The Italian Competition Authority Again Addresses Hidden Online Advertising

On October 13, 2020, the Italian Competition Authority (hereinafter the “AGCM”) issued three decisions regarding hidden advertising in connection with music videoclips posted online. The AGCM closed these proceedings by accepting the undertakings proposed by the professionals involved to make the promotional nature of product placement in the challenged videoclips, as well as in any future videoclips, clear to the public. Moreover, given the high profile of the professionals involved in the proceedings (e.g., well-known musical artists as creators and/or main characters of the videoclips, as well as some famous companies operating in the fields of audiovisual content production and electronics), the AGCM pointed out that these undertakings may serve as a good example and thereby encourage other similar operators to do the same.

In addition to the “moral suasion” activity carried out by the AGCM some years ago, which involved some main influencers and brands, for the third time in the last couple of years the AGCM focused its attention on the matter of the recognizability of advertising in the digital field, continuing a trend that started with the “Alitalia-Aeffe” (2019) and “Barilla” (2020) cases (read more about those here). However, this is the first case of hidden advertising in connection to online music videoclips dealt with by the AGCM.

1. On the commercial practice

The three AGCM decisions were focused on product placement in videoclips uploaded online to dedicated platforms, such as YouTube and VEVO, without proper disclosure regarding the commercial nature of the relevant content. Several different parties were involved. Two of these decisions involved musical artist Fabio Piccolrovazzi (known to the public as Fabio Rovazzi) and the LG and WIND3 brands, while the last one involved musical artists Alessandra Amoroso and the group Boomdabash and the Birra Peroni brand. While admittedly there are some differences between the three cases, the commercial practices employed are very similar, as are the grounds for the AGCM’s decisions, so they can effectively be discussed together as a group.

All proceedings were started by request of the consumer association “Unione Nazionale Consumatori,” which keeps a close watch on the issue of transparency in digital advertising. Indeed, the previous cases regarding influencer advertising were also undertaken by the AGCM at the request of this association.

As in the abovementioned Alitalia-Aeffe and Barilla cases, the challenged conduct consisted of infringement of the general provisions on unfair commercial practices described in the Consumers’ Code (Legislative Decree No. 206/2005), and specifically the provision considering per se unfair the practice of “using editorial content in the media to promote a product, where the costs of such promotion have been borne by the professional without this being apparent from the content or images or sounds clearly identifiable to the consumer” (see Section 20, Paragraph 2; Section 22, Paragraph 2; and Section 23, Paragraph 1, Letter m) of the Consumers’ Code).

What makes this new case different from those earlier cases is that it represents the first case involving hidden advertising in online music videoclips, meaning that this is the first time the AGCM has focused on the display of branded products in music videoclips for (undisclosed) advertising purposes. Specifically, the AGCM found that the product placement was the result of contracts stipulated between the parties involved, according to which a price was paid by the brand for advertisement of its product in the videoclip. Although disclaimers regarding the products being included in the videoclips for advertising purpose were included, a consumer had to click on the “Show more” link in the videoclip’s “description” section to see the disclaimer, along with some other information. The AGCM considered that mechanism inadequate. It reasoned that consumers were not immediately informed about the promotional purpose of the product placement when viewing the video, but instead needed to click on a separate link (Show more) to become aware of it, and that consumers could even choose not to click on the link.

During the proceedings, it was also pointed out that in order for the creators to integrate a disclaimer into a videoclip – to clarify product placement – they would need to remove the videoclip from the platform and re-upload the new version with the disclaimer integrated. In this scenario, all views recorded for the videoclip in its previous incarnation would be lost, causing substantial economic damage to the professionals involved.

1. On the undertakings proposed by the professionals and accepted by the AGCM

All professionals involved in the proceedings presented undertakings to eliminate the unlawful consequences of the commercial practices in the cases at hand and to avoid similar issues and risks of hidden advertising in the future.

