Ezgi Baklacı Gülkokar, LL.M. and Merve Altınay - February 8, 2019
In today’s digital world, brands, as well as individuals, use social media and internet effectively and actively. Users can follow up any content, news, article, and photo online and can share their comments through social media. In addition, more consumers now prefer online shopping and are interested in user comments. In response to these consumer behaviour trends, companies adopt new marketing strategies, by focusing on time spent online by consumers. While the traditional media loses its popularity and receive less investment, the advertisement on digital platforms are now seen as a rising star. In 2017, the total global amount of media investment rose by 4%, and 37% of this investment was made to the advertisement in digital platforms, and Turkey is not an exception to the changing trends: Indeed, in 2017, the share of the investments made on advertisement in digital platforms is 25.9% of the total media investment, and such share has been raised 19.7% compared to 2016 data1. The expansion of digital platforms is expected to continue in this manner in the upcoming years.
The increase of media investment in digital platforms is inevitable and comes as no surprise, as the media impact value of the influencers in social media is taken into account. Take, for example, Chiara Ferragni, who became famous with her blog “The Blonde Salad” and currently has 15.9 million followers on Instagram. In her wedding, Ferragni generated more than $5.2 million in audience-driven media impact value (“MIV”) and 5.6 million globally engagement for Dior by wearing two of the brand’s gowns and posting pictures. Her Prada rehearsal dinner dress racked up $1.8 million in MIV and 1.5 million interactions globally for Prada, and Lancôme, which she wore on her wedding day, benefited from a total of $700,000 in MIV and 1.3 million in engagement2. These figures prove that advertisement in digital platforms, especially in social media, has a great impact on the economic behaviour of the consumers. However, in some cases, advertisements in social media can be disguised, meaning that the consumer may not easily perceive the content as an advertisement.
Such situations raise the question of whether the advertising activities on digital platforms, especially in social media, should be strictly regulated by the consumer protection legislation. The risk of “misperception” applies to Turkey, as well. In fact, the companies in Turkey engage in all types of agreements with social media influencers as part of their advertising strategy. In accordance with these agreements, companies often send samples and products to the influencers. By using these products, influencers create the impression on consumers that they chose the product personally, used it voluntarily, and are highly satisfied with it. The consumer who has no information about the background relationship between the company and the influencer becomes convinced that the product is a “must-have.”
Currently, the advertisement activities stated above are not specifically regulated in Turkey. Under the Turkish Law, an advertisement is defined as follows:
– written, oral, aural or similar marketing communication announcements made by the advertisers
– in any media related to commerce, business, handicraft or any occupation,
– in order to
– promote the sale or renting of any goods or services,
– inform the target consumers, and/or
– persuade the target consumers.
in the Consumer Protection Law no. 6502 (“CPL”). However, as described above, the consumer cannot estimate whether the advertisement is legal or even real, based upon the content.
Disguised advertising aims to resemble the non-commercial content and appear in the same places on the platform with them. There are several types of disguised advertisement, such as native advertising or influencer marketing.
Native advertising is a marketing practice that
– aims to blend in with non-commercial content to the highest extent possible,
– developed by the advertisers themselves,
– and clearly mimic the format of user-generated content and occupy the same space on the online social marketing.3
Influencer marketing, on the other hand, relies on promoting and selling products or services through influencers, persons who have a greater than average reach and impact through word of mouth in a relevant marketplace. The practice involves the creation and promotion of content that features specific brands or products, with the aim of tapping into the positive impact influencers are likely to have on consumer perceptions of what is being promoted4.
In all these types of disguised advertising methods, the consumer needs to be aware of the fact that the content is sponsored, which, unfortunately, is not the situation in Turkey and many other countries for most of the time.
In addition to the laws and regulations, the Federal Trade Commission (“Commission”) in United States of America has already taken an action against such misleading advertisement tactics, and further, prepared a detailed guideline5 on general principles that the Commission will use in evaluating endorsements and testimonials, together with examples illustrating the application of those principles. The highlights of the guideline include the requirements of full honesty of the endorser, and liability of the endorsers for false or unsubstantiated statements made through endorsements, or for failing to fully disclose material connections between themselves and their endorsers.
Actually, the Turkish CPL and the Regulation on Commercial Advertisement and Unfair Trade Practices (“the Regulation”) makes the consumers’ awareness compulsory. Indeed, under the relevant provisions of the CPL and the Regulation, it is stated that regardless of the form and media choice, an advertisement should be able to be easily identified while the covert advertising is explicitly forbidden.
As a matter of fact, the Advertisement Board has granted many decisions, whereby covert advertisement has been spotted, and imposed an administrative fine in addition to the cease of such advertisement. For example; an online article underlying the importance of expertise in medicine has been decided to include covert advertisement due a statement about a dental hospital, saying that this hospital continues to serve the individuals even after the evening meal in Ramadan with its expert staff6. In another decision, the Advertisement Board concluded that a columnist mentioning the discount on an online shopping website, and stating he will spend entire night shopping in his newspaper column, is covert advertisement7.
The first issue attracted the governmental authorities’ attention was influencers’ economic activities and advertising revenues. Indeed, first in March 2018, the Revenue Administration has published an official opinion on taxation of the payments to the persons for the advertisement posts on social media platforms. The notification clearly stated that:
– all income generated through all types of trade and industrial activities are trade income in the sense of tax law,
– all real persons providing advertisement services through his/her social media accounts and earning an income should be payer of income tax,
– payments made by companies to these persons will be taken into account as outgoings during the calculation of the profit of the company.
In April 2018, former Minister of Treasury and Finance has confirmed this issue by stating that Turkish tax legislation is clear, and regardless of the medium (internet or not), all persons, including social media influencers, generating an income from trade should pay the corresponding taxes. However, the same awareness is not observed in the consumer protection legislation, and no specific guidelines or opinions are yet published with respect to the content of the advertorial posts on social media.
Consequently, advertisement in digital media, especially disguised advertisement, has an enormous impact on the consumers’ economic decisions. Therefore, if an area with such great effect is not regulated and guided clearly, the consumers may be misled, and the fair competition between the companies in the Turkish market may get damaged. Even though the legal frame is available for preventing such hostile advertisement techniques and make it compulsory to disclose all relationship between the advertiser and the endorser, Turkey still needs a guideline and stricter inspections.
6. Decision of the Advertisement Board dated 15.07.2014, numbered 2014/627 given during the assembly numbered 226
7. Decision of the Advertisement Board dated 09.01.2018, numbered 2017/4108 given during the assembly numbered 268