'Deceptive marketing works' — social media ads grab attention of regulators

Deceptive marketing on social media is a growing problem that regulators in Canada and the U.S. are trying to contain. So-called influencers get paid to promote products, but not all of them are upfront about it.

Regulators concerned about growing wave of deceptive marketing

Both Torontonian Casey Palmer and celebrity Kim Kardashian are hired to promote companies and brands on social media. (Instagram)

Casey Palmer is no Kim Kardashian — and never will be. But the Toronto–based, bespectacled father of two does have something in common with the super-celebrity.

Both he and Kardashian — who's been described as famous for being famous — are so-called social media influencers. A range of companies pay them to promote their brands online. 

"I haven't blown up past the reaches of the stratosphere yet," Palmer says with a smile, about his own smaller form of fame. "But I've done okay so far. At any given time I'm usually juggling about a dozen clients."

Advertisers such as Telus, Pampers and Subway Sandwiches are eager to pay Palmer to write about their products in a positive way, and spread the good word throughout his social networks. He posts regularly on Facebook, Twitter, Pinterest, Snapchat and Instagram, about parenting, travel, and technology. He also writes a blog called Casey Palmer, Canadian Dad.

His audience of 15,000 is miniscule compared to Kardashian's 87 million Instagram followers. Even so, he's a hot commodity.

Tiffany Heimpel of Izea says her company helped regulators in the US design new rules for social media advertising. (CBC)

"Anyone who wants to work with dads wants to have Casey onside," says Tiffany Heimpel, managing director of Izea, a Florida–based company that recently opened an office in Toronto to serve Canadian clients that employ influencers. "In the dad world, his voice is pretty strong."

Time to come clean

Today many advertising campaigns include a social media component. In a world skeptical of business and its messages, a friendly recommendation from someone you know personally — or admire from afar — is golden.

But as social media marketing has grown in popularity, so has scrutiny from consumer groups and regulators who view the practice as advertising in disguise. Too often, influencers don't disclose that they have a financial arrangement with the companies and products they promote.

"We see social media influencers being paid, but consumers not knowing that they're receiving monetary compensation for it," says Bonnie Patten, director of Truth in Advertising, an American consumer group.

"It's only human nature that if you receive something for free, or you're paid over $100,000 to put up a post, that may change your mode of bias and interest in regard to that product or service. And consumers have a right to know that."

Patten's group has filed an official complaint with the Federal Trade Commission about the three Kardashians and their sisters Kylie and Kendall Jenner. The complaint alleges that close to 100 paid posts have not be labelled as advertisements.

Canada takes action

In Canada, the industry group that sets the Canadian Code of Advertising Standards updated its guidelines last month. The Code now notes that testimonials, endorsements and reviews must disclose "clearly and prominently" when there's a financial connection between the influencer and the company they are promoting.

Meanwhile, the Competition Bureau tells CBC News in a statement that "the enforcement of deceptive marketing practices in the area of the digital economy is a top priority."

The Bureau won't comment on any current investigations, but says companies can be fined as much as $15 million, and that it's "constantly monitoring the marketplace."

Tiffany Heimpel believes that's a good step. She explains that Izea instructs all of its influencers to disclose when they're paid to post. The company even recommended the use of a hashtag, #AD, to the FTC in the U.S., as a way to identify paid posts. "Authenticity is important," she insists, if influencer marketing is to maintain its value.

However, both she and Casey Palmer say they see examples in Canada where influencers are not so transparent.

A penalty for deceiving consumers 

"Yup, definitely," says Palmer. "I don't know what the ratio is from those who do and don't, but there is the crowd of those who haven't yet decided that they should put a disclosure statement on all the web pieces they put out."

He's put disclaimers on his blog since he started, convinced that his readers expect honesty, and that he'll lose his influence if he appears "phoney."

Khloe Kardashian identifies this Instagram post as a paid promotion by using a hashtag: #ad. (Instagram)

Truth In Advertising wants to see companies fined if they use influencers in deceptive campaigns.

"What I'd like to see happen is that the 30-plus companies that have material connections with the Kardashians ensure that the posts are corrected, and I'd also like to see them pay a penalty for deceiving consumers," says Bonnie Patten.

So far, the FTC has sent warning letters to companies involved in undisclosed influencer marketing. Lord & Taylor, Cole Haan and Warner Brothers are just some of those that have faced investigation. The regulator has also recommended that sponsored posts be labelled with the hashtag #AD.

Truth in Advertising's Patten isn't convinced consumers understand what #AD means, but believes it's the best solution to be proposed so far.

"Deceptive marketing works. And that's why companies and social media influencers are doing it," she says.


Dianne Buckner has reported on entrepreneurs for two decades. She hosts Dragons' Den on CBC Television and is part of the business news team at CBC News Network.