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Social media influencers: Big business or grassroots enterprise?

In the age of technology, it can be almost completely unavoidable to have a social media presence in some form or another. And why wouldn’t you? The benefits are immeasurable, not least of which include having a veritable treasure trove of information constantly and readily available.

As a result, there are tens of thousands of Canadians sharing their daily lives with the internet. It’s become hugely profitable and big business; the ‘lucky’ few who become household names can net millions of dollars (US!) within a single year.

It’s all well and good to have a brand, but what is it without a business? That’s what some influencers are quickly realizing, incorporating themselves and hiring managers to properly serve their clientele while safeguarding what makes them different enough to warrant the attention fuelling their career.

So, how does the law view these ‘business owners?’

The answer is a fairly simple one; the Canada Revenue Agency considers the money one receives from ‘influencing’ as taxable business income (BI), putting influencers squarely in the ‘business’ bracket. As such, influencers, if working alone at their nascent stage, are considered sole proprietors, and are subjected to both federal and provincial laws regulating business practices and the creation of corporations. If and when they grow in repute, influencers can choose to incorporate. In doing so, they separate their liability from their company’s, which becomes its own legal entity with its own assets and liabilities. Business-wise, this is an extremely beneficial move. As a sole proprietor, an influencer would be solely responsible for repairing the damage they caused, leaving their personal assets, even those entirely separate from the business, up for grabs to settle a debt. Because of this, most influencers will incorporate at some point in the course of their business career. Not only does it safeguard their personal effects, but in the event that they must pay damages as a result of an unfavorable lawsuit, the blame, and thus the financial burden can be spread out amongst multiple members of the corporation, instead of solely on the influencer as an individual.

Enormous companies, such as Nike, Adidas, and Pepsi have jumped at the chance to work directly with people whose fanbase is ever-growing, and have made considerably more profit in the past few years because of it. It’s only natural to incorporate one’s brand when dealing directly with the business giants of Europe and the Americas.

“Influencing” has become a colloquial expression throughout the world, and with it comes a fair amount of responsibility. Incorporating may be a smart decision to make for the most part on a completely business-centred basis, but can lead to devastating consequences. Within the throngs of fans are those ready to hold influencers accountable for their errors in judgment and injurious behaviour.

The mid-2010s opened the floodgates for fraudulent marketing practices when Kim Kardashian promoted her favourite waist trainer on Instagram, declaring herself “obsessed” with the product. Her sisters followed suit, and the corset became the very definition of a successful Instagram ad.

Other celebrities jumped in headfirst soon after with weight-loss gummies and teas galore, all the while perpetuating a harmful lie: none of these products worked – not even a little bit. The US Federal Trade Commission, the Canadian Competition Bureau, and Advertising Standards Canada quickly involved themselves in the wake of hundreds of complaints, and set some rules in motion to ensure that any posts on social media that advertised a product or service was to be clearly identified as doing so, usually with the simple addition of #ad. This seemingly small change rippled through the influencer community and made way for a modicum of accountability.

Here we are, however, half a decade later and still heavily saturated in sponsored content,  courtesy of our favourite socialites who have the undying support of the easily impressionable. The rising popularity of certain people has left them reckless when accepting sponsorship contracts, accepting campaigns based on salary and not on the brand they built initially. Incorporation can come with an important decrease in personal agency for the influencer, leading to the promotion of increasingly insidious products. There is more responsibility on behalf of the influencers who have remained a one-person business, naturally because they are closer to their fans on a social level.

So, how should these entities be treated in the eyes of the law?

The Competition Act has very clearly prohibited misleading advertising, and extended it to apply to social media influencers as well. They are just as liable for the consequences of their deceit as a large corporation would be albeit on a smaller scale.

In light of the above, should influencers be considered small, farm-to-table artisans, or sole proprietors with big ambitions?

The law is clear: social media influencers are big business, and should be treated accordingly.

By Maria Gibbons Harrigan

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