Here’s a scenario that’s not too hard to imagine—a seemingly reputable business being underhanded to boost its online reputation.
In today’s competitive market, businesses employ various tactics to capture consumers’ attention, and this raises questions about the authenticity of reviews on social media. But did you know that the same laws that apply to traditional advertising also apply to social media marketing?
An Overview of the Regulation of Social Media Marketing
Just like traditional marketing, social media marketing is subject to regulation in Australia. The Australian Consumer Law (ACL) prohibits businesses from engaging in misleading or deceptive conduct. This is supplemented by standards such as the Code of Ethics from the Australian Association of National Advertisers and the Influencer Code of Practice published by the Australian Influencer Marketing Council in 2020.
Section 18 of the ACL states that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead and deceive. Misleading or deceptive conduct occurs when a business entices or leads a person into buying something by creating an overall impression that is false or inaccurate. To determine whether conduct is misleading or deceptive, the issue to be assessed is the overall impression a business gives to a consumer when engaging in the conduct.
Misleading or Deceptive Conduct
Determining whether conduct is misleading or deceptive isn’t black or white. The overall impression a business gives to a consumer when engaging in the conduct is assessed. Generally, misleading or deceptive conduct occurs when a business entices or leads a person into buying something by creating an overall impression that is false or inaccurate.
Misleading or deceptive conduct occurs when a business entices or leads a person into buying something by creating an overall impression that is false or inaccurate.
Puffery vs. Falsity
Puffery is another word for obvious exaggeration. An example would be, “Our pizzas are the best pizzas in the universe.” This statement is so exaggerated that it’s unlikely to be taken literally by consumers. However, if a business states, “Our pizzas are the best in the universe because they are 100% vegan and gluten-free” when they are not, this is false and constitutes a misrepresentation.
Common Pitfalls for Businesses
There are many pitfalls businesses should avoid in any form of advertising, including social media marketing. These include misleading or deceptive conduct, puffery, falsity, and misrepresentations. Other pitfalls include:
- Comparative Advertising: This involves comparing your product or services with those of another business. You must always ensure comparisons are fair and compare like with like.
- Promotions: For “buy one, get one free” promotions, businesses must not increase the price of the product to make up for the cost of the second “free” item.
- Disclaimers: Businesses cannot rely solely on disclaimers to qualify the terms and conditions of selling their products or services. The overall impression created in the consumer’s mind is what matters.
Customer Reviews
Customer reviews are essential for building consumer trust. Most of us consult online reviews when making purchasing decisions. While customer reviews are effective for promoting your goods or services, business owners must be aware of the legalities of procuring and moderating them.
False reviews can mislead consumers and create unfair competitive advantages for dishonest businesses. Section 18 of the ACL prohibits businesses from making incorrect statements or creating false or misleading impressions, including through customer reviews.
A 2023 case in South Australia highlights the consequences of false reviews. An electrical and plumbing business trading as Star Plus Group posted fake reviews on websites like Yellow Pages and Product Review to enhance its online reputation. These reviews misled potential customers and tainted the credibility of online review platforms.
The court found Star Plus Group guilty of misleading and deceptive conduct in breach of section 18 of the ACL. The court imposed several penalties, including declaratory relief, injunctive relief, corrective advertising, and a fine of $125,000. This case underscores the importance of adhering to legal standards in online marketing.
Influencer Marketing
Influencer marketing is a popular strategy where influencers promote a business’s products or services. Transparency is crucial in influencer marketing. Influencers must disclose sponsored content, and businesses must ensure the accuracy of those endorsements.
The Australian Influencer Marketing Council’s Influencer Code of Practice provides guidelines for transparency, brand safety, advertising disclosure requirements, appropriate briefs and contracts, and intellectual property rights.
The key legal concern in online and social media marketing is ensuring that the promotion of your goods or services is not misleading or deceptive. The rules that apply to traditional forms of advertising also apply to online and social media marketing.
Businesses must not engage in misleading or deceptive conduct when advertising their products or services. Puffery in advertising is acceptable, provided it does not have the effect of misleading or deceiving consumers. Engaging in misleading or deceptive conduct can lead to significant penalties, including corrective advertising and monetary fines.
Practical tips for legal compliance
Here are some practical tips to assist you in achieving legal compliance in your social media marketing:
- Comparative Advertising and Promotions: ensure that any comparative advertising compares like with like. For “buy one, get one free” promotions, do not increase the price of the product to compensate for the free item.
- Disclaimers: disclaimers cannot save false or misleading impressions. It’s the overall impression created in the consumer’s mind that is relevant.
- Customer Reviews and Influencer Marketing: ensure customer reviews are genuine and accurate. Avoid false or manipulated reviews, which can mislead consumers and lead to legal consequences. In influencer marketing, proper disclosure of sponsored content is critical. Both influencers and businesses have responsibilities under Australian Consumer Law to ensure that endorsements are accurate and not misleading.
This article introduces the legal aspects of online and social media marketing, emphasizing the importance of following legal regulations akin to traditional advertising. It outlines the relevance of Australian Consumer Law (ACL) and the standards set by industry organizations.
We have emphasised the role of section 18 of the ACL, highlighting the need to avoid misleading or deceptive conduct. Additionally, we clarified the distinction between puffery and falsity and pointed out common pitfalls businesses should avoid. We also stressed the significance of genuine customer reviews and the correct use of influencer marketing.
Adhering to legal standards in online and social media marketing is of utmost importance. Legal literacy by way of an understanding of the laws relevant to social media marketing better equip you to market and grow your business while avoiding the perils, and significant reputational and monetary damage, of misleading or deceptive conduct.
Disclaimer: The information provided by the Legal Literacy Foundation, in all formats, is for educational and information purposes only. It is not intended to be a substitute for professional legal advice, and is solely an educational tool for your own use.
