Fyre Festival, influencers, and the CMA – why are regulators finally getting involved in the world of social media sponsorship?

Social media influencers are back in the headlines, and as usual, it’s for all the wrong reasons.

Late last month, the government’s Competition and Markets Authority (CMA) announced that it had told 16 high-profile celebrities – including models Alexa Chung and Rosie Huntington-Whiteley, musician Rita Ora, and YouTube star Zoe Sugg (better known as Zoella) – that they needed to disclose more information in their social media posts, and declare if they’d been paid to endorse a product or had received it as a gift.

The move was the culmination of an investigation which the CMA launched in August. It warned that these influencers may be breaking consumer protection laws if they fail to reveal that they were being paid or rewarded to promote a brand.

The involvement of the CMA is important – it shows that government regulators are growing more concerned about the influencer market.

Up until now, the watchdog has kept its distance, and let ad industry bodies like the Advertising Standards Authority try to control this burgeoning sector. But clearly the CMA now feels the need to step in, which means there may be new rules – or prosecutions – in the future.

Some in the industry may view this as an overreach by the CMA. After all, why should it be concerned if a handful of celebs recommend a handbag to people online?

But the CMA is right to be concerned. Social media influencers hold power – more than people may think. That’s why they have become so popular with marketers, who want to leverage the connection between an influencer and their millions of online followers to boost brand sales.

Celebrity endorsements are obviously not a new thing. So why should we be more concerned about Zoella recommending a particular brand of lipstick than Roger Federer promoting Gillette razors or LeBron James wearing Nike trainers?

One word: context. When we see a Gillette commercial, we know that it is an advert. The brand has paid for the poster space or the airtime on TV.

But we use social media to keep in touch with friends and family, and in that context it’s easy to forget that the posts we see may in fact be adverts.

Mock the trend if you want, but social media enables people to view the celebrities they follow like their friends.

This obviously isn’t the case, but it’s certainly not something that influencers try to discourage. Instead, they tend to talk about how much they love all their fans and use friendly, affectionate language. Seeing influencers as close acquaintances can mean that consumers consider them trustworthy and authentic, and so are more likely to act on their suggestions than on Federer’s or LeBron’s.

This blurred relationship opens the door to real risks to consumers if influencers abuse this power. For proof, look no further than the infamous Fyre Festival.

Billed as a luxury music festival on a remote tropical island in 2017, with ticket prices from $1,500 up to $250,000, the event turned out to be a complete disaster. As two documentaries released last month by Netflix and Hulu reveal, festival goers were completely misled.

Instead of quality accommodation, they were expected to sleep in disaster-relief tents on rain soaked mattresses; the site wasn’t finished; there was a lack of lighting and basic utilities; the food was catastrophic; and the bands didn’t even turn up. It’s a wonder that no one was seriously injured.

But why would anyone spend so much money on a new festival that had never been tested before?

The event was heavily promoted using a network of around 400 influencers, including supermodels such as Bella Hadid. Celebrity Kendall Jenner promoted Fyre on Instagram for an alleged $250,000. The internet hype meant that tickets sold out almost instantly, even though the organisers were yet to book any bands or arrange any infrastructure.

The influencers involved in promoting the festival had no idea at the time that it would turn out to be a disaster, but there is now a question over whether they are in some way culpable.

In fact, several lawsuits have since been filed not just against the organisers of Fyre Festival (one of whom, Billy McFarland, pictured above, is now in jail for fraud), but implicating the influencers involved, claiming that they broke US regulations.

“Social media ‘influencers’ made no attempt to disclose to consumers that they were being compensated for promoting the Fyre Festival,” writes personal injury attorney John Girardi in the legal brief for a $100m fraud lawsuit.

This brings us back to the CMA. The watchdog hopes that better disclosure about the commercial links between influencers and brands will help consumers be more informed and make better decisions, so they can avoid falling for another event like Fyre Festival.

However, this is easier said than done. It’s easy for regulators to police influencers with millions of fans, as they are more visible, but what about up-and-coming personalities with only a few thousand followers whom the watchdog does not yet know about?

To complicate matters further, there’s a growing trend of “fake” sponsored content. Wannabe-influencers pretend that they are being paid to promote a product, in order to inflate their status and make themselves appear valuable to other brands – it’s the digital equivalent of lying on your CV.

How can regulators police situations like this, where disclosure about sponsorship is actually a lie?

Perhaps instead of focusing on the influencers, regulators should target the brands that sponsor them – these firms could be more transparent about how and when they’ve paid for an endorsement. Solberg Audunsson, chief executive of influencer marketing platform Takumi, thinks that brands that use influencers irresponsibly should be held accountable.

“Brands are the buyer in influencer marketing,” he says. “In 99 per cent of cases, they are great practitioners and are up to date on regulation. Established brands understand what is required. It’s the upcoming brands that go direct to influencers or through small agencies that are skirting regulation.”

Rules will always be bent or broken, so regardless, maybe we consumers need to re-evaluate our relationship with social media. Instead of thinking of influencers as friendly faces whose opinions we respect, we must remind ourselves that, like the sports stars wearing Nike shoes, internet personalities are also looking to make money from sponsorship.

Then maybe we’ll regard their opinions on products with a pinch of salt, rather than drop a grand on a ticket to an unknown music festival like Fyre.