The undertakings presented by the musical artists can be summarized as follows:

• For challenged videoclip published on YouTube/VEVO: (i) to display a pop-up disclaimer on the videoclip by means of specific features provided by the hosting platform – the disclaimer would appear at the beginning of the video and would stay on for a few seconds (this would avoid re-uploading the video, which would have the abovementioned negative economic consequences), and (ii) in one of the cases only, to show commercial messages clearly in the first part of the “description” section under the videoclip, to make sure that the user is aware of the nature of that message.
• For challenged videoclip requested by broadcasters: to underline the presence of product placement and the involvement of brands in the end titles of the videoclip.
• For new future videoclips: to insert a proper disclaimer about the presence of product placement at the beginning of the video or in the end titles.
• For future commercial communications on social media: to disclose their commercial nature properly by using, for instance, hashtags like #advertising, #sponsored, #adv, in line with the best practices identified by the AGCM in the context of influencer marketing.

As far as the companies involved (both brands and agencies) are concerned, the main undertakings can be summarized as follows:

• to send a formal letter to company headquarters as a reminder to respect the current advertising regulatory framework and to avoid cases of hidden advertising;
• to adopt a code of conduct regarding influencer marketing and product placement; for music videos specifically, the use of an advertising pop-up or verbal advertising during the video to ensure that the commercial nature of the message is clear to the user;
• to adopt guidelines to better inform the company’s top management of the current regulatory framework regarding unfair commercial practices and surreptitious advertising;
• to insert clauses and contractual penalties in contracts with influencers/artists to further strengthen the obligations contained in the code of conduct;
• to inform video producers of their obligation to show the advertising nature of product placement clearly, for example in the end titles of the videos, in order to offer greater safeguards for consumers.

The AGCM took a favorable view of these undertakings and accepted them, so the AGCM closed the three proceedings without issuing sanctions. Indeed, the undertakings were considered “suitable to make transparent, where applicable, the purpose – even the promotional one – of their artistic creations and suitable to generate a wide-ranging useful effect. Indeed, these undertakings are not limited to the videoclips concerned, but are extended, on a permanent basis, to the overall conduct of each professional, even for the future. Moreover, given the overall relevance for the industry of the parties involved in the proceedings, these measures could generate virtuous emulative effects among other similar operators.”

1. Some considerations on the cases at stake

In each of the three decisions issued, the AGCM noted that the practice of hidden advertising can be subtle and insidious, as the user/consumer is not made aware of the advertising nature of the relevant content – as a result, the negative influence of such non-transparent content can be enormous, especially when it comes to young users.

That said, as in the past in connection with the Alitalia-Aeffe and the Barilla cases, the AGCM declined to charge the professionals involved formally with infringement or issue sanctions and instead accepted the undertakings proposed by the professionals. This was done at least in part in light of the possible positive influence – referenced above – that such undertakings may have on other operators.

An overall analysis of all the decisions issued so far by both the AGCM and by the Jury of the Italian Advertising Self-Regulatory Institute (Istituto dell’Autodisciplina Pubblicitaria, “IAP”) in connection with influencer marketing and hidden online advertising seems to show that the AGCM and the IAP are – once again – on the same page. Indeed, the principles underlying AGCM decisions are very similar to those provided in the “Digital Chart Regulation” issued by the IAP to try to counter hidden digital advertising. Specifically, Article 3 of the Digital Chart Regulation refers to videos and states that the promotional nature of the content must be immediately perceivable by the user (e.g., through the use of phrases like “in collaboration with the brand”), through the use of pop-ups or disclaimers at the beginning and at the end of video, as well as in the “description” section of the video itself. Moreover, as the IAP has stressed in the past (see IAP decision No. 45/2018, Comitato di Controllo vs. Peugeot Automobili Italia S.p.a. and Newtopia S.r.l.), the AGCM is reiterating – both in the Barilla case and in the three cases discussed here – the importance of contractual clauses aimed at preventing non-transparent advertising, potentially by means of including specific penalties in the contracts for the parties involved (basically brands, influencers/artists, and agencies).

The full text of the three AGCM decisions is available here, here, and here.