Watchdog says online companies who did not disclose paid-for promotions by celebrities and bloggers were deceptive

How does a celebrity declare their affiliations to certain brands in fewer than 140 characters? Many may have to learn, after a clampdown by the government's consumer watchdog on non-declared endorsements in blogs and on social networking sites such as Twitter.

The Office of Fair Trading (OFT) has begun a crackdown on Twitter users and bloggers using their online presence to endorse products and companies without clearly stating their relationship with the brand.

In the first of its kind, the OFT has brought a case against a PR firm that was discovered to be paying bloggers to write effusively about its clients. The watchdog has launched an investigation into Handpicked Media, which operates a commercial blogging network – insisting that it must clearly state when promotional comments have been paid for.

In a statement, the OFT said online advertising and marketing that did not disclose paid-for promotions were "deceptive" under fair trading rules. "This includes comments about services and products on blogs and microblogs such as Twitter," it said.

Celebrity twitter endorsements are already big business in the US, where artists such as Snoop Dogg can earn a reported $3,000 (£1,900) for sending a tweet endorsing a product. But the US Federal Trade Commission insists that such endorsements must contain the words "ad" or "spon" to show the reference has been paid for. Such a requirement does not currently exist in the UK.

"Celebrities can be great influencers, whether they're on TV or tweeting," Arnie Gullov-Singh, chief executive officer of Ad.ly, which pairs celebrities and companies, told Business Week in a recent interview.

Reality TV star Kim Kardashian, who has more than 5.6 million followers, can collect up to $10,000 for tweeting, Gullov-Singh added. "Her price keeps going up. The most effective ones can get six figures a year, and in some cases six figures a quarter."

Launched in 2009, Ad.ly uses more than 5,000 celebrities and experts to promote products such as Coke, Toyota and Microsoft in the US. It now plans to launch the service in Britain.

"A year ago, celebrities were wary about their reputation, about selling out, but when they saw how easy it was to earn up to $5,000 a tweet, they flocked on board," said Gullov-Singh.

It is a business that could boom in the UK, after Range Rover became one of the first companies to dip its toe in the water. It recently signed up 40 stars – including ex-GMTV host Ben Shephard and model Daisy Lowe – to drive its new Evoque 4x4 and tell their followers about the experience, according to Marketing Week.

Complimentary tweets about the cars have appeared on Twitter. In November, fashion designer Henry Holland, who has more than 133,000 followers, tweeted: "CAN'T WAIT FOR MY NEW RANGE ROVER..!!!"

A Range Rover spokesman appeared to confirm to the Mail on Sunday today that the company had an arrangement with certain celebrities. He said: "We enlisted the help of a number of people with high profiles on Twitter. They get the loan of a vehicle which they can use, drive around and take pictures of.

"Under the terms of the deal they tweet. That's the idea. They tweet about the car."

A different Range Rover spokesman later denied that the company gave incentives to celebrities to tweet about its cars.

Actor Liz Hurley has also written in glowing terms about certain products, with her Twitter page including more than 10 references to cosmetic company Estée Lauder's product range. She. The self-described "mum, model, actress, bikini designer and organic Farmer" has been the face of the company for 17 years, but her Twitter page has no mention of her affiliation.

Media commentator Mark Borkowski said there was little doubt that celebrity endorsements would become increasingly common in the UK. He believes the industry could follow the example of the US where the number of followers a celebrity has determines how much their "advertising space" is worth.

"Celebrity endorsements go back to cigarette advertising in the 1900s. All we are seeing here is a change in the medium. "Twitter is a very powerful medium," he said.

But celebrities endorsing products had to be honest and open, he added. "If people are open and there is a conversation about it, then fine. The problems come when people endorse covertly, that puts the whole thing into jeopardy."

In that case the OFT would have to intervene, although twitter users themselves might be better arbiters. "People can see through these things, and having the twitter cloud against you is a powerful thing."