Effective October 1, 2016, amendments to the Canadian Code of Advertising Standards (the “Code”) will come into effect, along with an Interpretation Guideline. The Interpretation Guideline expressly requires influencers, endorsers, and the like to clearly and prominently disclose any material connection they have with the entity who supplies the products and services they endorse. Although the Code has Clause 7 dealing with testimonials, the current clause does not expressly address payment or other material benefit received by the endorser. The amendments address this issue squarely.
The existence of “influencers” and “tastemakers” is not new. Diana Vreeland, the iconic columnist at Harpers Bazaar and Vogue through the forties, fifties and sixties famously said "What these magazines gave was a point of view. Most people haven't got a point of view; they need to have it given to them—and what's more, they expect it from you…” While Ms. Vreeland may have had the power to raise and lower hemlines, her reach was arguably not as broad or as instant as her contemporaries who have social media at their helm. Today, fashion bloggers can generate an “out of stock” notice on third party retailers’ website within hours after posting about a clothing item.
If Ms. Vreeland was right: that we want to be told what to wear, what to eat, where to dine, where to shop, where to live, then there seems to no shortage of people dispensing advice and recommendations. The terms “tastemakers” and “influencers” have never been more ubiquitous, and these titles are viable careers in the new economy. But it begs the question: is an opinion impartial if the provider is being paid to give it. The answer may be “no”, and regulators have stepped in to require that any material connection be disclosed to the consumer so that they can decide for themselves.
Clause 7 of the Code, which is administered by Advertising Standards Canada (“ASC”), currently states that testimonials, endorsements and representations of opinion or preference must reflect the genuine, reasonably current opinion of the individual, group or organization making such representations, and must be based upon adequate information about or experience with the product or service, and must otherwise not be deceptive.
The amendments to the Code include a new “Interpretation Guideline to Clause 7”. It states that if a “material connection” exists between an influencer and an entity providing a product or service, the fact and the nature of the material connection must be clearly and prominently disclosed in close proximity to the representation about the product or service. The amendments to the Code include a definition of “material connection” as being “any connection … that may affect the weight or credibility of the representation”, and includes: “benefits and incentives, such as monetary or other compensation, free products with or without any conditions attached, discounts, gifts, contest entries, and any employment relationship”. There is an exception if the material connection is one that a consumer would reasonably expect to exist, which does introduce a shade of grey. The Interpretation Guideline gives the example of a television advertisement in which a celebrity publicly endorses a product or service. To what extent celebrities, particularly those known for paid endorsements, will be relieved of the obligation to disclose a “material connection” will be clarified as complaints arise.
For guidance on how to disclose material connections, the Interpretation Guideline refers to the Federal Trade Commission’s “Guide to Testimonials & Endorsements”, published in 2009, and the Word of Mouth Marketing Association’s White Paper called, “Ethical Word of Mouth Marketing Disclosure of Best Practices in Today’s Regulatory Environment”.
ASC joins other regulators who have taken issue with the lack of transparency by endorsers. In October 2015, the Competition Bureau reached a consent agreement with Bell Canada, which required Bell Canada to pay $1.25 million in penalties after employees were encouraged to post positive reviews about Bell and Virgin mobile apps in various app stores, without disclosing that they work for Bell. Although Bell removed the reviews and took steps to ensure it would not happen again, the Competition Bureau took issue with the reviews while they were posted because they gave the impression of being made by independent and impartial consumers.