As of 1 July 2022, the Therapeutic Goods Advertising Code (the “Advertising Code”) becomes mandatory. For businesses currently taking advantage of the widespread reach of influencers in their advertising campaigns, this is a significant change to the status quo and may have unintended consequences as to the regulatory classification of the products they are promoting.
What’s changed exactly?
The largest change in the Advertising Code is that the rules that apply to manufacturers, brand owners and sellers of therapeutic goods will now also expressly apply to “marketing”. In other words, influencers will now be just as regulated as pharmaceutical companies in their promotion of therapeutic goods.
This would not be a major change were it not for the prohibition against “testimonials” by any person engaged in the “marketing” of the goods. Given that the primary marketing tactic used by influencers is that of a testimonial (“I took this and I feel great!”), this will greatly inhibit the value influencers can bring to the promotion of therapeutic goods.
It is worth noting that an influencer will only be subject to the Advertising Code when they receive “valuable consideration” for their promotion. However, “valuable consideration” is a broad term including (most obviously) money, but also non-monetary items such as services, gifts (i.e. free products) and opportunities. So unless their testimonial is purely for free and the influencer has not even been provided the product to try, then their testimonial will now be prohibited.
Importantly, the ban applies regardless of whether any payment is disclosed or whether the testimonial is genuine. The current industry trend of hash tagging “ad” or “sponsored” will no longer get you over the line.
Brand ambassadors are safe… ish
It is worth noting that “endorsements” of therapeutic goods by influencers (so long as the influencer in question is not a health practitioner nor represent themselves as qualified to diagnose, treat or prevent a disease, ailment, defect or injury) are still permitted so long as the endorsement does not amount to a testimonial.
This means that influencers can be brand ambassadors for a therapeutic good, provided their endorsement doesn’t refer to the influencer’s personal experience in using the good. Again, this will greatly limit the majority of influencers’ market “influence”.
Even when an endorsement is permitted by the Advertising Code, other aspects of the Code will now apply to the promotion. For example, mandatory statements around directions for use, context of any therapeutic claims, and statements around traditional use will apply… which are hardly conducive to off-the-cuff, natural promotions favoured by social media.
Is this limited to therapeutic goods?
Whether this impacts your business depends on whether the products being promoted are “therapeutic goods”… to an extent. “Therapeutic goods” are generally defined as goods that can treat an illness or those goods that are represented as being capable of, or are likely to be taken, for therapeutic use. Commonly they fall into three main categories: medicines; biologicals and medical devices. Of particular importance to products commonly promoted by influencers is that the definition of “therapeutic good” can extend to complementary medicines, dietary supplements and traditional remedies.
And while – from a legal perspective – the Advertising Code only applies to the promotion of therapeutic goods, this does not mean that it will not impact on influencers’ promotion of other health-related goods, such as food and cosmetics.
First of all, the Advertising Code is not going to stop suppliers of therapeutic goods from wanting to make use of the marketing power of social media influencers. It may push such suppliers to instead promote products similar to therapeutic goods but are in fact not therapeutic goods (from a regulatory perspective, at least). For example, garlic powder when encapsulated is expressly classified as a therapeutic good. But when simply in powdered form, garlic powder is clearly a spice and as such ought to be regulated as a food.
Secondly, there is a lot of industry confusion around the regulatory overlap between food, cosmetics and therapeutic goods. There are many products on the market that currently classify themselves as not being a therapeutic good and so could conceivably continue to use influencers to promote their products (subject to compliance with their own regulations, such as the Australian Consumer Law, the Australia New Zealand Food Standards Code and Consumer Goods (Cosmetics) Information Standard).
However, the very definition of a “therapeutic good” extends to products that are represented as being for a “therapeutic use”. This means that just the marketing of a product in a certain way could result in a product becoming unexpectedly regulated as a “therapeutic good”. For example, encapsulated products with nutrient-rich food ingredients (like freeze-dried meat or vegetable powders) may classify and market themselves as “food supplements” and not as therapeutic goods. However, should an influencer marketing campaign portray these products as being for a “therapeutic use”, these kind of products could find themselves suddenly scrutinised by the Therapeutic Goods Administration.
What does this mean for your business?
Advertisers of therapeutic goods who intend to use influencers or testimonials in their campaigns should carefully consider their proposed strategy. In fact, you should probably steer clear of this altogether. Even if you’ve utilised influencers in the past to advertise, you must take down any paid or incentivised testimonials that are currently live and accessible by 1 July 2002, notwithstanding they were uploaded prior to that date. In other words, don’t wait until the new Code comes into effect; you’d be wise to make the most of the transitional period and ensure that your marketing campaigns are compliant.
For suppliers of foods and cosmetics, the Advertising Code may be a boon in some ways (in that it ought not to apply to such products). However, now that the Advertising Code has become mandatory, it should prompt strict guidelines in how influencers promote food and cosmetic products, particularly any health angles. Otherwise, an influencer’s promotion of a product could result in the product being legally re-classified from permitted food or cosmetic to a non-compliant therapeutic good.
If you would like any assistance in reviewing your partnerships with influencers or ensuring your advertisements are compliant with the new Advertising Code, please do not hesitate to contact KHQ Lawyers by emailing food@khq.com.au.
