On the Frontlines: A New Era of Social Media Risk
Blogs Deepak Byrappa, CFE Jul 20, 2022
Recently, a friend purchased a car that was new on the market. As any digitally savvy customer would do, he researched the car on various social video platforms and found unbelievably exceptional reviews. However, when he took delivery of his car, the descriptions did not align with the vehicle. Basic elements such as mileage, plastic used in interiors, gauge functionalities, ease of use, cost benefits, etc. were not accurately represented by the social media influencers who had swayed his opinion.
Social media platforms such as Twitter, Facebook, Instagram, and YouTube are widely used to market a company's products, services, or causes. Small and large organizations alike commonly leverage "influencers" on these platforms — people who have the ability to influence followers to buy a particular brand of product or service or take up a cause.
In the case of my friend, could these influencers have been paid for their video reviews by the car manufacturer? Could this be a case of false advertising? Is anyone auditing social media influencers or the use of them? Should they be audited?
Situations like these have made me wonder if there needs to be a change in risk assessment coverage to include modern marketing techniques and the digital ecosystem. Not every organization includes aspects of today's digital environment in risk assessments for fraud and corruption or even operational and legal risks. Social media marketing, digital influencers, surveys by third-party agencies, and online reviews of products and services are a few areas that need to be considered in risk assessment — and then audited.
In the case of social media influencers, trade laws relating to this topic are gray and awareness is low, but in recent times, courts have held influencers or the organizations working with them liable for misleading advertising or falsifying the facts.
Using social media platforms for private gain is generally allowed, but organizations need to do it in compliance with laws and regulations. For instance, in 2021, a German court ruled that social media influencers who are paid by companies to promote products must clearly label such posts as advertisements. Similarly, in the U.S., if an influencer is getting paid for promoting a product or service, then they should be ensuring compliance with guidelines set by the U.S. Federal Trade Commission. In 2017, with the growth in popularity of Instagram, several famous influencers and their corporate sponsors received letters from the FTC chastising them for not clearly indicating a business relationship between the influencer and the brand. Recently, the FTC promised to crack down on fake reviews and other misleading marketing.
While individuals think it is simple to upload a video or post a tweet, they could be implicated and fined heavily or their account could be disabled, if they are misleading. An influencer should never promote something that they don't support, lie about a product to generate sales for the brand, or talk about their experience with a brand or a product they haven't tried or used as claimed. Influencers are obligated to disclose if they are paid for the endorsement. The companies using them also could be held responsible for their actions.
With the growing impact of influencers on social media platforms — as well as rapid changes to laws and regulations — there needs to be more stringent monitoring and governing mechanisms to protect consumers from fraudulent endorsements. Likewise, organizations working with influencers, along with their internal audit functions, need to ensure all parties are acting ethically.