Influencer Marketing Disclosure Failures Fuel Class Action Litigation

A wave of consumer litigation over the past year has targeted influencer marketing practices by corporations. Class action complaints against major US brands allege that sponsored social media content lacked the legally required disclosures.

The trend indicates that influencer marketing has evolved from an informal promotional tool into a significant source of legal and regulatory exposure for corporations, according to an article by Norton Rose Fulbright.

The complaints claim that brands failed to ensure that influencers disclosed their paid partnerships on Instagram through clearly visible hashtag identifiers such as #ad, #sponsored, or #paidpartnership.

Claims generally fall into three categories: statutory violations of consumer protection or competition laws, unjust enrichment, and misrepresentation.

There is similar legal risk in Canada under the federal Competition Act. It carries administrative monetary penalties up to the greater of $10 million or three times the benefit derived. There are also provincial consumer protection statutes. For example, Quebec’s Consumer Protection Act imposes liability on both merchants and advertisers.

The legal standard for compliant disclosure is straightforward. Influencers must clearly and conspicuously identify promotional content at the outset of a post. Material connections, including payments, free products, discounts, or personal relationships, trigger disclosure obligations. Canada’s Competition Bureau has already issued guidance and notified corporations of noncompliance.

Transactional counsel should incorporate influencer marketing compliance into due diligence frameworks, particularly when evaluating consumer-facing brands in M&A transactions. Undisclosed liability exposure may affect deal valuation and representations and warranties coverage.

Counsel advising marketing and brand teams should implement robust influencer contract provisions, monitor disclosure compliance, and provide periodic training. Legal teams should update enterprise risk management programs to reflect cross-border regulatory enforcement trends in both the US and Canada.