Social Media Influencer Marketing: Critical Issues

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The NCAA’s recent announcement that college athletes may sell the rights to their names, images and likenesses has created an opportunity for businesses to sign influential college athletes and leverage their considerable social media footprints. Now is an opportune time for any company that contracts with social media influencers to re-examine regulations governing social media endorsements.

The watershed NCAA announcement was made earlier this month after the Supreme Court’s decision in June that the NCAA’s amateurism rules violated antitrust laws. In response, brands have begun targeting popular college athletes—particularly those with large social media followings—for endorsement deals. Boost Mobile, for instance, recently signed Fresno State basketball players Hanna and Haley Cavinder, who boast millions of social media followers, with its CEO telling ESPN that Boost has a list of 400 college athletes it hopes to partner with in the future. College athletes join a ballooning catalogue of paid influencers who are responsible for an increasing percentage of company marketing budgets. According to Business Insider, brands are projected to spend $15 billion on influencer campaigns by 2022.

Brands utilizing influencer social media marketing should be aware that it could implicate Federal Trade Commission regulations or give rise to other claims. To avoid FTC scrutiny and minimize other litigation exposure, brands should understand the potential legal pitfalls and consider implementing protective measures.

The FTC Regulates Influencer Marketing

The FTC regulates endorsements under section 5 of the FTC Act with the goal of protecting consumers from deceptive advertising. The FTC appears to have found that influencer marketing is subject to the same rules that apply to any other type of advertising. Influencer endorsements therefore would require “clear and conspicuous” disclosure of an endorsement when there is a “material connection” between the influencer and the brand. Brands would share responsibility for adequate endorsement disclosures with influencers, but the FTC has focused its enforcement efforts on the brands, not the influencers.

Incentivized Influencer Posts May Be Endorsements That Require Disclosures

Brands should assume, in an abundance of caution, that anything posted by an influencer who was incentivized in any way by the brand will be subject to FTC disclosure rules. The term “endorsement” has been interpreted broadly, including among other things, tagging or liking a brand, pinning a brand, or providing a review of a brand. If an influencer refers to a brand in a social media post, the FTC may consider it an “endorsement” subject to its disclosure rules. 

Similarly, brands should assume that if they offer anything of value to an influencer, there is a “material connection” with the influencer, which requires disclosure of the relationship. The FTC could find that these types of connections include a brand giving an influencer free or discounted products or services, party invitations, reciprocal endorsements or other perks.  

Carefully Review Influencer Marketing Contracts

Brands should carefully review their influencer marketing agreements with respect to several key issues that create legal risk. First, brands should consider addressing FTC disclosure requirements in their agreements. For example, the marketing agreement could require that the influencer comply with all FTC rules and guides, and mandate that posts disclose the connection between the brand and influencer.

Second, brands may elect to address treatment of intellectual property in their influencer agreements. Indeed, posts by influencers might give rise to brand liability for false advertising under the Lanham Act or similar state laws. For example, a college athlete influencer might be tempted to make claims that the brand’s product enhances the athlete’s performance. Unless that claim is based on fact, it may present serious legal issues. Social media influencer agreements thus often include provisions governing assignment and ownership of the intellectual property, including representations by the influencer that he or she will not post any content which infringes the intellectual property rights of third parties. Because FTC and false advertising risk can be contractually transferred, influencer marketing agreements also often include indemnification for violations of FTC or other laws governing deceptive or false advertising.

Third, brands may consider specifying the employment classification of their social media influencers. For example, if a brand elects to treat influencers as independent contractors rather than employees, clarifying this relationship in the agreement, including by addressing payment terms and that the brand cannot control the manner or means by which the services are rendered, may be advisable. In the independent contractor relationship, brands must be very careful that they do not exercise too much control over the influencer or the content of the posts. Overly controlling influencers risks a determination that the parties are in an employment, rather than independent contractor, relationship. Detailed instructions, regarding what should go into the posts, or a heavy-handed pre-approval process could leave the brand exposed to various employment laws applicable to employees.

Implement Formal Social Media Policies

Like any company that engages in social media advertising, formal social media policies can be very helpful to brands utilizing social media influencers. These policies can be detailed, and include specific posting guidelines for influencers (and others). Usually businesses include provisions relating to FTC-required disclosures, the use and disclosure of confidential information and intellectual property, offensive or other content that could implicate harassment or discrimination law, and privacy considerations.. This could help promote compliance with FTC disclosure requirements and potentially avoid liability for false advertising, misappropriation of confidential information, or infringement of intellectual property, among other things.  

Closely Monitor Influencer Endorsements

Closely monitoring posts made by a brand’s influencers is also important to maintaining compliance with the company’s social media policies and the FTC's regulations and guidelines.

When reviewing influencer posts, it is crucial to pay particular attention to the disclosures and evaluate whether they are “clear and conspicuous” as required by the FTC Act. What qualifies as “clear and conspicuous” depends largely on the type of endorsement and/or social media platform utilized. Generally, the FTC has explained that disclosure should be within “the endorsement message itself.” The FTC notes that “[d]isclosures are likely to be missed if they appear only on an ABOUT ME or profile page, at the end of posts or videos, or anywhere that requires a person to click MORE.”

For online posts, many marketers and brands prefer to disclose their connection using hashtags appearing at the end. But the FTC cautions against using a hashtag disclosure if it is hidden among a group of other hashtags. However, the hashtag – #ad – may be sufficient if it is the only one.

Photo endorsements are slightly different, and the FTC suggests that marketers “superimpose the disclosure over the picture and make sure viewers have enough time to notice and read it.”

And for videos, the FTC urges disclosure in the video itself, “and not just in the description uploaded with the video.”

If making an endorsement in a live stream, the disclosure should be repeated periodically so viewers who only see part of the stream will get the disclosure.

Conclusion

Brands increasingly use influencer social media marketing as a crucial part of their marketing strategies. The NCAA’s decision to grant college athletes the right to use their name, image and likeness has dramatically increased the pool of influencers. In light of the legal risks associated with influencer marketing, brands should become familiar with the applicable law and proactively address those risks in their contracts, policies, and procedures. 

 See FTC's Disclosures 101 for Social Media Influencers here.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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