The failed Fyre luxury music festival - chronicled in new documentaries on Netflix and Hulu - has been followed by a crackdown on social media influencers by authorities in the US and the UK.

And a leading regulator lawyer here says Instagram and Twitter stars in New Zealand also need to watch their step - and that fines of up to $200,000 could be in the offing.

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The received wisdom has been that the worst a Kiwi influencer faces is a strongly worded ticking-off from the Advertising Standards Authority if they fail to disclose a post is paid for with cash or freebie product.

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But Matthews Law principal Andy Matthews says: "This could be misleading by omission under the Fair Trading Act, which has significant fines."

The act allows for penalties of up to $200,000 per offence for an individual and $600,000 for companies.

Matthews' colleague Elsie Stone notes that the Commerce Commission would first have to decide if a social media influencer was "in trade" - that is, in the business of buying and selling services. And the watchdog tells the Herald it has so far not assessed any complaints about influencers.

NZ could follow international trend

An influencer could potentially argue they are only promoting a product and not "in trade" and thus covered by the Fair Trading Act, Stone says. But influencers have already lost that argument in the US and UK.

And, tellingly, Stone notes the commission could follow suit. "This is an area of law where there is considerable consistency among international regulators. This is definitely an international trend."

The commission will be talking to its sister agencies overseas about social media influencers, she says. "This will definitely be on their radar."

A spokeswoman for the commission says the NZ regulator belongs to the International Consumer Protection and Enforcement Network, which has issued guidelines for online reviews and social media influencers.

"Online retail is one of the key priority areas for the commission this financial year," she said.

"While there are no special rules governing social media influencers under the Fair Trading Act, it is a breach of the act to mislead or deceive consumers.

"In a general sense this means if what appeared to be neutral advice actually turned out to be paid advertising, it could be a potential breach of the FTA, which carries with it a range of enforcement options, including financial penalties."

Rita Ora was among 16 social media influencers targetted by the UK's Competition and Markets Authority last week over sponsored-post disclosure. Photo / Getty.
Rita Ora was among 16 social media influencers targetted by the UK's Competition and Markets Authority last week over sponsored-post disclosure. Photo / Getty.

Fyre starter

Around 400 social media influencers, from supermodels to musicians to actors to the famous for being famous, posted about Fyre in the build-up to the disastrous luxury music festival on an island in the Bahamas. The shambolic event was cancelled before a song was performed after hundreds of attendees had already arrived at the venue.

None revealed their posts had been paid for.

Both of the recent Fyre documentaries tread relatively lightly around this topic, for different reasons (the Netflix effort was co-produced with the New York social media agency originally hired to spruik the music festival, while Hulu has acknowledged it paid for its interview with principle organiser Billy McFarland).

But in its aftermath the US Federal Trade Commission sent warning letters to 90 social media influencers, telling them they must make it clear if a tweet is paid for with an #advertisement or #sponsored hashtag - and not something waffly like #partner or "my friends at... "

Kendall Jenner (right), pictured watching Steven Adams' Oklahoma City Thunder on January 19, was paid US$250,000 for a single Instagram post promoting the Fyre music festival. Photo / Getty.
Kendall Jenner (right), pictured watching Steven Adams' Oklahoma City Thunder on January 19, was paid US$250,000 for a single Instagram post promoting the Fyre music festival. Photo / Getty.

And last week, the UK's Competition and Markets Authority (CMA - the equivalent to our Commerce Commission) said it had secured formal commitments from 16 celebrities to ensure they will now say clearly if they have been paid or received any gifts or loans of products which they endorse. If influencers break the agreement, they could go before the courts, the CMA said.

Unlike the FTC, the CMA has named some of the social media influencers it has targeted, including include singers Ellie Goulding and Rita Ora, models Alexa Chung and Rosie Huntington-Whiteley, former Coronation Street and Our Girl actress Michelle Keegan and TV reality stars Millie Mackintosh and Megan McKenna.

Slap with a wet bus ticket?

Here, the Advertising Standards Authority - and industry self-regulatory body - issued guidelines that covered social media influencers last February.

The ASA says an influencer must make it clear if a post is sponsored, but does not detail how - a contrast to the US and UK regulator's guidelines.

In the UK, for example, the CMA says a post must be labelled #Ad or #Advert or equivalent, and that the hashtag not be buried in a laundry list of others. It also says vague terms like #sp (short for "sponsor") and #collab don't cut it.

ASA chief executive Hilary Souter says her agency has yet to field a complaint about a social media influencer - and that discussion of the first complaint will help resolve what constitutes full and transparent disclosure.

The ASA boss rejects the notion that many Instagram users are in a younger and simply don't know her organisation exists. She says the ASA fields complaints from a wide range of demographics.

She also rejects that a sanction from the ASA is a slap on the wrist with a wet bus ticket. She acknowledges that an influencer would only receive a warning letter, and that they would not have to post an apology (the ASA meets every two weeks, meaning any offending Instagram or other social media post would be ash by the time of a decision, rendering a deletion of the offending post meaningless).

But Souter adds that advertising, marketing and social media agencies would be aware of the warning. They would exert pressure on the offending social media influencer to change their ways. If they didn't they could well lose bookings.