Influencers and the Law: Analysis of Legal Issues in Endorsements and Sponsored Content

Abstract

In the digital age, we have seen the rise of influencer culture, which has put into the hands of individuals the power to shape what consumers think of products and how brands are perceived via endorsers and sponsored content. While this has brought about new marketing and communication tools, it has also brought forth very important legal and ethical issues. This blog looks at the legal structure that governs influencer marketing, which we see play out in laws like the 2019 Consumer Protection Act, the ASCI Guidelines in India and also looks at what is happening in the U.S. and European Union with their regulatory approaches. We also look at issues of liability the influencer has in putting out misleading info, not disclosing sponsorships, and breaking consumer rights. We discuss the balance between creative freedom and responsibility, the role of brands and ad agencies, and the part self-regulation plays. Also, we put forth what preventive measures and policy changes may do to bring about greater transparency, trust and responsibility in the ever-growing influencer space.

Introduction

Digital media platforms, which include Instagram, YouTube, and OTT channels, have brought about a transformation in the way we see product and service promotion. Today,  influencer marketing is at the core of what we think of as media and entertainment, which in turn is changing consumer behaviour better than traditional advertising does. From beauty to tech, we see that influencers today are the key players who serve as that extension of the brand to its target audience.

However we see that with great power comes great legal responsibility. Misleading ads, unsaid sponsorships, or false claims may bring forth liability which in turn may include the influencer as well as the advertising agencies and brands which they are associated with. In India the Advertising Standards Council of India (ASCI) and the Consumer Protection Act of 2019 have put forth detailed rules related to endorsements and disclosures. Also we see in the international arena the Federal Trade Commission (FTC) in the U.S. and the Advertising Standards Authority (ASA) in the UK have put in place similar measures.

This blog reports on issues of legal responsibility for influencers which we look at in the context of endorsements and sponsored content in the media and entertainment industry.

Detailed Analysis:

Influencer Marketing on the Rise in Media and Entertainment.

The past monopoly of TV commercials and print ads has been broken into by influencer-based promotions on Instagram, YouTube, and OTT which in turn has made the influencers’ space to grow. What we see is that influencers are putting out very real and relatable content which in turn is winning over the consumer’s trust.

In 2024 Influencer Marketing Hub[1] reported that by 2025 we are to see the global influencer marketing to cross $24 billion with India standing out as one of the fastest-growing markets, which is a result of its large digital population. Also we see that OTT players like Netflix, Amazon Prime and Disney+ Hotstar are into the practice of working with influencers for their marketing campaigns and at the same time advertising agencies are including influencer elements in to our general marketing plans.

Legal Structure for Influencer Endorsements in India.

a. Consumer Care Act of 2019.

The Act put in place measures against false advertising and unfair trade practices. Influencers are now to see that they are held responsible for putting out products which they have not properly researched. Penalties may range from large fines to ban of the influencer from endorsee activities.

b. ASCI’s Updated Guide for Influencer Advertising (2021, 2023).

ASCI has put forth in depth guidelines which require influencers to clearly report paid associations. Terms such as Ad, Sponsored, or Collaboration” have to be put out there in full view. Failure to which may result in penalties and reputational damage.

c. Rules of Information Technology[2] which include the Intermediary Guidelines and Digital Media Ethics Code of 2021.

Though out of which we see the introduction of rules for OTT platforms and digital news media which in turn also play a role in what we think of as responsible advertising and consumer protection which does include influencer marketing.

 

Global regulation of influencer liability.

United States (FTC Guidelines)[3]In 2019, the FTC brought to an end issues with influencers that didn’t reveal their sponsored content on YouTube.

United Kingdom (ASA Rules): In 2020, Love Island stars were warned about not disclosing paid endorsements. Influencers are required to put out there that they are in it for money, which in 2020 also applied to the Love Island cast. In 2020, we saw that even those from Love Island had to adhere to the rule of transparently labelled paid associations. What in 2020 broke out that the Love Island stars were into is that they had been putting out content for which they were paid without disclosure to the public. At that time, it was made known to the Love Island professionals that they had a break from which they were to return with an open declaration when being paid to post. Also in 2020, we had reports of issues within the Love Island team regarding the full disclosure of sponsored content, which also included that of the cast. That year also saw the issue of what is and isn’t a proper disclosure of a paid-for post brought to the fore with the Love Island stars.

European Union: The Unfair Commercial Practices Directive calls for full disclosure in advertising, which in turn holds influencers responsible for the info they present as fact.

