The CMA found that between March and July 2015, "Social Chain used its own social media accounts, and arranged for widely followed social media personalities, to promote films, games and takeaway and dating apps, without readers being informed that the content was paid-for advertising", according to a case report published today.
The Manchester agency, which was founded in November 2014 and claims to be Europe's largest influencer marketing agency, has clients including Just Eat, Spotify, Microsoft, Comedy Central and 20th Century Fox.
The report says that on 19 occasions in that period, tweets or other social posts were published in which it "may have been difficult for readers to distinguish from other posts, conversations and jokes they appeared alongside". The posts were written in the same style as the celebrity's own voice, and did not contain any indication that they were promoting a commercial partner of the personality.
Social Chain and its directors have now signed agreements with the CMA that it will not "design, draft, prepare or cause to be published editorial content which promotes a product but does not make clear that a trader has paid for the promotion", in line with the Consumer Protection from Unfair Trading Regulations 2008.
The CMA said it could not provide details of the offending tweets, or of 15 businesses and 43 "social media personalities" that have worked with Social Chain, to which it has written with warnings that advertising must be clearly labelled.
The CMA itself has increasingly focused on influencer marketing and native advertising in recent months, and the PRCA has warned the PR industry to be proactive about understanding the evolving guidelines and best practice in the area. A study earlier this year from influencer tool Takumi found some brands were encouraging influencers to flout the rules.
In a separate investigation also made public today, the CMA found knitwear retailer Wool Overs had "cherry-picked" more favourable customer reviews for publication on its website. Wool Over staff were instructed to approve only a selection of reviews and none below four stars.
Nisha Arora, senior director for consumer enforcement at the CMA, said: "Social media personalities can have an important influence on people’s views, especially young people. It is therefore crucial that when people decide what to buy, they should not be misled by adverts on social media that read like independent opinions.
"Businesses, marketing companies and authors of online content all need to play their role in ensuring that advertising is clearly labelled as such."
Social Chain told PRWeek in a statement: "Social Chain has been engaging with the CMA over the past 11 months to ensure we fully comply with the ever-changing advertising regulations.
"When the CMA first contacted Social Chain in March 2015, Social Chain was a start-up team of six. Over the past year, Social Chain has expanded into four markets globally with a team of 80-plus. Key hires include a team of directors from other leading marketing and social agencies and a compliance officer, guaranteeing all our work complies with advertising regulations.
"Social Chain is looking forward to continue educating our clients on advertisings rules and regs, and paving the way in social media marketing."
This article incorporates copy from PRWeek sister title Campaign