Influencer partnerships have become significant drivers of brand success in the rapidly changing world of digital marketing. They are also becoming increasingly common, so brands must navigate the complex legal landscape by understanding influencer law.
In this insightful investigation, we delve into influencer-brand partnerships and uncover the legal tidbits that content creators and brands should be aware of. Join us as we look into the legal nuances that underpin these collaborations.
Table of Contents
1. Disclosures and transparency
The Federal Trade Commission (FTC) enforces consumer rights by requiring prominent, unambiguous disclosures in influencer-brand partnerships. It’s essential for maintaining audience trust and ensuring transparency. The FTC guidelines emphasize the value of clear communication, the rejection of ambiguity, and the acceptance of openness. It recognizes that the public has the right to know whether they have received a free product or cash.
#Ad and “paid partnership”: real-world compliance
Social media has adopted concise disclosure methods, such as using hashtags like #ad or labeling posts with “Paid Partnership” to signal financial transactions or collaborations to the audience. These prominent identifiers are crucial in today’s evolving landscape.
#Ad: A symbol of transparency
A #ad in influencer marketing promotes transparency by serving as a digital beacon, signaling sponsored content to followers.
Paid partnership: a verbal declaration of trust
Instagram’s “Paid Partnership” label is a virtual handshake between the influencer and the audience. It ensures that followers know the commercial nature of the content they consume.
2. Contractual agreements
In the bustling realm of influencer marketing, a solid contractual foundation is paramount for influencers and brands. These agreements not only lay out the terms of collaboration but also serve as a roadmap for a successful partnership. Let’s delve into the key components of influencer-brand contracts and explore example clauses that ensure clarity, fairness, and a mutually beneficial relationship.
What are key components of influencer-brand contracts?
- Compensation terms
- Content deliverables
- Rights usage
- Dispute resolution mechanisms
It is essential to specify the exact nature of the compensation plan, whether commission-based, flat fee, or a combination. You should mention potential bonuses based on performance indicators, expense reimbursements, and payment schedules.
For instance, if the influencer meets specific metric targets, they will earn a performance bonus of $Y and a flat fee of $X. Getting the best business masters degrees can also help negotiate and understand complex contract compensation terms.
The type, quantity, and format of content—including posts, captions, and creative elements—should all be specified in the scope of work. Explicit statements about quality standards and adherence to brand guidelines are necessary. For example, the influencer must produce two stories and three Instagram posts highlighting the brand’s merchandise.
Make it clear if the influencer will only work with the brand during the contract term. Describe any limitations on promoting rival brands or products during and after the partnership.
The usage rights of the created content are outlined in this clause, which also grants the brand the ability to reuse, alter, or use the content indefinitely. It also clarifies whether the influencer can still repost content on their channels. The brand may use, reproduce, and disseminate the influencer’s content in a non-exclusive manner for marketing purposes.
Dispute resolution mechanisms
The clause specifies how disagreements or violations will be resolved through negotiation, mediation, or arbitration. It offers a systematic procedure for resolving disputes outside of court. For example, the parties agree to attempt mediation before pursuing arbitration if resolution is impossible.
3. Intellectual property rights
In the social media and digital marketing age, influencer collaborations have become a powerful tool for brands to reach new audiences and promote their products or services. However, brands and influencers must know intellectual property (IP) rights to ensure a successful and legally compliant collaboration.
Copyright is a legal term that refers to the legal protection of original works of authorship, such as literary, dramatic, musical, and artistic works. Determining who owns the copyright is critical when an influencer creates content for a brand collaboration. When a brand pays an influencer to create content, the brand typically owns the copyright. Typically, an influencer retains the copyright when using their content.
Influencers should use trademarks responsibly to avoid confusion. Trademarks are signs that identify and differentiate the source of goods or services. Brands provide guidelines on how to use their trademarks in content and branding restrictions. Influencers should avoid trademarks that imply endorsement or affiliation, such as claiming to be the brand’s official spokesperson. It ensures that they do not mislead customers.
Content ownership and licensing agreements
A content ownership and licensing agreement is a legal contract that outlines the copyright and usage rights of content created for a brand collaboration. It prevents disputes between brands and influencers over content rights.
Ownership of copyright
The agreement should clearly state who owns the copyright to the content.
The agreement should grant the brand a license to use the content in its marketing materials. The license should specify the scope of the brand’s use, such as the territories where the content can be used and the platforms on which it can be distributed.
Term and termination
The agreement should specify the terms of the license and the conditions under which it can be terminated.
