Compliance is 2022’s red tape
Sigh. Compliance. If 2020 was the year we drew up the laws, 2021 was the year that we implemented them, then 2022 might be the year that they are upheld. We previously talked about the US FTC rules for truth in advertising, as well as the privacy compliance rules in CCPA and GDPR. In addition to these rules, the IRS is also peaking in its head to make sure that influencers pay their fair share.
Influencer marketing exploded from 2019 to 2021 and governments are now looking for where the reallocated funds may have gone. Recently Chinese mega influencer Viya was fined $210 million for failing to pay back taxes. Her 2020 tax return which includes her 2019 earnings had a $110 million tax bill which she apparently did not pay.
Because of this, the government fined her a whopping $210 million, almost double what she owed, due to penalties, late fees, and interest. Her net worth, calculated to be $1.25 billion, means that an extra $100 million is close to 9% of her total net worth! Yet she’s just getting started, at 36, she once sold $1.3 billion worth of products in a one night livestream event.
What can we learn from this
While the situation in China is markedly different from the rest of the world, it still is smart to prepay your taxes to avoid the situation that Viya was put in. As the same article mentions, big name celebrities get no free pass from Beijing with 2 livestreamers being fined $14 million and 88 others given warnings.
Stateside, the IRS is already cracking down on tax evasion and while some cases will be brought to the public eye, our guess is that it will be nowhere near as large as the Viya case. Despite that influencers, pay your taxes, it’s much better to be in the clear than to have that looming overhead.
Keep in mind that you might owe taxes in other localities and states depending on where you earned the initial monies. (We aren’t tax experts so please consult your financial advisor or tax professional.)
Truth in advertising
The US FTC has tried to keep influencer marketing above board, and the UK’s Competition and Markets Authority (CMA) is not far behind doing what it can to ensure disclosures are happening. Sixteen UK celebrities including Rita Ora and Ellie Goulding have committed to fully disclosing the relationship with advertisers on their future posts. Despite the press, US celebrities and personalities including Anne hathaway, Stephen Curry, Blake lively, Cardi B, and Kim kardashian, have all been flagged by the US FTC for failure to disclose
Truth in advertising is more and more important as up to 90% of people turn to online reviews for purchase guidance, while the World Economic Forum thinks that close to 40% of the reviews could be fake. Recently the FTC sent reminders to 700 businesses that each undisclosed review could cost them up to $44,000 in fines.
Despite this almost 93% of top influencers on Instagram have been shown to be breaking FTC rules. From a business perspective the fines might be worth it to businesses with Legacy Learning Systems, for example, bringing in $5 million with fake testimonials while paying a $250,000 fine.
Many we’ve spoken to also feel like it’s time that various parts of these long complex pieces of privacy and data legislation written in California (CCPA) and in Brussels (GDPR) will soon come to shine.
Gay dating app Grindr was hit with a $7 million fine by Norway’s data protection authority for letting advertisers access a user’s sexcual orientation, a direct violation of GDPR articles. Clearview AI has also been in violation of GDPR, according to French authorities, although collecting fines might be more challenging given Clearview AI does not have a French branch.
Compliance to the CCPA has been much better with California issuing non compliance notifications to a variety of businesses ranging from car dealerships to pet adoption agencies. Thus far the agency has reported that 75% have complied and the remainder are still within cure windows (time for the company to get compliant).
2022 seems to be the year that governments are keen to enforce these new laws from taxation to truth in advertising to privacy. Have you been a party to any of these issues? Drop us a line and let us know!