New guidelines, hefty fines split social media influencers over impact, earnings

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The Central government’s plan to release new guidelines for social media influencers, including hefty fines for failing to disclose paid promotions, has divided the community, with some saying their earnings will be impacted and others emphasising that stricter norms are needed.

The guidelines, aimed at preventing misleading advertisements and fake reviews, are expected to come out in about 10 days. Non-compliance with the guidelines will entail fines of as much as Rs 50 lakh, Central Consumer Protection Authority (CCPA) chief commissioner Nidhi Khare said recently.

The penalties that will be imposed will depend on the nature and the number of such offences. Some say the fines are disproportionate and will hurt smaller influencers, while others justify them.

“Hefty fines of Rs 10 lakh to Rs 50 lakh are not justifiable for creators as it will majorly impact their earnings,” said Neel Gogia, cofounder of IPLIX Media.

Levying hefty fines won’t be the right move, said Dhruv Modwil, founder of Nocturnal Media, a talent management agency.

Small influencers

“There are many influencers who are not even earning that much in a year and levying these hefty fines will lead to demotivation among creators, which can even lead to less creators and content in future,” Modwil said.

The impact is likely to be more on micro influencers, said Vaibhav Pathak, cofounder of TGB Troop, a marketing agency.

“I am not sure how these monetary fines will be calculated,” said fashion influencer Isha Borah. “But I think it may be a bit too much for nano and micro influencers who may not be making a lot of money through brand promotions. I think it should be based on their total earnings through paid collaborations rather than a flat sum.”

However, digital content creator Sakshi Keswani said creators will now become more careful when it comes to labelling paid promotions.

“The likely fines are on the higher side but they’re justified. If the fines are not high, creators and brands can find loopholes,” said influencer Vedant Kaushik.

Ritesh Ujjwal, cofounder of Kofluence, an influencer marketing agency, said such heavy fines are levied in other countries, too.

“In Poland, influencers were fined up to 30,000 euros for non-compliance with the paid promotion policy. Even Spain recently released a new policy for crypto influencers where they will be fined up to 300,000 euros if the mandated guidelines are not followed,” said Ujjwal.

Brand deal impact

Despite the good intentions, the guidelines will make it even more difficult for smaller and medium-sized influencers to get brand deals, said Ashish Sidhra, cofounder of Alike.io, a creator economy-based platform for travel bookings.

“To ensure compliance, brands will look to work with a limited number of larger influencers instead of a wider number of smaller influencers. This makes the situation worse in an industry where about 80 percent of influencers are dependent on brand deals for their revenue,” he said.

Influencers may also become more selective and cautious while signing brand deals, said Karan Pherwani, director, influencer solutions, and head of Chtrbox Represent. He said that currently, a creator with 100,000 to 500,000 followers does around 10 brand deals a month and the size of a deal can range from Rs 50,000 to Rs 2.5 lakh.

Influencer Kaushik said a drop in brand deals will be one of the downsides of the new guidelines.

“But in another way, it might also lead to creators focusing more on better organic content and not just for the sake of getting more brand deals. About 20-30 percent of my content has sponsored integrations accompanied with paid partnership labels,” he said.

Non-compliance

However, not all influencers have been transparent about paid promotions, even after the Advertising Standards Council of India (ASCI) issued guidelines to regulate paid content deals in June last year.

“After the ASCI released guidelines for paid promotions, influencers, particularly those belonging to the mega and celebrity segments, have been more transparent with their paid promotions. However, the same cannot be said for nano and micro influencers, who are more inclined to promote brands subtly without labels,” said Ujjwal.

Many influencers in categories like reviewers, real money gaming, and beauty and cosmetics don’t follow these guidelines, alleged Shivam Agarwal, founder of Deckster.Live.

“A lot of them review products and services for a living and if they put up the paid label post, it would hinder their authenticity,” he added.

Rohit Agarwal, founder of Alpha Zegus, a marketing agency, said the new guidelines with stricter implementation will have a negative impact as the audience might start skipping paid promotions considering them as ads, which might lower influencer engagement for branded pieces.

“There is less compliance amid influencers when it comes to ASCI’s paid-promotion guidelines as there no penalties, leading to influencers flouting those guidelines,” said Pherwani of Chtrbox Represent.

According to ASCI’s 2021-2022 report, influencer violations contributed 29 percent of the complaints against ads. The ad regulator processed a total of 5,532 ads. Cryptocurrency influencer ads recorded 24.16 percent of the violations, followed by personal care at 23.2 percent and fashion at 16.3 percent.

“About 95 percent of the creators are independent. So, they are not well aware,” said Modwil.

Inviting scrutiny

More than purposeful non-compliance, lack of awareness and indifference may have contributed to some influencers overlooking these guidelines, said Ujjwal.

“There were situations where influencers, without receiving anything from the brand, promoted them because they enjoyed their products or services,” he said.

However, the flouting of the ASCI’s guidelines may have resulted in inviting greater government scrutiny.

“The recent issue involving crypto promotions by a few influencers – where the crypto was devalued at a later stage – may have fuelled this need. Also, anything to do with YMYL (your money or your life) content that has a direct impact on individuals’ health, safety, or financial stability should be looked into,” said Borah.

Some companies, too, may have been reluctant to follow the paid-promotion guidelines.

“Brands want to avoid the paid partnership tag as a lot of people end up skipping content if they see such labels,” said Deckster.Live’s Agarwal.

Pherwani said he doesn't think advertisers will cut down on brand deals.
“Some brands may shy away from paid content deals, but brands that want to take advantage of the social media space will continue to do so,” said Abhijit Kain, a digital content creator.

Strict approach needed

Influencer Dhananjay Bhosale said the new guidelines will add to the weightage of ASCI guidelines.

The Central government has taken these steps to democratise an infamously disorganised industry, said Kofluence's Ujjwal.

“Considering how the earlier established guidelines were being taken leniently, a strict approach regarding this was necessary,” said Animesh Agarwal, founder of 8Bit Creatives, an e-sports consulting and talent agency.