Influencer Marketing - Know Your Legal Duty

In recent years, influencer marketing has become a powerful tool for businesses to reach their target audience and promote their products or services. However, with the rise of this industry, there has also been increased scrutiny and regulation surrounding the activities of influencers and the companies that use them for marketing.

We have explored most aspects of influencer marketing including:

• The ALMOST Definitive Guide To Influencer Marketing

• Who is an Influencer? How to Optimize Them!

• The Science Behind Influencers

• Amazing B2B Influencer Marketing Strategies

• Influencers - How to Select and Measure Their Performance

• How to Find and Hire the Right Influencer

• Artificial Intelligence - Impact on Influencer Marketing

• How To Become an Influencer

The one area that we have not discussed is the potential liability when any party hires a brand or influencer that they do not control.  In this article, we will explore the laws impacting influencers and the legal requirements that companies must adhere to, including the Federal Trade Commission (FTC) laws about disclosure.

Please Note – This does not represent legal advice but we simply want to make sure that both influencers, and those companies that engage them, fully understand that you need to do your own due diligence to make sure that the entity you are working with (either side) is both ethical and adherent to all legal requirements.

Due Diligence – As in any business relationship, it is incumbent on both parties to engage in due diligence about the other party and their reputation and business practices. It is never wise to engage before you have done a thorough review of them. Fortunately,  the internet allows this type of research to be conducted quite easily and inexpensively.

Since you should only be doing business with established influencers and companies, they should have a footprint from prior activities and engagements. While everyone will have detractors, look for patterns of conduct, lawsuits, and who their prior business partners might have been. Remember, you will be judged by the company you keep.

If you don’t appreciate the impact, your reputation can be affected by those you associate with. Ask anyone who has accepted a plane ride from Jeffery Epstein. They will always be tainted by that association, even if they did nothing wrong.

Federal Trade Commission

FTC Laws and Disclosure- The FTC is the primary regulatory body in the United States responsible for protecting consumers and ensuring fair business practices. When it comes to influencer marketing, the FTC has specific guidelines that influencers and companies must follow to maintain transparency and protect consumers from deceptive advertising practices.

Disclosure of Material Connection- The FTC Act requires that social media influencers provide several disclosures as part of their online profiles, sponsored posts, or on their websites. Specifically, all sponsored or paid endorsements must be labeled. If an influencer receives payment, to talk or write about a brand, they must share that with their audience.

This means that if an influencer receives any form of compensation, such as free products, payment, or discounts, they must disclose this relationship to their audience in a clear and conspicuous manner.

The disclosure should be placed in a prominent position where it is easily noticeable and understandable to the average viewer. It should be made before any endorsement or promotion takes place, ensuring that consumers are aware of the potential bias or financial interest involved in the influencer's recommendation.

Clear and Conspicuous Disclosures- The FTC also emphasizes that disclosures must be clear and conspicuous, meaning they should be easily noticeable and understandable to the average viewer. Disclosures should not be hidden, buried within a long list of hashtags, or placed in a location where users are unlikely to see them.

Native Advertising and Endorsements- The FTC also addresses native advertising, which refers to content that appears similar to the platform's non-advertising content but is actually paid for by an advertiser. In the context of influencer marketing, this can include sponsored posts, product placements, or endorsements.

According to the FTC, any material connection between the influencer and the company must be clearly disclosed, even if the content is part of a larger campaign or appears in a format that may not immediately appear as an advertisement. The goal is to ensure that consumers can easily distinguish between genuine content and paid endorsements.

The FTC works to stop deceptive ads, and its Endorsement Guidesgo into detail about how advertisers and endorsers can stay on the right side of the law. If you endorse a product through social media, your endorsement message should make it obvious when you have a relationship (“material connection”) with the brand. A “material connection” to the brand includes a personal, family, or employment relationship or a financial relationship – such as the brand paying you or giving you free or discounted products or services.

Here is a quick recap of what the FTC imposes:

• Nondisclosure agreements cannot circumvent notice requirements. To call yourself an expert requires qualifications in specific areas.

• Free or discounted products require disclosure. If you endorse a product/service, you must:

• State the influencer was paid or compensated. Influencer must give their REAL opinion.

• Influencers must ACTUALLY use the product/service.

• Influencers cannot make claims that require medical or scientific proof.

• Penalties can cost $43,792 per violation.

Other Legal Requirements

While the FTC guidelines are crucial for influencer marketing, companies and influencers must also be aware of other legal requirements that may impact their activities. Some of these include:

Intellectual Property Rights- Influencers and companies must respect intellectual property rights, including copyrights, trademarks, and patents. They should not use copyrighted material without permission, and if they are promoting a product or service, they must ensure they have the necessary rights to use any trademarks associated with that product or service.

Endorsements and False Claims- Influencers and companies must be cautious when making claims about a product or service. They should not make false or misleading statements, as this can lead to legal consequences. It is important to ensure that all claims made are truthful, substantiated, and not likely to deceive consumers.

Data Privacy and Protection- As influencers and companies engage in marketing activities, they often collect and handle personal data from their audience. It is essential to comply with data protection laws and regulations, such as the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) in the United States. This includes obtaining proper consent for data collection and ensuring the security of any personal information collected.

Advertising Standards and Regulations- In addition to the FTC guidelines, influencers and companies must also adhere to advertising standards and regulations set by industry-specific organizations. For example, the Advertising Standards Authority (ASA) in the UK provides guidelines for influencer marketing, and the Interactive Advertising Bureau (IAB) has published best practices for digital advertising.

Recommendations

Here are some of the contract provisions we require when working with influencers:

• Mutual Hold Harmless and Indemnification Agreement - for all acts or omissions by either party, including but not limited to copyright violations, misrepresentations, and libel or defamation.

• Right for Final Content Review - right to review before posting including the hashtag usage.

• Performance Review Requirements - agreed upon schedule of what will be the controlling metrics, when will they be reviewed, and how they will be submitted.

• Conflict of Interest Clause - to avoid the influencer from promoting competing brands at the same time or immediately after the contract ends.

• Brand and Messaging Adherence - to ensure that the influencer conforms to brand and voice guidelines.

Conclusion

As influencer marketing continues to grow, it is crucial for influencers and companies to understand and comply with the laws and regulations that govern their activities. The FTC guidelines on disclosure are particularly important, as they aim to maintain transparency and protect consumers from deceptive advertising practices.

However, it is not just the FTC guidelines that influencers and companies need to consider. Intellectual property rights, endorsements and false claims, data privacy and protection, as well as advertising standards and regulations, all play a role in ensuring legal compliance in influencer marketing.

By staying informed and adhering to these legal requirements, influencers and companies can build trust with their audience, maintain their reputation, and contribute to a thriving and ethical influencer marketing industry.

Hire an Attorney- Do not take shortcuts. The risks are too great!