Are e‑commerce platforms liable for misleading influencer endorsements?

Influencer marketing has become one of the most effective tools in digital advertising, with many e-commerce platforms relying on influencers to promote products and reach wider audiences. However, this growing trend raises concerns about misleading or deceptive marketing practices, especially when influencers fail to disclose paid promotions or exaggerate product claims. In many jurisdictions, platforms that host or facilitate such influencer endorsements may face scrutiny, and could potentially be held liable for misleading advertisements. As influencers and e-commerce platforms become key players in digital marketing, both parties must adhere to ethical marketing guidelines and legal requirements to protect consumers.

Legal Responsibility of E-Commerce Platforms in Influencer Endorsements

• 1. Liability for Misleading Advertising

• E-commerce platforms can be held partially or fully responsible for misleading influencer endorsements if the endorsement is found to be deceptive or false.
• Legal Precedents: In several countries, such as the United States and India, there are laws that regulate advertising and marketing practices. In the U.S., the Federal Trade Commission (FTC) enforces guidelines for influencers, including the disclosure of paid partnerships. Similarly, in India, the Advertising Standards Council of India (ASCI) governs advertising practices, requiring that influencer promotions be truthful and transparent.
• Platform Responsibility: While influencers themselves are responsible for their endorsements, platforms that host such content may also be held accountable if they are complicit in deceptive practices. If an e-commerce platform knowingly allows misleading product claims or fails to ensure that influencers adhere to disclosure regulations, it could be held liable.

• 2. Failure to Enforce Advertising Guidelines

• E-commerce platforms must actively enforce advertising standards and ensure that influencer endorsements on their site or through their affiliate channels comply with advertising disclosure requirements:
• Disclosure of Paid Endorsements: Platforms must ensure that influencers clearly disclose if a post or video is a paid advertisement. This can include using labels like #ad or #sponsored to inform viewers that the influencer is being compensated for the promotion. If a platform fails to require such disclosures, it could face scrutiny for enabling deceptive advertising.
• Misleading Claims: If an influencer promotes a product using false claims (e.g., this product will help you lose 10 kg in a week), the platform may also be held accountable if the product is listed or sold on their site. In cases where false or misleading claims lead to consumer harm, regulators could impose penalties on both the influencer and the platform.

• 3. Duty to Monitor and Regulate Content

• Platforms have an obligation to monitor and regulate the content being posted by influencers, especially when it involves direct or indirect promotion of products sold through their marketplace:
• Content Moderation: Platforms are increasingly expected to monitor for misleading or harmful content, including influencer endorsements that could mislead consumers about a product’s quality, benefits, or efficacy.
• Regulatory Action: Platforms that allow misleading or deceptive marketing to persist on their website or social media channels risk facing fines or sanctions from regulators. For example, the UK’s Advertising Standards Authority (ASA) has penalized platforms that fail to prevent the spread of misleading advertisements by influencers.
• If a platform receives a complaint about misleading influencer marketing and fails to take action (e.g., by removing false claims or issuing warnings), it could be found liable for not adhering to advertising and consumer protection standards.

• 4. Legal Consequences for E-Commerce Platforms

• Platforms that are found to be complicit in or negligent about misleading influencer marketing may face several legal consequences:
• Consumer Protection Laws: In many jurisdictions, consumer protection laws prohibit unfair, misleading, or deceptive advertising. E-commerce platforms may be penalized for not taking sufficient measures to prevent misleading promotions or for failing to adequately inform consumers about the nature of influencer endorsements.
• Penalties and Fines: Platforms that are found guilty of not enforcing proper disclosure or failing to moderate misleading claims may face substantial fines or penalties. These penalties can be enforced by local regulatory bodies, such as the FTC in the U.S. or the Competition Commission of India (CCI), depending on the country.
• Loss of Trust: Beyond legal fines, platforms that are linked to misleading marketing campaigns may also suffer reputational damage, losing the trust of both consumers and influencers. This could lead to decreased consumer engagement and a loss of business.

• 5. Influencer and Platform Joint Liability

• In some cases, both the influencer and the platform may be held jointly responsible for misleading marketing:
• Joint Responsibility for Deceptive Claims: If an influencer makes deceptive or exaggerated claims about a product, and the platform allows the post to remain online without intervening, both the influencer and the platform can be held jointly responsible.
• Shared Accountability: Platforms may argue that influencers are independent third parties, but they are still required to ensure compliance with advertising guidelines. Regulators expect platforms to take proactive measures to prevent the promotion of misleading or harmful content, which may include removing or flagging non-compliant influencer posts.

Example

• Scenario: An influencer on a popular e-commerce platform like Amazon or Flipkart promotes a weight loss supplement with exaggerated claims such as Lose 10 pounds in a week! The influencer does not disclose that the post is a paid promotion, and consumers begin purchasing the supplement based on these misleading claims.
• Steps that could happen:
• Consumer Complaints: Consumers who use the product and see no results file complaints about misleading advertising. They argue that the claims made by the influencer were false and exaggerated.
• Regulatory Scrutiny: A consumer protection agency, such as the FTC in the U.S. or the ASCI in India, investigates the claim. They find that the influencer did not disclose the paid nature of the promotion, violating advertising standards.
• Platform Responsibility: The e-commerce platform (e.g., Amazon or Flipkart) is found to have allowed the influencer's post without ensuring compliance with disclosure guidelines or product claims verification. The platform is held accountable for enabling misleading marketing.
• Penalties: The influencer faces a fine for failing to disclose the paid promotion, and the platform faces penalties for not enforcing advertising standards. The platform may be required to provide refunds to affected consumers and take down the misleading content.
• Corrective Action: The platform may update its policies to require more stringent checks on influencer content, including verifying that all claims made by influencers are substantiated and that paid promotions are properly disclosed.

Conclusion

• E-commerce platforms have an increasing responsibility to ensure that influencer marketing on their websites and social media channels adheres to advertising standards and consumer protection laws. If influencers make misleading claims or fail to disclose paid promotions, platforms may face legal consequences, including fines and reputational damage. To avoid liability, platforms must actively monitor influencer content, enforce advertising guidelines, and ensure transparency in marketing practices. With the growing influence of digital influencers, platforms must remain vigilant in ensuring that the content they host is both truthful and fair.