Product placement on social networks: current discipline and future challenges

Over the last years, many famous people have been publishing photos and videos through social media giving visibility to branded products in change of compensation by companies, without adequately informing the public about their promotional aim. Is this to be considered as product placement, common and regulated practice on television and in the movies? So it seems. Not by chance, the characters we are talking about are defined as influencers, meaning people more or less famous that with their publications are able to influence trends, tastes, and even their followers’ consumption choices. Is the activity of sharing private content, based on sponsorship agreement, always qualifiable as a promotional activity? Or only if it is paid by sponsors? Do followers need the same protection as consumers? These and other questions arise, even after the complaint to the Italian Antitrust Authority made by the Unione Nazionale Consumatori (i.e., a National Consumer Union): it censored VIPs who did not provide adequate information about the real nature of their choices that, in the eye of the average consumer, might be seen as due only to the product’s quality.

Discipline applicable by a way of analogy

The fact that there is no specific regulation for this new form on online advertising, as many operators in the field, doesn’t mean that it is out of control of any form of regulation. In this regard, the Consumer Code (Codice del Consumo) may apply, thus fining the professional who fails to disclose relevant information that the average consumer requires to make an informed decision.

A commercial practice that, considering all the characteristics and circumstances of the case and the limits of the means of communication used, is considered misleading if omits relevant information that the average consumers need in that contest to make a conscious commercial decision, and induces or can induce the average consumer to make a commercial decision which otherwise he would not have taken.

A commercial practice is also considered a misleading omission when a professional conceals or represents in an obscure, incomprehensible, ambiguous or non-timely way the relevant information provided under paragraph 1, taking into account the same circumstances, or does not indicate the commercial intent of the practice in case it is not obvious from the context and when, in any case, it induces or is capable of inducing the average consumer to make a commercial decision which otherwise would not have taken.

This is what is stated under the first two paragraphs of Article 22 of Legislative Decree no. 206/2005, Italian Consumer Code, and which, according to the members of Unione Nazionale Consumatori must also apply to regulate those new forms of advertising that have spread on social networks.

It is useful to refer to what was found by the Istituto di Autodisciplina Pubblicitaria – IAP, i.e. the Italian institute for self-regulation in advertising. More specifically, in June 2016 it published the Digital Chart, with the aim of making the point on the most common forms of commercial communication on the web and in the digital world. The Chart provides that, like any other commercial communication, advertising contents transmitted through social networks and content sharing sites, must comply with the rules contained in the IAP’s Code of Conduct. Article 7 states that the commercial communication must always be recognizable as such. In the means and forms of the commercial communication in which content and other information are spread, commercial communication must be clearly distinguished by appropriate arrangements.

So, according to the Digital Chart, the promotional nature of the contents outside the official advertisers’ pages or channels must be clearly stated, so that users are able to identify them as commercial communication.

Even on this subject, the network tried to self-regulate. In fact, some bloggers, when they receive sample gifts from companies in order to try and show them to their loyal supporters, they indicate the promotional aim using hashtags like “ad”, “sponsorship” or “advertising” in video and photo comments.

Is a legislator’s intervention necessary?

Another opposite orientation believes that the Code of Conduct above mentioned, as well as being ineffective because applicable only to those who decide to join the IAP, according to what established by the Audio-visual Media Services Directive, refers only to publishers. Therefore, since social networks are not publishers, because they display users-generated contents, they do not have to comply with the same rules as television or newspapers, and consequently they are not even sanctionable by AGCOM (Italian Independent Authority that guarantees communications).

According to this opinion, it is worth pointing out how the discipline provided by the Consumer Code is inadequate to regulate social networks. In fact, this Code does not provide specific modalities that bloggers or influencers must use to inform the public and followers of the promotional purpose of their posts. Up to now, anyone wanting to publish a promotional content is free to choose the way to inform the recipients of the advertisement, creating disparities and poor consumer protection. 

In addition, the fact that promotional activities are carried out through personal profiles is sufficient to make the followers believe that what they publish are personal reflections and not advertising, differently from the classic channels used for promotional purposes such as television. In fact, in the latter case, the average recipient of advertising is aware of the real purpose of communication.

Another aspect that deserves to be mentioned is the non-sanctionability of companies using this new type of advertising. In particular, although there is a regular sponsorship contract with famous people or influencers, companies in fact, by not communicating their promotional intent to the public, make occult advertising and unfair competition, which however is not sanctionable because of the lack of laws ruling or forbidding it.

Those supporting this thesis believe that the lack of a specific discipline for occult advertising through the so-called influencers can be considered a legislative void to be filled up by timely intervention of the legislator. However, neither the Italian or the European Parliament have been involved in this phenomenon this far.

Comparative analysis

As of today, only the competent authorities of Common Law countries, the United States and the United Kingdom, tried to regulate this practice spread on social networks and to protect consumers. In fact, in these countries where the principle of stare decisis is followed, it is easier to regulate those sectors that are constantly evolving such as advertising. This, as opposed to Civil Law countries, that are hardly able to keep up with the changes.

In England, commercial communications must be clearly identifiable and companies cannot make believe that influencers promote their brand acting as simple consumers. Hence, the commercial purpose of inserting a product into a publication on social networks must be clear and comprehensible to the average consumer. 

In the United States, the Federal Trade Commission, which promotes competition and protects consumers, has set seven rules that companies, communication agencies and influencers must comply with for every social networking campaign. These include the indication of the word “sponsored” in the caption, in a way that the label is clearly distinguishable and easily comprehensible by consumers, especially by those less protected as children and seniors.

 

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In conclusion, we can surely state that since the social networking world presents features that make it different from other advertising media, it is necessary to provide for a specific discipline. Such discipline shall directly address social networks, so that they will adopt specific tools to supervise the content they display and to identify any breaches of law. While waiting for the discipline to be actually implemented, it is certainly possible to apply by analogy the discipline provided for product placement in cinema and television, in order to fill up the lack of protection for consumers.