All evidence shows that the legal rules regarding the marketing activity which is carried out by influencers will increasingly be the subject of legal analysis in the coming years. Influencer marketing has grown into a global industry showing significant growth year after year. In comparison, according to the Influencer Marketing Hub, the value of the market was estimated globally only at USD 1.7 billion in 2016 while, by 2022, this figure reached USD 16.4 billion.
Under Hungarian law, the most important influencer marketing-related regulations are included in the local Unfair Commercial Practices Act (UCPA). According to the UCPA, influencers need to comply with the requirements of professional diligence and their marketing activity cannot distort the economic behavior of consumers. This means that the content published by the influencer must provide a true, fair, and authentic picture of the promoted product or service, also the advertisement nature of the content should be clear as well.
According to the relevant surveys, the success of influencer marketing is primarily based on the fact that potential consumers place more trust in a person they follow, and thus are familiar with, than any alternative promotional sources. In light of this level of trust, it becomes even more important that the content published by the influencer accurately covers the reality and does not exaggerate or hide a key feature of the promoted product or service, nor the fact that the content is an advertisement.
Although there is no legal definition of an influencer yet, according to a practical guide on influencer marketing published by the Hungarian Competition Authority (GVH), the influencer is a person, thing, or virtual entity (e.g., animal, digital character, avatar) who is capable of exercising a dominant influence in the digital environment and shape consumer opinion and publishes online content on their website, social media account, or other online platforms, irrespective of whether that content is their own or a guest post. The GVH adds that in most cases, the influencer has a committed follower base.
It is important to note that the influencer must receive some form of compensation in exchange for the promotion, which may ultimately lead to a distortion of the objectivity of the published opinion. Such compensation may include but is not limited to financial payments, considering that it can take the form of e.g., a free product, a discount, a voucher, event tickets, a partnership agreement, i.e., anything that usually requires payment.
The promotional content for which the influencer receives compensation can be essentially anything, e.g., opinions, comments, notes, expressions of mood, spontaneous reactions, labels using the # (hashtag) sign, marking of web links (https://www...), product placements, sponsored posts, advertisements, promotions, commentaries, and explanations. The promotional content can be disseminated through optional mediums.
In order to comply with the relevant regulations when publishing such content, the influencer must indicate clearly, simply, unequivocally, and in an understandable manner the fact of the compensation and any existing business relationships. However, a uniform method for indicating these cannot be defined in general since, depending on the nature of the promotion (e.g., text, image, or video content) and the differences among social media platforms, the appropriate method may differ in many cases.
Based on the case law of the GVH, it is generally considered appropriate to indicate the existence of some form of compensation, or business relationship with the usage of advertising tags (e.g., “Commercial,” “Advertisement,” “Supported,” or “Sponsored” content) as well as hashtags (e.g., #commercial). In the case of video content, these are still necessary, the indication in the narration alone is not sufficient.
With regards to possible infringements, the influencer is jointly and severally liable with the legal entity which ordered the promotion if the influencer is also directly interested in the sales related to the promotion, e.g., receives a commission. However, if that is not the case, the influencer may be exempted from liability if the influencer can prove that the infringement results only from the execution of the clear and precise instructions of the directly interested legal entity.
The legal considerations of influencer marketing are still being outlined, both on the side of legislation and legal practice. Taking into account the above-mentioned market growth rate, as a legal professional, it is also worth adapting to this phenomenon and monitoring the related developments.
This article was originally published in Issue 9.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.