Engaging social media influencers is one of the fastest-growing advertising mediums today. What do companies need to know when entering into a contract with a social media influencer?
As influencer agreements become an increasingly important part of brands’ overall marketing strategy, both brands and influencers need to be aware of the various legal challenges that can arise. In many jurisdictions, the legal framework for influencer marketing agreements is still uncertain, making it difficult to carry out campaigns in a legally compliant manner.
Companies are often held liable for the actions of their influencers. In any influencer agreement, sponsorship agreement, agency agreement, brand ambassador agreement, or the like you have to protect your company, its image, publicity rights, trademarks, and copyrights. This article provides an overview of some of the key legal challenges that brands and influencers need to be aware of when entering into influencer marketing agreements.
Legal Framework and Considerations
While an influencer’s deceptive practices may be flagged by state attorney generals or regulatory agencies, the Federal Trade Commission (“FTC”) is the primary rule maker and enforcement authority when it comes to influencer marketing, and they have extensive power to fine businesses that do not comply. In October 2021, the FTC provided a notice of penalty offense to hundreds of companies for issues relating to endorsements. Companies who receive this type of notice must correct their behavior or they could be subject to fines of $45,000 per violation which could be incredibly costly for a business if these add up. The FTC has now released several guides that outline how influencers and businesses who employ them should treat their endorsements. Here are some of the biggest takeaways from these rules:
Endorsements must be honest.
While it may seem obvious, the FTC has made it clear that an influencer must provide their own honest opinion on a product or service that they have used. Influencers cannot merely serve as a mouthpiece for the business to provide their opinion on their product or service. In order to comply, businesses should make sure that the influencer uses the product before posting about it. This should be outlined in the influencer agreement. While a company can provide the influencer with a script or a set of suggested phrases, the influencer may only post those statements if they are consistent with his or her own opinion and experience. See FTC’s First-Ever Complaint Against Individual Social Media Influencers for not disclosing properly.
The influencer agreement should follow FTC guidelines that these disclosures be clear and conspicuous, meaning that it should be easy to understand and should be well-placed and prominent so that it can easily be read. Companies should consult an attorney for guidance on the FTC’s guidelines and the location of disclosures.
The influencer agreement should state that the influencer cannot make any claims about a business’s products or services unless the business has the proper substantiation for that claim. This is especially true for any products that make health or medical claims related to their products. To help prevent these unsubstantiated claims, companies can provide the influencer with a list of approved and substantiated claims so long as these claims are consistent with the influencer’s own opinion as discussed above.
What Can I Do to Make Sure I Comply?
Vet and Monitor Your Influencers
Before hiring the influencer, a company should review the influencer’s content to make sure their values, messaging, and overall brand mesh well with the business. Additionally, businesses should make sure that the influencers have provided adequate disclosures, as discussed above and as outlined in the influencer agreement and have not employed any fraudulent methods to obtain followers or views (i.e. using bots or purchasing followers).
After the influencer has been properly vetted and hired, businesses should continue to monitor the influencer’s activity to make sure that it is in compliance with FTC guidelines and the businesses’ policies. Here is the FTC’s Disclosures 101 for Social Media Influencers. Additionally, companies should routinely check their influencer’s posts to make sure that they are compliant with their own social media policies (as explained below), provide sufficient disclosures, and do not contain any unsubstantiated claims.
Businesses who want to efficiently monitor their influencers may require that influencers get an approval of their posts before uploading, provide lists of acceptable disclosures or language, and even provide a mechanism that allows them to require the influencer to edit or modify a post that is not compliant with these policies. These procedures can and should be, outlined in the businesses’ social media policy and social media influencer agreement.
Create a Social Media Policy
When the FTC looks to see if a business is in compliance with its endorsement and testimonial guidelines, they will look at whether the company has an established social media policy. There are several cases where the FTC has not pursued action against the business when it found that they had a social media policy that was readily accessible to its influencers. See Hyundai Motor America. These policies should contain the following information:
- The types of material connections that the influencer should make and any specific language you would like them to use
- Guidelines for clear and conspicuous disclosures
- How the business will monitor the influencer’s posts for compliance
- Procedures or processes for handling any failures by the influencer to follow these guidelines
In addition to having a social media policy in place, the FTC will also look at whether a business has provided training on this policy. Businesses that seek to be in compliance should make sure that their employees, including influencers, receive some training on these policies. Anything a company can point to that would show that their influencers were aware of this guidance would only help the company if the FTC initiated an investigation.
Get it in Writing!
While the structure of the influencer agreement is very similar to a typical services agreement, as discussed in detail here, there are a few provisions that should be included for influencers:
Require influencers to abide by endorsement guides and social media policies. Companies should include a section in their influencer agreements that states the influencer’s obligations to abide by the FTC’s Endorsement Guides and the businesses’ social media policy.
Outline an influencer’s posting obligations. The business should outline the frequency of posts required during the relationship; where and on what platforms the posts should be made, and whether the business will review the posts before the influencer posts them. Since the business should be monitoring these posts, they will want to outline any requirements for reviewing and approving posts.
Consider Intellectual Property. Since the influencer may be using the businesses’ intellectual property, including trademarks, and copyrights, the influencer agreement should give a limited license to the influencer for use of this information (more on IP rights here). Additionally, the influencer agreement should define how the influencer can use your IP by specifying fonts, colors, resolution, or other requirements to make sure that your brand is preserved.
Whitelisting. Influencer agreements should include permission for whitelisting if they would like to gain access to the influencer’s social media accounts for direct marketing. Typically, this provision would give permission to the business to promote the influencer’s social media post with paid media and will usually require the influencer to provide prompt access to their accounts when requested.
Gouchev Law’s Social Media Influencers Practice Group is a highly specialized and knowledgeable team of lawyers. For a more comprehensive review of your legal strategy when comes to influencer marketing, book a free session with a senior partner.
Disclaimer: The information in this article is for general information purposes only. Nothing in this article should be taken as legal advice for any individual case or situation. This information is not intended to create and viewing it does not constitute an attorney-client relationship.