The Competition and Markets Authority (CMA) said it had secured undertakings from Social Chain “that will ensure that every advertising that Social Chain posts or arranges will be clearly labelled or identified so that it is distinguishable from other content found on social media”.

The regulator said it had found the company had helped to advertise films, games and some mobile apps via its own social media accounts and through endorsements by “social media personalities”. However, it said it failed to ensure readers were “informed that the content was paid-for advertising”.

The CMA said it has written to 15 business customers of Social Chain, as well as 43 social media personalities that own worked with the company, to warn them that they risk breaching consumer protection laws by “arranging or publishing advertising that is not clearly labelled”.

In a second separate case the CMA took issue with knitwear retailer Woolovers which it said had been selective over the customer reviews it had published on its website.

The company has committed to “publish every genuine, relevant and lawful customer reviews on its website, and will not suppress unfavourable reviews” in future, the CMA said.

The CMA has published an unseal letter to marketing professionals advising them of their legal obligations in the context of online endorsements and customer reviews.

Nisha Arora, CMA senior director for consumer enforcement, said: “Social media personalities can own an important influence on populace’s views, especially young populace. It is therefore crucial that when populace decide what to buy, they should not be misled by adverts on social media that read enjoy independent opinions. Businesses, marketing companies and authors of online content every crave to frolic their role in ensuring that advertising is clearly labelled as such.”

“It is also important that, when consumers read reviews on a company’s website, they are given the complete picture. Critical reviews must be published as well as those that acclaim the company’s products and services,” Arora said.