Answer By law4u team
With the rapid rise of social commerce, platforms that host influencer-run shops are increasingly coming under scrutiny for how products are marketed and sold. Influencers, who promote products to their followers through platforms like Instagram, TikTok, or YouTube, have a significant impact on consumer buying decisions. However, if influencers misrepresent a product whether through exaggerated claims, misleading product descriptions, or failing to disclose sponsored content marketplaces may face legal liability for allowing such products to be sold. Legal obligations around consumer protection, advertising regulations, and influencer marketing play a significant role in determining whether a marketplace can be held accountable.
Legal Responsibilities of Marketplaces in Influencer-Run Social Commerce Shops
Platform's Role in Misrepresentation
Marketplaces are responsible for ensuring that all products sold through their platform are accurately represented and that marketing practices do not mislead consumers. In influencer-run social commerce shops, where products are directly promoted by influencers, the marketplace may be seen as indirectly responsible if the influencer makes false claims or engages in misleading advertising.
Misrepresentation in this context could include:
- Exaggerated product benefits that are not substantiated by evidence.
- False claims about product effectiveness or safety.
- Failure to disclose that content is sponsored, which could be seen as misleading the audience.
Legal Frameworks Governing Misrepresentation
In many countries, there are consumer protection laws that prohibit businesses from making false or misleading claims about products. For example:
- Consumer Protection Act (CPA) in India.
- Federal Trade Commission (FTC) regulations in the U.S. governing advertising.
- European Union consumer protection laws that require transparency in advertising.
These laws hold both sellers and platforms accountable for ensuring that products are not misrepresented. If an influencer promotes a product in a misleading way and the marketplace fails to act, the platform could be held liable for facilitating the sale of a misrepresented product.
Influencer Disclosure and Advertising Regulations
One critical aspect of influencer-run social commerce is the requirement for disclosure. Influencers must clearly disclose when their content is sponsored or when they have a commercial relationship with a brand. If they fail to do this, both the influencer and the marketplace can be at risk.
For example, in the U.S., the FTC requires that influencers must explicitly state if a post is sponsored or if they have received compensation for promoting a product. Similarly, the Advertising Standards Council of India (ASCI) has guidelines that mandate influencers to disclose when they are promoting a product for which they have been paid. If a marketplace allows influencers to violate these guidelines, it could be seen as complicit in the misleading promotion.
Vicarious Liability for Influencer Actions
Vicarious liability refers to the legal concept where an entity (in this case, the marketplace) can be held responsible for the actions of a third party (the influencer). If a marketplace profits from influencer sales and does not take reasonable steps to monitor influencer behavior, it could be seen as liable for misleading advertising or misrepresentation.
In some cases, courts have found that platforms have a responsibility to ensure that their users (influencers) are not violating advertising laws. For instance, if influencers on an e-commerce platform make misleading health claims about products, and the marketplace does not intervene or take down those listings, the platform could face legal repercussions.
Duty to Monitor and Act on Misleading Claims
Marketplaces are expected to have systems in place to monitor content and prevent deceptive practices. If a consumer files a complaint about misleading influencer content, the platform must have a process for handling these complaints and removing or addressing the issue.
Many platforms already have mechanisms to report misleading ads or product listings. If a marketplace fails to remove a misleading post or prevent further promotion of a misrepresented product, it could be held accountable for not taking action.
For instance, if an influencer on a marketplace platform promotes a weight-loss product with exaggerated results and the platform ignores consumer complaints, the marketplace could be liable for the misrepresentation.
Platform’s Responsibility for Seller Compliance
While influencers are the primary promoters, the marketplace has a role in ensuring that the sellers they work with comply with advertising and consumer protection laws. Many marketplaces have seller policies that hold them accountable for truthful marketing. If a seller on the marketplace provides the influencer with misleading information or product descriptions, the marketplace could be seen as facilitating the sale of a misrepresented product.
Consumer Claims and Repercussions
If an influencer-run social commerce shop misleads consumers and those consumers are harmed (either financially or in terms of health), they may file a lawsuit against the influencer and the marketplace. The platform could be required to refund customers or offer compensation, depending on the jurisdiction and the nature of the violation.
Example
Scenario:
An influencer runs a social commerce shop on a popular marketplace, selling a skin care serum that claims to cure acne in just 7 days. The influencer does not disclose that the product is sponsored, and the claims made in the promotional content are exaggerated and unproven. Several customers purchase the product, but after using it, they experience skin irritation and feel misled about its effectiveness.
Steps the Marketplace Might Face Legal Scrutiny:
- Investigation by Consumer Protection Agencies:
Regulatory authorities like the FTC (U.S.), FSSAI (India), or Advertising Standards Authority (UK) could investigate the marketplace for allowing false advertising. The platform could face fines for failing to ensure compliance with advertising laws, such as not enforcing disclosure of paid content and allowing misleading claims to be made.
- Legal Action from Consumers:
The consumers who suffered from the skin irritation could file a class action lawsuit against both the influencer and the marketplace. The marketplace could be held liable if it is shown that it allowed the sale of misleading products or did not monitor the influencer’s claims adequately.
- Penalties and Reputational Damage:
The marketplace might face penalties for violating consumer protection laws related to false advertising. In addition to the legal consequences, the platform could also suffer significant reputational damage, losing consumer trust, and facing a decline in sales.
- Policy Overhaul and Action Steps:
The marketplace may need to overhaul its influencer vetting process, create clearer guidelines for influencer disclosure, and implement stronger checks to ensure that product claims are accurate. It might also need to issue refunds or compensate consumers who were misled by the influencer's promotion.
Conclusion
Yes, marketplaces can be held liable for misrepresentation in influencer-run social commerce shops, particularly if the platform fails to monitor the content and ensure compliance with consumer protection laws, advertising regulations, and truthful marketing practices. Marketplaces have a responsibility to enforce transparency (such as requiring influencers to disclose sponsored content) and to ensure that false claims about products are not made. Failure to act could lead to legal penalties, consumer lawsuits, and damage to the marketplace's reputation. Therefore, it is crucial for platforms to implement robust policies, monitor influencer activities, and address consumer complaints promptly to mitigate liability.