Protecting a brand’s intellectual property
Brands should register their trademarks with the appropriate government agency to protect their intellectual property (IP). They should monitor influencer content to ensure that intellectual property rights are respected. Send cease and desist letters or file lawsuits to prevent unauthorized use.
4. Data privacy and GDPR compliance
Data privacy is crucial to business operations, especially when forming partnerships. 95% of CISCO Data Privacy Benchmark Study 2023 respondents see privacy as a business requirement, up from 90% the previous year.
The General Data Protection Regulation (GDPR) for the European Union establishes strict guidelines for data collection, processing, and storage. It guarantees people’s authority over their personal information.
How should you handle collection and handling of personal data in partnerships?
Sensitive information, including customer or intellectual property data, is frequently shared in partnerships. Maintaining trust and adhering to legal requirements requires ensuring the security and privacy of this data.Over 70% of consumers are more concerned about data privacy than a few years ago. This emphasizes how crucial it is for partnerships to set up precise policies and procedures for gathering, using, and storing data. The policies should include:
- Purpose specification: Clearly state why personal data is being collected and shared. Ensure that the amount of data collected is only required to achieve the partnership’s predetermined goals.
- Data minimization: Only gather the minimum personal information needed to fulfill the stated objective. Refrain from gathering extra or irrelevant data that might raise privacy concerns.
- Transparency: Inform individuals about the types of personal data being collected, the purpose for collection, and how their data will be used. Provide clear and accessible privacy policies.
- Data security: Use effective technical and organizational measures to prevent unauthorized access, use, disclosure, alteration, or destruction of personal data.
- Data retention: Set a data retention policy that specifies how long personal data will be kept and how to dispose of it safely.
- Data subject rights: Observe people’s rights under data protection laws, including the ability to object, restrict processing, rectification, erasure, and access.
- Data breach notification: In the event of a data breach, have a thorough plan for quickly identifying, looking into, and informing the affected parties and appropriate authorities.
GDPR and other data protection regulations
The GDPR sets a high standard for data protection practices, and businesses operating within the EU or those that handle EU citizens’ data must comply with its requirements.
Key principles of the GDPR include:
- Lawfulness, fairness, and transparency: Personal data must be processed in a transparent, fair, and legal way.
- Purpose limitation: It’s only legal to collect data with good intentions, and it can’t be used in a way that goes against those intentions.
- Data minimization: The data we collect must be useful and only what is needed for the reasons we are processing it.
- Accuracy: Personal data must be accurate and, where necessary, kept up to date.
- Storage limitation: Brands must keep personal data in a form that permits the identification of data subjects for no longer than is necessary for the purposes for which the personal data are processed.
- Integrity and confidentiality: The processing of personal data must be done in a way that keeps that data safe.
- Accountability: The controller is in charge of following the rules and must be able to show that they have done so.
Obtaining consent and opt-in practices
Data privacy policies must be implemented to preserve people’s control over personal information, including opt-in procedures and consent collection. A free, explicit, and knowledgeable consent to data processing is known as consent.
Opt-in procedures are preferable to opt-out ones because they require individuals to voluntarily provide their consent and data. To ensure valid consent, people must be provided with clear information about data processing, including its purpose, usage, and rights.
Instead of using default settings or pre-checked boxes, affirmative action should be used to get consent. Opt-in policies encourage transparency, trust, and moral data-handling practices by empowering individuals to make informed decisions.
5. Competitions and sweepstakes
Many businesses use influencer-hosted competitions and giveaways to engage with their target market and promote their products and services. To prevent future legal issues and customer complaints, brands must ensure these competitions are legally compliant.
What are key legal considerations for influencer-hosted contests?
- Clear and disclosed rules: Establish clear and concise contest rules that are easily accessible to participants. These rules should clearly outline the contest’s eligibility criteria, entry methods, selection process, and prize details.
- Licensing and copyright rights: Get the required licenses or consents before using copyrighted content in the contest, including music, videos, or images. Ensure the influencer is authorized to use the material they produce for the competition.
- Advertising standards: Observe the guidelines and standards for advertising that significant regulatory organizations have established. Steer clear of deceptive or misleading advertising tactics.
- Fairness and transparency: Make sure the competition is run openly and equitably. Participants should be given a clear explanation of the selection process that is impartial.
- Prize fulfillment: Indicate the nature and value of the prizes in clear terms, along with any limitations or restrictions. Ensure the prizes are sent out on time and according to the contest guidelines.
- Tax considerations: There might be tax ramifications for the winners, depending on the jurisdiction and the value of the prizes. If necessary, give winners comprehensive information about any potential tax obligations.
