Product placement: the rules on celebrity endorsement

In 2016, we are saturated with content through the medium of social media. And, with user numbers topping the millions, Instagram, Facebook, Twitter and even Snapchat present powerful opportunities for advertising. Companies are fast catching on to the potential that paid advertorials – using celebrity endorsement to get their product in front of a huge audience – present, but ambiguity around sponsored promotion could leave the posters in legal trouble.

One of the most popular social media users, Kylie Jenner (who has 72.5m followers – over 8 times the number of people who tuned into the 2015 X Factor Final), is no stranger to product placement. But it’s been recently reported that Truth In Advertising Inc. has sent Kris Jenner – the matriarch of the powerful Kardashian brand, and Kylie’s mother – a legal letter threatening to notify the US Federal Trade Commission about the famous family’s ‘deceptive marketing techniques’. Unless Kylie and her sisters, all part of their $65 million brand, declare that they are being paid for their social media posts – by specifically marking them with #ad or #spon – they could be breaking the law.

Product placement has long been accepted in the US and has been commonplace since the beginnings of broadcasting. Big brands that saturated the marketplace became engrained in family dinner conversations through this relentless, non-traditional form of advertising. Monopolistic companies such as Procter + Gamble and Unilever in fact had such an overwhelming impact on American culture that certain soap operas received their namesake from being underwritten by them. More recently, some production’s – like Extreme Makeover: Home Edition – whole existence has been funded through subtle (and less subtle!) placement.

However, British consumers have proved more sceptical when it comes to product placement. This is primarily because product placement has only recently been permitted on UK TV screens since the advent of the Broadcasting Code in 2011. Ofcom allows product placement in certain types of programme (TV series, entertainment shows and sports programmes), which can only be broadcast on Ofcom licenced channels, such as Channel 4, Channel 5 and ITV. Such licensees could be liable to statutory sanctions under the Communications Act 2003, therefore making it essential for broadcasters to consider how the programmes they broadcast have been funded.

Digital marketing, as a new, widely popular, advertising medium, has brought a range of different opportunities beyond those offered by traditional methods of revenue generating advertising, such as TV and radio. The British Competition watchdog, CMA, has been quick to investigate unmarked paid-for-digital advertising in the UK. In an open letter published earlier this month, the CMA crystallised a previously ambiguous line; everyone who is involved in online endorsements is responsible for ensuring that paid promotions are clearly labelled or identified.

According to the CMA, the integration of social media into our everyday life has meant that online endorsements can have huge influence over consumers buying habits. Celebrities must make it clear to their followers that they are being paid (financially or otherwise) for a promotion. Otherwise, the endorser is carrying out misleading online practices which are against the law and can lead to enforcement action. As a result, 40 British celebrities have been issued warnings after they were found to have promoted films, games and takeaway or daring apps on social media sites.

This regulation makes sense, as it becoming increasingly hard to separate the individual from the broadcaster. Using Kylie Jenner as an example, how can one separate the individual (Kylie Jenner) from the brand (Kylie Jenner) from the broadcaster (Kylie Jenner with 72.5 million Instagram followers)? In fact, when participating in paid advertorials, all of these facets of Kylie Jenner must adhere to the marketing rules which would traditionally have been imposed on TV broadcasters. This is a complex and constantly evolving aspect to marketing, and the rules which are imposed on the industry.

Currently, a simple solution has been imposed; sponsored posts must be marked with #spon or #ad, both protecting US celebrities and informing the consumer. The whole Jenner/Kardashian clan would be well advised to sit down and search through all of their sponsored social media posts and make sure their captions let their followers know they are being paid to endorse a brand or product. Look out for what promises to be a riveting episode of KUWTK, folks!

In the case of British celebrities, it is not surprising that 40 have already been caught unawares, as they are unlikely themselves to have read the UK Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing, particularly Section 2 on the Recognition of Marketing Communications (#catchytitle).

Until the rules become more user-friendly, talent agents and legal representatives should take the time to familiarise themselves with marketing rules before agreeing for their client to sign-up to any major catch-all marketing campaigns that include access to their individual social media accounts. Not only because of the personal risk of breaching marketing laws, but also because celebrities’ social media accounts could provide hugely lucrative revenue streams for their clients.

According to the CMA, it is also the responsibility of marketing agencies to ensure celebrities are aware that they need to clearly label or identify paid promotions before they are published online. To help with this, the CMA invites marketing agencies to refer to numerous sources for guidance, such as the Advertising Standards Agency; the Committee of Advertising Practice and its Copy Advice Team; the CAP Code rules; and three sets of guidelines published by the International Consumer Protection and Enforcement Network.

Media lawyers, casting agents, advertising agencies have to be aware of how these rules work together, and how to make the best use of new advertising opportunities, without breaking the rules.

Fiona Peet, Media Advisor

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