel misled or deceived. The platform could be considered to be engaging in an unfair trade practice, as it facilitated the misleading advertisement.
• Penalties: Platforms can face penalties under consumer protection laws, which may include fines, reputational damage, and even legal action from consumers who feel misled by the influencer’s false or non-disclosed claims.

Legal Consequences for Marketplaces:

• Penalties and Fines: If an online marketplace is found to be in violation of ASCI guidelines by promoting or facilitating deceptive influencer marketing campaigns, it could face penalties and fines. ASCI itself may issue warnings or take up complaints, but regulators and consumer protection agencies could also intervene.
• Fines for Non-Compliance: Marketplaces could be fined for hosting or promoting misleading content that violates advertising guidelines.
• Consumer Compensation: In some cases, affected consumers may be entitled to compensation or refunds if they were misled by false or unsubstantiated claims made through influencer marketing.

Reputational Damage:

• Being associated with deceptive influencer marketing can severely damage the reputation of a marketplace. Consumers trust marketplaces to ensure the authenticity of the products and claims made by sellers and influencers.
• Loss of Consumer Trust: If a marketplace is seen as allowing misleading advertising or failing to enforce ethical marketing practices, consumers may choose to shop elsewhere, leading to loss of business.
• Impact on Brand Partnerships: Other brands or influencers may be hesitant to collaborate with a marketplace known for allowing unethical marketing practices, impacting the marketplace's future business opportunities.

Regulatory Scrutiny:

• Regulators such as the Department of Consumer Affairs in India or Advertising Standards Council may take action against platforms that repeatedly violate advertising standards. If an influencer marketing campaign violates ASCI guidelines and results in significant consumer harm, the marketplace could be subjected to scrutiny and further regulatory action.

Example:

• Suppose an online marketplace collaborates with an influencer to promote a beauty product on their platform. The influencer posts a sponsored video about the product but fails to disclose that they were paid for the promotion. The marketplace does not ensure that the post follows ASCI guidelines, and consumers are misled into thinking the review is authentic.

Outcome:

• The marketplace faces a complaint from a consumer protection agency or affected consumers. ASCI may issue a warning or fine to the marketplace for failing to ensure the proper disclosure. In addition, the marketplace may face reputational damage as consumers may feel the platform is not enforcing ethical marketing practices. The marketplace may also need to issue refunds or clarifications to affected consumers.

Conclusion:

• Yes, online marketplaces can be held accountable for influencer marketing that violates ASCI guidelines. If a marketplace promotes or facilitates deceptive influencer marketing campaigns, it could face legal consequences, including fines, penalties, and reputational damage. Marketplaces must ensure that influencer campaigns on their platforms comply with advertising standards, such as proper disclosures, to protect consumer trust and avoid legal issues.