- Data privacy: Follow the rules about data privacy that apply. Before collecting personal information from participants, make sure you have their permission.
Example of prize fulfillment and legal considerations
McDonald’s Monopoly game
McDonald’s set up a Monopoly-themed promotion in 2001, allowing customers to collect game pieces and win prizes. Jerome Jacobson discovered that the game was rigged and sued McDonald’s. According to Jacobson, McDonald’s printed more winning game pieces than disclosed, making it difficult for customers to win large prizes. McDonald’s initially denied the allegations but eventually agreed to settle for $10 million, requiring the company to change sweepstakes and be more transparent about winning odds. This case highlights the significance of transparency in sweepstakes and contests and the need for fair promotions.
Pepsico’s Doritos roulette challenge
Pepsico launched the Doritos Roulette Challenge in 2016. It required participants to record themselves eating a mysterious Doritos flavor and reacting to the spicy taste. The challenge went viral, with participants coughing, choking, and crying in videos. Some participants sued, claiming Pepsico failed to warn consumers about the dangers of eating Doritos. Even though Pepsico settled the lawsuits, the case raised questions about legal liability for brands that run social media challenges. Brands should carefully consider risks and take precautions to avoid legal liability.
6. Endorsement and testimonial rules
The FTC has established guidelines for endorsements and testimonials in influencer marketing to protect consumers from deceptive advertising practices. These guidelines apply to any influencer or brand that promotes products or services through social media, blogs, or other online platforms.
Key FTC endorsement and testimonial rules:
- Disclosure of material connections: Influencers who support a brand must clarify if they have a personal or professional connection with it. Take, for instance, t-shirt marketing, makeup brands, or exercise equipment manufacturers.It should be easy for people to notice that this information is being given in the same way and tone as the endorsement.
- Truthful and accurate representations: Endorsements and testimonials must be truthful and accurate. Influencers must have genuine experience with the product or service they endorse and not make exaggerated or misleading claims.
- Substantiation of claims: Any claims an influencer makes about a product or service must be backed up by proof. This proof can come from personal experience, product testing, or brand data.
Example of deceptive advertising to avoid
In 2015, the FTC sued Lord & Taylor for deceptive advertising, alleging that the luxury fashion retailer had paid social media influencers to promote its clothing without disclosing the paid relationships. The influencers posted photos of themselves wearing Lord & Taylor clothing without informing their paid relationships. This deceptive advertising led consumers to believe the influencers were endorsing the clothing without being paid, potentially leading to purchases based on their endorsements. The FTC settled the lawsuit for $1.2 million, requiring Lord & Taylor to disclose all paid relationships with influencers in the future.
Importance of brand review and approval of influencer content
Brands should set up a way to review and approve influencer content to ensure it follows FTC rules and fits with their brand messaging. As part of this process, you should review the influencer’s proposed content before it goes live. Give feedback on disclosing material connections and ensure the content is honest and correct.
7. Minors and COPPA
In influencer marketing, partnering with minors under 13 presents unique legal considerations due to the Children’s Online Privacy Protection Act (COPPA). It’s a federal law in the United States designed to protect the privacy of children under 13 online.
Websites and online services that want to collect personal information from kids younger than 13 are required by COPPA to get permission from a parent or guardian first. You can give this permission by emailing, checking a credit card, or completing a secure online form. It is necessary to confirm the child’s identity and billing address. Also, permission must come from a legal guardian, not the child.
Legal considerations when targeting younger audiences
Brands should be cautious when using influencer marketing to contact kid influencers. They should avoid directly targeting children under the age of 13 and limit the collection of personal information from children’s audiences.
Obtain verifiable parental consent before collecting data, and provide clear privacy policies outlining how personal information is collected, used, and disclosed. It ensures that the content is not limited to this age group and is accessible and understandable to parents.
Example of handling legal matters when targeting younger audiences
The FTC and Mattel reached a $5.2 million settlement in 2016 after Mattel violated the Children’s Online Privacy Protection Act (COPPA). According to the FTC, Mattel failed to obtain parental consent before collecting personal information from children under 13 and did not take appropriate precautions to protect it.
Mattel committed to erasing all data gathered and implementing a new procedure for getting parental approval before collecting any data.
8. Product claims and liability
In the dynamic world of influencer marketing, product claims and liability pose significant legal considerations for brands and influencers. Brands rely on influencers to promote their products and services, while influencers leverage their reach and influence to endorse brands and products. However, both parties must navigate the legal landscape carefully to avoid potential disputes and consumer complaints regarding product claims and liability.
