Watch-Out for Using KOL’s Social Media for Advertisement or Promotion

As on-line social media such as Weibo or WeChat (the Chinese counterparts of twitter and Facebook) became an indispensable part of everyone in our era, businesses simply cannot stop using these communication resources to do advertising and product/service promotions. Among others, the so-called “key opinion leaders” which are popular online regardless of whether they are actually leading any public opinions anyhow (“KOL”) is most ideal resources as such KOL draws most eyeballs and what they say in most times look or sound like personal opinions or private discussions of individuals.

 

A major legal watch out for such marketing strategies is that such statements or endorsements becomes increasingly more likely to be deemed as advertisements by government authorities in more and more jurisdictions, especially when such KOLs receives compensation or benefits such as money or free products or services from advertisers or agencies for making those statements.

 

Among others, U.S. Federal Trade Commission (“FTC”) has issued a guideline stipulating that, if the advertisers and bloggers ally to promote the advertiser’s products or services on bloggers’ personal blogs, such promotion is legally deemed as advertisement. Both the advertiser and the bloggers will be held liable for misleading or unsubstantiated representations made via a blogger’s endorsement.

 

The guideline also requires the bloggers to disclose to consumers the material connections they have with the advertiser, and businesses to disclose the (business) relations with these individuals or particular sites. Equally important, this guideline prohibits a “testimonial consumer”, or the use of such consumer’s comments, to make an individual experience sound like a typical experience other consumers in general could expect, unless such individual experience has been substantiated as typical.

 

As this FTC guideline is based on long-established advertising legal principles, positive echo from other countries/regions would not be surprising. For instance, Taiwan’s Consumer Protection Commission recently announced its intention to follow this FTC approach. Such approach has also been adopted in Hong Kong and violation has given rise to significant penalties. In mainland China, although KOL is not specifically covered in existing legislation, the over-reaching language of the aggressive new Chinese Advertisement Law requiring disclosure of any communication in commercial nature should enable the enforcement authorities to find it easy to catch such KOL’s endorsement as advertisement by way of interpretation.

 

In light of the above, it is advisable to be consult with your legal counsel if any question arises in planning and execution of advertising/promotion that utilize the foregoing communication tools. In particular, potential key points may include without limitation the following:

 

  1. Externally, in terms of the contract with the said KOL, it would be advisable to request a clear written undertaking from the said KOL that his / her personal experience of the products shall be duly documented and kept in good record as evidence in case of future governmental or consumer challenges for false advertisement;

 

  1. Internally, it would be advisable to make sure that any promotion or advertisement message to be delivered by such KOL shall not be differentiated by any other channels but shall go through the same internal procedure that is in place for the purpose of assuring compliance with local advertisement, competition and consumer protection law;

 

  1. If there is no such internal procedure for compliance with local advertisement, competition and consumer protection law yet, it is the high time to consult your legal counsel to formulate one as enforcement against false advertisement has reached an unprecedented magnitude and any penalties in this regard may literally kill any small start-ups.

 

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Please note that this article is not contemplated to exhaustive or be relied upon as formal legal advice. Should you wish to know more about the details of this particular area of law, please send an email to j.cao@pricecao.comand we would be more than happy to hear from you.

 

 

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