Italian social media star faces sticky questions over charity cake fraud

A pioneer in the art of social media influencing, Chiara Ferragni has built a global brand and a multimillion-dollar business on her marketing savvy and eye for image.

But this week the Italian entrepreneur found herself in an unwelcome glare of publicity when a Milan court announced she was under investigation for “aggravated fraud” related to sales of a Christmas cake that were misleadingly linked to fundraising for a children’s hospital.

The country’s competition watchdog had already fined her companies €1mn in December for “unfair commercial practice”, ruling buyers of a Ferragni-branded cake sold for twice the regular price in 2022 had been misled into believing the proceeds would go to the Regina Margherita hospital in Turin.

The cake company, Balocco, had made a €50,000 donation to the hospital, the regulator found, but this was before the branded cake was sold and there was no link to it. Balocco also received a fine.

A separate branded Easter egg sales campaign linked to another charity, and from which Ferragni earned €1.3mn over two years, is also being looked at by Italian prosecutors.

Over the past decade, influencers like Ferragni have changed the face of marketing, with brands increasingly turning to them to reach a bigger and younger audience.

Rupert Younger, director of Oxford university’s Centre for Corporate Reputation said the Christmas cake incident highlighted the potential pitfalls of brand partnerships with social media stars. “Reputational risk is everything,” he added.

Ferragni has described the episode as a communication error and promised to keep commercial and charity campaigns separate. In a statement this week, she said she had “acted in good faith” and had made herself available to prosecutors to “clarify every detail”.

Nonetheless Safilo, the world’s second-largest eyewear company has terminated its licensing agreement with her brand citing “violation of contractual commitments” and Coca-Cola has cancelled an advertising campaign featuring Ferragni that was due to be broadcast this year. Milan-listed luxury children’s clothes maker Monnalisa, which produces a Ferragni-branded line, said it was “weighing its options”.

“Ferragni is meant to be wholesome and good and aspirational for brands to be associated with . . . it’s easy to see why brands would be distancing themselves,” Younger said.

She is also on the board of Milan-listed luxury group Tod’s. Chief executive Diego Della Valle told a press conference in Florence this week: “When we have answers we’ll see what to do.” Other brands that she has advertising contracts with, including Louis Vuitton, Nespresso and Pantene, have not made any public comment, but people close to three of the four companies said the incidents were embarrassing and the investigation complicates matters further.

Since the regulator’s fine in December, Ferragni has posted a single video to her Instagram account apologising for the “communication mistake”. She has also lost hundreds of thousands of her near 30mn followers and she and her family have been inundated with insults and accusations.  

Matteo Salvini, Italy’s deputy prime minister and leader of the far-right League, conceded “the rage against her is disconcerting”.

She has hired a group of legal and communication experts to try to salvage her contracts and protect her reputation but consumer and luxury brands have been watching events.

“[Brands] will eventually have to face the question of ethics and trustability when it comes to associating their names with influencers who built their careers on pictures they post to social media where their influencing power is dependent on [public] perception.” said a veteran brand adviser in Milan.

“They have nothing left to offer if that online persona shatters.”

Ferragni earned €14mn of revenues in 2022 from sponsorships and digital campaigns, while her separate “Chiara Ferragni Brand” fashion line posted revenues of €14.2mn in 2022, up 115 per cent on the previous year.

In email exchanges quoted in the regulator’s decision in December, Ferragni’s team demanded that the press release announcing the Balocco partnership linked sales of the branded cake with donations to the Regina Margherita hospital.

After the release was widely picked up by Italian media, Balocco — which paid Ferragni €1mn for the collaboration — told the influencer’s team to stop associating sales and donations in social media posts because it could amount to “false advertising”, the decision showed.

Balocco and Ferragni both declined to comment.

Younger said that when corporate crises called into question the integrity of an organisation, the only way out was to “remove the person at the helm”.

“But when it comes to an influencer, they are the brand, the company and the CEO.”

A 2021 study by online marketing platform LTK, found that 92 per cent of adults aged 18-25 made purchasing decisions based on influencers, while a 2023 Morning Consult survey reported that 63 per cent of Gen Z consumers preferred influencers in advertisements to celebrities. “Authenticity”, the surveys found, was a key factor through which influencers have succeeded in changing the way brands connect with consumers.

“When you take authenticity away there’s no good reason left for brands to shower you with gold,” said the Milan brand adviser. “The question is how many of these mega-influencers are actually authentic?”