Online paid for promotions

17 February, 2011

The Office of Fair Trading (OFT) has taken a similar stance to that of Ofcom regarding the transparency of paid-for promotions in social media. The OFT took enforcement action in December 2010 against Handpicked Media Ltd for misleading consumers and breaching the Consumer Protection Regulations 2008.

The purpose of these regulations is to protect consumers from unfair commercial practices that might cause consumers to make purchases that they would not have made, had it not been for the unfair practice. Effectively, the regulations aim to prevent businesses from misleading consumers, and impose a general duty not to trade unfairly. The enforcement action taken by OFT against Handpicked Media Ltd was the first time the Consumer Protection Regulations have been applied to online activity of this sort.

The enforcement action by the OFT found that individuals engaged by Handpicked Media had used blogs and Twitter to promote products and brands owned by clients of Handpicked Media, without making this clear to consumers. The OFT stated the case will set a precedent and confirmed that “online promotional activity, just like any other promotional activity, must clearly identify when promotions and editorial comment have been paid for” to prevent consumers from being misled. Where this process is not followed, companies are at risk of being found to have deceived their customers.

The success of this enforcement action by the OFT means that organisations will now need to ensure that not only their offline promotions, but also online paid-for promotions are compliant with the requirement for transparency. The OFT has indicated that it will take “targeted action” against companies who do not adhere to the transparency obligation.

The OFT’s finding will be of particular interest to organisations which use third-party blogs, advertorials (advertising features that look like articles) and organisations that charge for inclusion in “best of..” directories. The increased use of the internet by consumers to make purchases has fuelled a massive increase in online advertising and for consumers to be able to make informed decisions about the purchase of goods or services, the integrity of information online is crucial.

The OFT has stated that consumers should understand when they are reading paid-for promotional content regardless of the media through which that content is being displayed. It is expected that there will be a degree of harmonisation in relation to how sponsored posts are disclosed on Twitter and other microblogs, for example by using hashtags such as #paid-promotion or #advert.

As different forms of online advertising continue to materialise, it is probable the number of enforcement action cases pursued by the OFT will continue to increase. Consequently, organisations must be cautious and ensure that they are compliant with the Consumer Protection Regulations and clearly identify where any promotions or editorial comments have been paid for. This will ensure consumers are not misled, and that the general duty to trade fairly is complied with.  

Reviewed in 2015