The majority of influencers probed in a watchdog's sweep are posting content that is misleading their followers, while a third of firms have manipulated their online reviews.
Those findings come from an Australian Competition and Consumer Commission investigation of 118 influencers and 138 businesses earlier this year.
Influencers, who often use their large social media followings to promote products, most commonly misled their fans with a lack of disclosure about the payment or incentives associated with recommending brands and services.
Several businesses investigated were found to be using third-party professional reviewers and "review removalists" to curate their online reputations.
"Influencers and businesses need to review their practices and improve compliance with the Australian consumer law to ensure consumers can trust the information they find online," ACCC acting chair Catriona Lowe said.
Ms Lowe said she was concerned that influencers, brands and advertisers were taking advantage of consumers' trust through hidden advertising in social media posts.
"Influencers often cultivate an image of themselves as being relatable and genuine, which can create an element of trust with their followers when it comes to recommendations," she said.
"Influencers and brands may break the law if they do not take reasonable steps to ensure consumers are not misled to believe that sponsored posts are genuine."
The report found that fashion and gaming influencers were the worst offenders for questionable posts, while appliance, electronic and beauty product businesses were the most likely to create fake reviews.
Of the 26 fashion influencers included in the online influencer sweep, 96 per cent made online posts identified as concerning, while 73 per cent of gaming and technology influencer posts raised concern.
All influencers investigated as part of the sweep were the result of tip-offs made to the ACCC about accounts on Instagram, TikTok, Snapchat, YouTube, Facebook, and the live-streaming service Twitch.
Most had large followings, but a number had smaller reaches.
"The influencer industry is complex and constantly evolving, with many parties involved that may not be fully aware of good practice," Ms Lowe said.
When it came to businesses maintaining their reputations online, firms needed to be aware of the risks of breaching consumer laws through the posting of fake reviews or hiding genuine negative feedback.
"Misleading reviews cause considerable harm to consumers who increasingly seek out and rely on online reviews to help them make a purchase," Ms Lowe said.
Signs of fake reviews included multiple reviews written by the same reviewer, a spike in positive reviews in a short period and positive reviews on a business's website conflicting with mixed reviews on a third-party website.
The ACCC will release targeted guidance for influencers and businesses early next year to help inform people of their legal obligations.
Educational material for consumers is also in the works.