These worldwide guidelines mark a global turn to greater responsibility in digital issues, which our Indian laws support.

Legal Issues for Influencers and Brands.

a. Deceptive Advertising.

If a business person pushes out a product which is reported in over-the-top or false terms (for instance, “miraculous weight loss pills” they put themselves at risk of charge under the Consumer Protection Act, which includes misleading the public.

b. Disclosure of sponsorships not reported.

Failing to report on partnerships also causes audiences to think that a review is unbiased. This is a practice which is condemned in India and abroad.

c. Responsibility for Unsafe Products.

Endorsers are at risk of responsibility should consumers be harmed by defective products. For instance, a skincare influencer may see legal action for pushing a harmful cream that was not properly verified.

d. Shared Responsibility of Agencies and Brands.

Advertising bodies and brands play a role in putting out misrepresentative information which we in turn see in our feed. This is what I mean by full-scale accountability in the media and entertainment space, which goes beyond just influencers.

Case Studies: When influencers ran into legal trouble.

Kim Kardashian’s Cryptocurrency Promotion[4] (USA): In 2022, she was fined $1.26 million by the SEC for not reporting which of her crypto endorsements were for pay.

Indian Fitness Influencers (ASCI Action, 2023): Several brands sent out warnings to the influencers that they didn’t disclose that they were associated with.

Patanjali Case[5] (India, 2024): In a move that saw the Supreme Court go after Patanjali for putting forth what it said were medical claims in ads that are not true, we saw a greater intervention into the world of health claim endorsements. Also, we report that, which may come as a surprise to some, the Court did this despite the fact that they went after companies that are celebrities as opposed to health and personal care influencers.

These examples are of what is becoming a worldwide trend of disapproval of deceptive advertising.

OTT Services and Ad Agencies.

OTT players like Netflix and Hotstar which do partner up with influencers for content promotion. Ad agencies play the role of intermediaries in these influencer brand relationships. They also see to it that brands comply with ASCI and other related laws.

Failure to do what is due in terms of care and attention may see agencies held responsible for putting forth false endorsements. For example, if an OTT campaign has influencers who use to make out-of-proportion claims regarding content or subscriptions, we see agencies also to be at fault, as well as the influencers.

Ethics beyond the law.

Legal compliance is a start in influencer marketing, but it is not enough. We also have to look at the ethical issues like body positivity, avoiding put-down stereotypes, and building up consumer trust. In the entertainment business which runs on credibility, influencers which play fast and loose with ethics risk losing out on long term brand value.

Future of Influencer Marketing and Regulation.

As the influencer marketing space grows so does the legal attention it draws. The Government of India is looking at puting in place more rigorous regulations for digital ads and also may introduce AI based tools to detect unreported affiliate relationships.

Globally regulators are pushing for the harmonization of ad laws which in turn will see an end to misleads in cross border campaigns. Ad agencies, OTT platforms and influencers must adapt to this new environment.

Conclusion

In the past years influencer marketing has transformed the media and entertainment industry by putting a mix of relatable elements with commercial messages. But what also has grown is the issue of trust which in turn is marred by deceptive practices. We see laws like the Consumer Protection Act, ASCI guidelines, and international rules put forth by the FTC which in turn hold influencers and brands to account.

In order for the industry to grow we see that influencers must put forth transparency, honesty and ethical responsibility along with legal compliance. Also they protect the consumer and at the same time raise their own bar of credibility which in turn improves their long term prospects in the media and entertainment world.

Author: Prince Raj, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney. 

References

1. Advertising Standards Council of India (ASCI) – Guidelines for Influencer Advertising in Digital Media, 2023.

2. Consumer Protection Act, 2019 (India).

3. Federal Trade Commission (FTC), Disclosures 101 for Social Media Influencers.

4. Advertising Standards Authority (ASA), UK – Guidelines on Social Media Advertising.

5. Securities and Exchange Commission (SEC) – Settlement Order against Kim Kardashian, 2022.

6. Ministry of Consumer Affairs, Government of India – Press Release on Endorsement Guidelines, 2023.

[1] According to the Influencer Marketing Hub (2024), global influencer marketing is expected to exceed $24 billion by 2025

[2] Ministry of Electronics and IT (MeitY).

[3] FTC “Disclosures 101 for Social Media Influencers.”

[4] SEC settlement order

[5] Supreme Court of India order / news report.