Distinguishing between authentic content and advertising on Instagram
On 22 February 2023, the district court approved a withdrawal motion in a proceeding to certify a class action in Schoenberger v Adika style Ltd et al. The motion to certify a class action had been brought against 19 companies that had allegedly used “hidden advertising” by influencers on Instagram.
In its decision, the court established, as a general principle, that the commercial nature of any commercial content should be disclosed. However, since the Israeli legislature has yet to form clear and specific regulations regarding the proper way to disclose hidden ads by influencers on social media platforms, this issue should not be regulated by the court in a class action proceeding. Nonetheless, in its judgment, the court made a few comments that may help to shed some light on this matter, which concerns many corporations that promote their brands or products on Instagram or other social media platforms in Israel.
A motion to certify a class action was brought before the district court in Jerusalem. The applicants alleged that the respondents had promoted their brands and products through hidden ads on Instagram by paying influencers to upload photos or videos (content) to Instagram (also known as “product placement”). According to the applicants, the consumers had been unaware that the content was in fact ads that had been paid for by the companies. Instagram users were therefore unable to distinguish between authentic content and promoted content.
It was alleged that such actions were contrary to section 7(c)(1) of the Consumer Protection Law (CPL) 5741-1981, which prohibits “advertisements that may lead a reasonable person to assume that what is said (or shown) is not an advertisement”. According to the CPL, such an ad is considered a “misleading advertisement, even if its content is not misleading”.
The respondents claimed, among other things, that:
- the ads referred to by the applicants were not misleading since they all included some form of disclosure of the commercial nature of the post (eg, by tagging the brand or using a hashtag that disclosed the commercial relationship);
- product placement is not prohibited under the CPL;
- the respondents had no control over the influencers. There was not always a direct commercial relationship between the respondents and the influencers, and the influencers did not always follow the respondents’ guidelines;
- Instagram users are aware that Instagram is, in essence, a commercial platform, and influencers receive consideration for products that they promote on social networks; and
- the motion to certify the class action was flawed, since it was, in fact, asking the court to “replace” the legislature and establish ground rules regarding advertising on social media platforms – rules that would only apply to 19 random companies.
After long negotiations, which were held according to the court’s recommendations, a withdrawal motion from the class action was filed in court. Although the parties did not admit to each other’s claims, the respondents agreed to adhere to certain guidelines according to which product placement would be labelled. The parties agreed that the respondents would request the influencers to label any content that they upload on Instagram in one of the following ways:
- by using the tool currently offered by Instagram (which adds the text “paid partnership with”); or
- by adding specific agreed-upon words in the description or in a hashtag that reveal the commercial nature of the content (eg, “in paid partnership with [brand name]”).
The parties also agreed that if the influencers failed to include such disclosure, the respondents would bear no liability for such ad.
In its decision, the court stated that the motion to certify a class action had both legal and logical faults.
First, the court found that a significant number of the ads referred to by the applicants explicitly included tags and text that any reasonable Instagram user would understand to have a commercial meaning. The court also found that many people who do not understand that tagged content is an ad would not be helped by a “clear” inscription on the side of the image, stating that the content is sponsored. The court further ruled that there was an inherent difficulty in defining the benefit that would arise from adding one phrase or another to the fairly clear phrases already included by influencers in their posts, considering, among other things, the fact that users of the platform are generally aware of its commercial nature.
Second, the applicants had failed to define what the “proper disclosure” would be and had therefore failed to prove that the respondents had breached their obligation to properly disclose their ads. In any event, there is no specific regulation regarding product placement, and such regulation should be determined by the legislature and not by the court during a decision on a class action proceeding.
Third, the applicants did not have an independent cause of action. The applicants did not claim that they had been misled by the ads or that they had purchased any products from any of the respondents because of the ads. In addition, the applicants had failed to prove that they had suffered any damage as a result of the hidden ads. The court ruled that it is unlikely to award non-monetary damages just for viewing hidden ads.
The court thus concluded that, due to all the flaws, it would be reasonable to grant the withdrawal motion without approving any remuneration. However, the court decided to approve the withdrawal motion with a small amount of remuneration as it wished to encourage disclosure on social media platforms.
Although the proper way to disclose the commercial relationship with the influencer remains somewhat unclear, it is safe to say that certain disclosure of the commercial nature of the content should be made.
