Italian competition Authority investigates on influencer marketing

The Italian competition authority (AGCM) is currently investigating influencer marketing practices carried out on social media.

Influencer marketing consists in the posting on blogs, vlogs and social networks (such as Facebook, Instagram, Twitter, YouTube, Snapchat, Myspace) of photos, videos, and comments by bloggers and influencers (i.e. online celebrities having a large number of followers), showing support or approval of specific brands (i.e. giving an endorsement), thus generating an advertising effect, without making clear to consumers the commercial intent of the communication.

This phenomenon is increasingly growing in size because of its effectiveness, given the ability of influencers to establish a strong relationship with their followers-consumers, who perceive such communications as advice based on personal experience and not as advertisement. Often, the pictures displaying a specific brand, posted on the personal profile of the celebrity, are mixed with neutral photos, in a flow of images that give the impression of being a private account of the celebrity’s daily routine. Sometimes the photos represent a domestic environment and are shot without using advanced techniques, while in other cases the type of image, the posture of the celebrity, and the surroundings clearly hint to a professional photo shoot. Moreover, the visibility of the product varies substantially, given the heterogeneity of the type of post and of the kind of celebrity. In some cases, the brand name is quoted in the hashtag of the post, in other situations instead they occupy a prominent position in the picture. In addition, the post can be associated with emphatic comments on the product itself.

As prescribed by the Consumer Code in Italy, in order to grant the maximum degree of transparency and clarity on the potential advertising content of the posts published by celebrities, the AGCM, with the collaboration of the Antitrust Unit of the Financial Police, has sent moral suasion letters to some of the main influencers and companies producing the branded goods displayed in the posts.

In the letters, after reminding the addressees that advertisements must always be clearly recognizable as such by consumers, the AGCM has stressed that the prohibition of hidden advertising has a general validity and therefore must be respected also in communications delivered through social networks. Therefore, influencers cannot make consumers believe they are behaving in an unsolicited and unselfish manner when they are actually promoting a specific brand.

The AGCM has thus identified general rules of conduct and has required the addressees to make apparent the possible advertising nature of the content delivered through social media, through the use of warnings, such as #ad, #sponsored, #advertising, #paidad, or, in the case of products given for free to the celebrity, #productsuppliedby; in particular, all these wordings should be followed by the name of the specific brand being advertised.

Given that hidden marketing is considered to be particularly dangerous, since it deprives consumers of the natural defenses that arise in the presence of a declared advertising intent, the AGCM urges all those involved in the phenomenon to abide to the prescriptions of the Consumer Code, providing consumers with suitable indications able to reveal the nature of the message, also when it is the outcome of a commercial relationship, and even when it is based on the free provision of branded goods to the celebrity.

Food products are often subject for influencer marketing: in Italy we had cases related to infant formula, slimming beverages.

Before the Italian AGCM, to my knowledge, only the UK CMA did something similar in the past: see the following link.

Romania Suspends Unclear Food Waste Law

Today I receive and publish an interesting contribution about the recent “food waste” law recently entered into force in Romania, coming from Oana Constantinescu and Toma Barbărasă (respectively partner and attorney at law at Schoenherr si Asociatii SCA).

After France and Italy to my knowledge that is the most concrete attempt in EU to mitigate the problem by law: the path seems nonetheless paved of difficulties. Compared to the Italian legislation (already covered on this blog) a point of merit is the provision of sanctions; but the negligible amounts of the fines could foster the lack of application of the law.

It will be extremely useful to follow the developments of these bills and try to measure the impact of them in the mid-term, since doubts on their real effectiveness seems to remain.

A new law meant to fight food waste in Romania came into force in late May but is now inapplicable, as its provisions are unclear and application norms have yet to be published.

On 21 May 2017, Law 217/2016 on Food Waste Reduction entered into force (the “Law“). The Law aims to reduce food waste by imposing measures on all operators in the food industry.

The issues

In its current form, the Law has already raised concerns about its scope as well as the practical measures that operators need to take in order to comply with it.

For instance, it is not clear which entities must comply with the Law, as the Law stipulates that it applies to operators in the agri-food sector without defining who these are. This may raise more difficulties, since the Law only refers to enterprises (in terms of applicable sanctions), but does not define them.

In addition, the Law does not provide a definition for products that are close to expiry. This is important, since a clear distinction needs to be made between highly perishable products that can only stay a few days before becoming unsafe and products with a longer validity.

Another cause for concern is the lack of clear procedures, as food operators are given no guidelines or instructions on how to implement the measures in practice. Of course, each operator must assess its activity on a case-by-case basis and proceed depending on the products and its specific activity.

All of these issues are meant to be resolved through the application norms, which were supposed to be drafted by 21 May 2017, but have now been pushed back pending analysis.

In the beginning of June, the Ministry of Agriculture issued a statement saying that the legal mechanisms included in the normative act cannot be applied and that the enforcement of the law is postponed until further notice.

Outline of the measures imposed

Under the Law food operators must take the following effective measures:

  1. Accountability measures for the reduction of food waste in the entire agri-food chain, from the manufacturing stage to the marketing stage, and to the final consumer;
  2. Low-priced sale measures for products close to expiry;
  3. Transfer measures by donation or sponsorship for products close to expiry; such transfers shall be made to entities specifically registered in this respect;
  4. Measures for the direction of by-products not intended for human consumption under Regulation (EC) 1774/2002, under certain conditions, for the disposal of animal by-products;
  5. Measures for the direction of agri-food products unfit for human or animal consumption by transformation into compost;
  6. Measures for the direction of agri-food products unfit for human or animal consumption for their transformation into biogas;
  7. Measures for the direction of by-products left after going through the above stages to an authorised neutralising unit.

The Law gives food operators the opportunity to offer nearly expired products to associations, foundations and social enterprises. It also sets maximum amounts in this respect, namely 3 % + VAT of the purchase price (for food marketers) or of the production price (for food manufacturers or processors). In their turn, associations and foundations may market the offered products at maximum 25 % + VAT of the purchase price (in case they receive the products from food marketers) and at maximum 25 % + VAT of the production price (in case they receive the products from food manufacturers or processors).

Sanctions

Operators who fail to observe the above measures will face fines ranging from RON 1,000 to RON 10,000 (approx. EUR 220 to EUR 2,200). The fines depend on the size of the entity, i.e. big enterprises will face higher fines.

Conclusions

Although the Law officially came into force on 21 May 2017, its provisions are not clear enough to be applicable in practice. Moreover, the Ministry of Agriculture and Rural Development had the legal obligation to enact application norms for the Law before 21 May 2017. Although the norms were initially published on the Ministry’s website for public debate, they are now no longer available.

A serious issue that the Law may trigger is so-called parallel trade caused by the obligations imposed on operators. On the one hand, operators must donate or sell products close to expiry at a low price. On the other hand, associations and foundations that purchase these products at a low price may then market them at maximum 25 % + VAT of the purchase/production price. Since the Law sets a maximum value for the latter, there is a risk that the price may raise competition issues by becoming fixed, thus affecting operators on a free market.

Obviously the Law will have a major impact on all players in the agri-food sector. A deeper analysis of the impacts will be required before the issues (or at least some of them) can be resolved.

Oana Constantinescu and Toma Barbărasă (respectively partner and attorney at law at Schoenherr si Asociatii SCA)