Instagram Influencer Advertising Non-Disclosure Lawsuit: The Fine Line of Transparency
Did the celebrity recommend that product because they really 'liked' it? The truth of influencer advertising often hides behind hashtags.
Hello! Today, I’m going to talk about a topic that has sparked continuous debate in recent years: influencers on platforms like Instagram promoting products without disclosing that they are advertisements, leading to lawsuits. I, too, once bought a beauty product recommended by a famous influencer without any suspicion, only to later find out that it was a 'sponsored ad.' As this has happened repeatedly, the issue of not clearly stating whether a post is an ad has grown into a serious problem of consumer deception, and it has even led to sanctions from the Fair Trade Commission and civil lawsuits. Today, I will take a closer look at the background of this issue, representative cases, and the legal disputes surrounding it.
Table of Contents
Rise of SNS Influencer Marketing
Platforms like Instagram, YouTube, and TikTok have now become massive marketing channels, moving beyond just spaces for communication. Influencers, in particular, create powerful consumer influence by exposing products and services to followers based on relatability and access, differentiating themselves from celebrities. Companies have adopted influencer marketing heavily due to its lower costs and higher conversion rates compared to traditional advertising, blurring the lines between 'advertisement' and 'daily posts.' This trend has, at times, led to misleading advertising that deceives consumers, and the debate on legal standards and ethical responsibilities has been intensifying.
Advertising Disclosure Obligations and Legal Standards
In South Korea, the Fair Trade Commission (FTC) has specified advertising disclosure obligations since 2020 through the 'Guidelines on Advertising and Endorsements.' If influencers are promoting products that they received in exchange for compensation, sponsorship, or free products, they must clearly state that it is an advertisement. Failure to do so may be deemed 'deceptive advertising.' However, the method of disclosure remains a contentious issue, especially when it simply involves using hashtags like #ad.
| Item | Details |
|---|---|
| Target of Disclosure | Posts where products are provided in exchange for compensation, sponsorship, or free products |
| Disclosure Method | Use of clear terms such as 'Advertisement' or 'Sponsored,' or FTC-recommended hashtags |
| Penalties for Violation | Corrective orders, fines, civil compensation, and criminal prosecution |
Representative Lawsuit Cases on Non-Disclosure
In recent years, famous influencers have been investigated by the FTC and become subjects of civil lawsuits for promoting products without disclosing that they are ads. Some have been ordered to pay compensation for 'deceptive advertising.' Here are some notable cases:
- Famous beauty influencer A, failed to disclose 30 sponsored posts, fined and faced a collective lawsuit from followers
- Instagram celebrity B, received free hotel stay and posted a review, failing to disclose it as an advertisement, received corrective order from FTC
- Fashion influencer C, received sponsorship and posted a recommendation without disclosing it as an ad, civil lawsuit filed by a consumer
Fair Trade Commission Guidelines and Regulatory Changes
Since 2020, the Fair Trade Commission (FTC) has introduced guidelines to enhance transparency in influencer advertising and has been investigating related violations. In collaboration with SNS platforms like YouTube and Instagram, the FTC has recommended the use of tags such as #ad and #sponsored. These guidelines aim to clarify the ambiguous standards and ensure a clear distinction between advertisements and regular posts. However, confusion still exists regarding the application of these guidelines depending on the platform and content type.
Consumer Perception and Social Response
Non-disclosure of advertising by influencers undermines consumer trust and leads to growing skepticism about SNS content as a whole. The realization that a beloved influencer's recommendation was actually an advertisement often leads to a sense of betrayal, which can escalate into collective lawsuits or reports. On the other hand, influencers argue that the boundary between authentic recommendations and advertisements is often unclear. Restoring trust between consumers and content creators remains a significant challenge.
| Reaction Type | Specific Reaction Examples |
|---|---|
| Increased Consumer Distrust | SNS reactions like "I thought it wasn’t an ad, but they got paid for it." |
| Decreased Trust in SNS Platforms | Increased criticism of 'manipulated information' across Instagram and YouTube |
| Influencer Backlash | Repeated claims like “It was a personal experience, not a promotion.” |
Future Directions for System Improvements and Global Trends
Improving transparency and rebuilding trust have become global challenges. Regulatory bodies such as the Federal Trade Commission (FTC) in the United States and the Advertising Standards Authority (ASA) in the United Kingdom have established guidelines to enhance SNS advertising transparency. South Korea is also expected to continuously revise its regulations to align with these trends. Here are key proposals for system improvement:
- Mandating advertising-specific tags and filter functions within platforms
- Introducing regular training programs for influencers and advertisers
- Strengthening the monitoring function of consumer organizations and civil society
Frequently Asked Questions (FAQ)
Yes. According to the Fair Trade Commission guidelines, influencers must clearly state that it is an advertisement or sponsorship if they received compensation.
You may face corrective orders, fines, criminal prosecution, or civil claims for damages.
No. Hashtags can be confusing, so it's recommended to use clear phrases like 'This post is an advertisement.'
On the contrary, acknowledging transparency and authenticity may increase trust in the long run.
It should be placed in an easily noticeable position, such as the top or first part of the post.
Yes. You can report it through the Fair Trade Commission’s consumer reporting center or the reporting function on the platform.
Conclusion: Trust with Followers Starts with Transparency
In the age of SNS, we experience information and consumption simultaneously every day. Influencer recommendations often feel like advice from a friend. But when marketing based on that trust turns out to be hidden advertising, consumers become victims, and trust inevitably breaks down. I also remember being disappointed when I later found out that a product I bought based on a 'recommendation' was actually all sponsored. A true content creator should take responsibility for their content and be honest with their followers, right? What do you think? Share your thoughts in the comments below!
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