Over the years, it’s no secret that celebrities and social media influencers in the UK have received public shaming by the media for ‘breaching’ Advertising Standards Agency (ASA) rules regarding promotional posts on social media.
Just today, the Competition and Markets Authority (CMA) has announced that it has secured formal commitments from 16 celebrities, including Rita Ora, Zoe Sugg and Michelle Keegan, to state clearly if they have been paid or received gifts from brands they endorse.
Although a welcome move for the industry, there is still a lot more work to be done with a whole raft of ‘shamed’ celebrities including the likes of Millie Mackintosh, Louise Thompson and more recently Olivia Bowen making headlines for breaching rules.
Blurring the lines between personal recommendations and paid advertising
In the Instagram boom over recent years, savvy marketeers are finding new ways to promote their brand or product by working with what’s known as “social media influencers”.
From models and reality TV stars to sports stars and bloggers, these influencers boast tens of thousands of followers, and more and more brands are building paid-for relationships with influencers in order to expose their products to thousands of followers.
However, this process poses an array of legal issues and new UK advertising rules (known as the Committee of Advertising Practice (or CAP) code) have been developed to control paid-for advertising and encourage influencers to be as transparent as possible when it comes to exchanging product exposure for cash.
Over the past year, and as this sub-sector grows rapidly, we’ve accumulated a growing list of celebrities, social media influencers, brands and agencies keen to secure our advice – whether that’s negotiating terms and conditions or secure their intellectual property rights – on the changes and to understand how to navigate the complex array of legal issues and new advertising rules.
The code explained
To simplify, there is a two-stage test under the code of influencer marketing which decides whether a post is deemed as an advertisement:
- ‘Payment’ otherwise known as consideration (this includes freebies); and
- Some form of editorial ‘control’ exercised over the content of the post
Both elements of the test must be met for a post to be considered an ‘advertisement’. When a post is deemed to be an advert the publisher (being the individual – usually the celebrity or influencer) must make it obvious within the post that it is an advertisement, and that they are being paid in some form for the post, rather than being presented as a personal recommendation.
This means including phrases such as; ‘#ad’ or ‘#sponsored’ within their posts.
Countries such as Australia and US have taken an even stricter approach to promotional posts and income received through advertisements. The Australian Taxation Office are set to introduce changes to the tax rules that will see celebrities, sports and social media personalities pay tax on all income made through advertising, sponsorships, free products and public appearances and promotions.
This tax is currently being avoided by many individuals, using methods such as licensing their image rights through separate legal entities. The UK does not recognise a right to your own image.
However, there has been common law examples where other intellectual property rights have been established to aid the protection of an image (protection not promotion).
Individuals can register their name and signature as a trademark; for example, David Beckham is registered as a Community trademark for goods including perfumes, sunglasses, jewellery etc. This piecemeal and incomplete protection for image rights provides individuals with the tools to control the use of their image through licensing and, as a result receive an income whether that be received personally or to a corporate entity that has been set up.
The future for social media stars
At present, HMRC recognises image right contracts (if properly structured) as a legitimate way to structure payments for endorsing products and services.
As common law and protection relating to image rights continues to develop around the world as part of the social media boom, it appears that the UK may be forced to follow suit with the US and Australia and clamp down on individuals from structuring separate legal entities to avoid tax implications.
Speak to us
If you’re unsure how the new ASA rules apply and want to find out more you can visit the ASA website at either https://www.asa.org.uk/codes-and-rulings/advertising-codes/register-of-cap-code-changes.html or https://www.asa.org.uk/news/new-guidance-launched-for-social-influencers.html.
Or you can speak to one of our experienced team. Our contact details are here:
email@example.com or firstname.lastname@example.org.