Reality star and businesswoman Kim Kardashian recently found herself in legal trouble in the United States after endorsing the high-risk cryptocurrency EthereumMax (“Emax”) to her millions of followers on Instagram. Since her endorsement, EMAX’s value has plummeted which led to the US Securities and Exchanges Commission bringing charges against Kim. The problem lies in the manner in which Kim promoted the product. Kim failed to disclose to her followers that she was paid a hefty quarter of a million dollars to promote the cryptocurrency, which ultimately collapsed. US law requires influencers and celebrities to disclose to the public when and how much they are paid when promoting investment opportunities in securities.
Kim Kardashian has agreed to settle the matter by paying over $1.26 million in penalties, repayments to affected customers, and interest for unlawfully promoting cryptocurrencies on her Instagram. For Kim Kardashian, this substantial fine may not make a dent in her wallet but what about you? Can you get into legal trouble for unlawfully promoting a product on social media in South Africa? – Yes, you can.
Often, companies or brands pay groups or people, such as celebrities or influencers to interact with their followers on social media and help promote goods and services. This is achieved by promoting it through the creation of new content around the product or service. The Advertising Regulatory Board (“ARB”), an independent entity established and funded by the marketing communication industry to regulate advertising in South Africa, has a Social Media Code of Conduct (“the Code”) that outlines regulations that are applicable to social media influencers and marketers. Brands, publishers, and influencers are bound by the provisions of the Code of Advertising Practice in its entirety.
In terms of the Code, social media influencers are required to disclose whether their content is part of a social media advertising campaign. These posts should be marked as “Sponsored” or “Promoted”. The content should be clearly identifiable to an average social media user as an advert on behalf of a third party. Examples of these social media identifiers include: “#AD”, “#Advertisement”, or “#Sponsored”. These identifiers must be visibly included in the post itself. In addition, advertisers are also required to disclose to their followers if the goods or services they are endorsing have been provided to them in exchange for marketing services. This practice ensures transparency and enables consumers to make an informed decisions or form opinions about the advertised goods or services.
Both influencers and the companies collaborating with social media influencers for their campaigns should take note of the ARB Regulations and the Code when planning their campaigns and should also consider wider regulations such as the provisions of the Consumer Protection Act, 68 of 2008 and the Code of Advertising Practice. By adhering to these regulations, social media influencers and companies can ensure compliance and maintain ethical advertising practices.