Italy's government proposed new rules for companies and influencers who promote products that raise money for charity, following a scandal involving celebrity Chiara Ferragni.

Prime Minister Giorgia Meloni said she was moved to act after Ferragni, a blogger and Instagram star, was first fined and then investigated for fraud over her promotion of a holiday "pandoro" cake which claimed to raise money for a children's hospital.

Italy's competition watchdog found in December, however, that the producer of the cake had paid a fixed amount to the hospital months before it went on sale – while Ferragni's companies made more than 1 million euros ($1.08 million) without donating anything.

Under the proposed law, the producers of goods and the "professionals who market and promote products" must state on the packaging how much will go to charity, whether a sum or a percentage of the ticket price, Enterprise Minister Adolfo Urso said.

Before the product goes on sale, those involved must also inform the competition watchdog of their plans and when they intend to pay the money raised to the charity.

The watchdog will be able to impose fines from 5,000 to 50,000 euros for those who do not comply, Urso told reporters after a meeting of Meloni's ministers.

He said half the money raised will go toward charitable causes, although these have yet to be decided.

The competition watchdog had fined two companies owned by Ferragni 1 million euros for "unfair commercial practices" over the endorsement deal of a pandoro cake made by Balocco, which itself was fined 45,000 euros.

Milan investigators earlier this month launched a probe into Ferragni over suspected fraud in the deal, while her other endorsements have come under intense scrutiny.

Meloni said this week the case had revealed the need for greater transparency.

"This story has shown that there is a hole in the legislation," she told the "Quarta Repubblica" program on Monday.

Ferragni has built up a business empire estimated by Forbes as worth $8 million per year, including her brand. She earns lucrative endorsement contracts from a variety of brands, although she has reportedly lost some of these since the scandal broke.

She insists she has "always acted in good faith."

Earlier this month, Italy's communications authority said it was extending its purview to social media influencers, who it warned must be transparent about paid content.