Legal implications of product claims made by influencers
Influencers significantly impact consumer perceptions of products and services, influencing purchasing decisions. They must, however, ensure that product claims are true, accurate, and supported by evidence. The FDC enforces consumer protection laws and establishes guidelines for influencer marketing endorsements and testimonials, requiring influencers to disclose any material connections and refrain from making false or misleading product claims.
Misleading product claims can result in legal consequences for both influencers and brands, including:
- Consumer protection lawsuits: Customers may sue the influencer or the brand if they fell for fraudulent or misleading product claims.
- FTC investigations and enforcement actions: When brands and influencers engage in unfair or deceptive advertising practices, the FTC can look into the matter and prosecute them.
- Damage to brand reputation: Negative customer reviews and possible legal issues can damage a brand’s reputation and clientele.
Managing product liability and responsibility
Influencers and brands should set clear policies regarding product claims and liability. It entails giving precise product details and ensuring the endorsements are real. Before releasing influencer content, businesses should evaluate and approve the influencers’ content and disclose any meaningful relationships between the influencers and the brand. Influencers should adhere to FTC regulations, refrain from making inflated claims, and only recommend goods they genuinely believe in.
Addressing consumer complaints legally
Brands must systematically handle customer complaints regarding product claims made by influencers. This process includes obtaining information, looking into the claim, reacting professionally, and acting appropriately if the complaint is legitimate. Companies should also evaluate internal procedures to prevent future occurrences of the same problems. That includes giving precise information, elaborating on product details, modifying influencer content, and releasing a statement to the public.
9. Taxation and financial compliance
Influencer marketing has completely changed how companies communicate with their target markets and advertise their goods and services. However, the complexity of taxation and financial compliance challenges influencers and brands as they grow rapidly. Maintaining transparent financial records and knowing one’s tax responsibilities are essential for a legally compliant and open partnership.
Tax implications for influencers
Influencer’s tax obligations on self-employed contractor influencer marketing earnings must be paid regularly. That covers self-employment tax, income tax, and possibly state and local taxes. Influencers should maintain thorough records of their payments and outlays to determine their taxable income.
Accounting for compensation and proper tax reporting
Companies may give financial compensation, non-monetary compensation (like goods or services), or a mix of the two may be granted for influencer marketing efforts. Accurate recording of all forms of payment is essential for financial reporting and tax purposes. The brand should record the money as wages or commissions, and the influencer should record it as income on their tax return.
Ensuring financial transparency in partnerships
For business partnerships, especially influencer partnerships, to be successful, financial transparency is essential. Influencers and brands should establish explicit agreements and maintain accurate records to prevent miscommunications and conflicts. Key practices include creating thorough arrangements, maintaining accurate records of transactions, and releasing financial statements regularly. Companies should also consider the services of an independent auditor for review to increase openness and trust.
Example of ensuring financial transparency
United Technologies Corporation (UTC) was accused by the Securities and Exchange Commission (SEC) in 2020 of withholding vital information regarding its supplier relationship. According to the SEC, UTC concealed that the supplier had given bribes to obtain contracts with the business.
When UTC announced in 2016 that it was assisting the Department of Justice (DOJ) in investigating bribery claims, the SEC launched its investigation into the company. After the DOJ’s investigation, UTC and the government eventually reached a $20 million settlement.
10. Case studies and legal pitfalls
Influencer marketing has emerged as a powerful tool for brands to connect with their target audience and promote their products or services. However, the dynamic nature of this industry has also presented legal challenges that brands and influencers must be aware of to avoid costly pitfalls.
Lord & Taylor and Chiara Ferragni
Influencer Chiara Ferragni and Lord & Taylor partnered on Instagram in 2015, but Chiara did not disclose her paid relationship with the brand. A $1.2 million settlement resulted from an investigation by the FTC into the failure to disclose the endorsement. This case emphasizes how crucial it is for brands to make sure influencers follow FTC guidelines by disclosing any relevant relationships.
Warner Music and Iconic London
Warner Music sued Iconic London in 2022 for using their music in social media posts without permission. The influencer used Warner Music songs in her content but did not obtain the required licenses. This case emphasizes the significance of obtaining appropriate licenses or permissions for copyrighted material used in influencer content.
Key lessons from influencer marketing legal mishaps
Businesses must obtain the appropriate licenses for copyrighted content and ensure genuine endorsements. They should also disclose meaningful relationships between influencers and brands to provide ethical influencer marketing. Contracts should specify the scope of the work, payment, ownership rights to the content, and legal compliance. A review and approval procedure should be established to ensure that brand standards, regulatory obligations, and customer expectations are met. Legal counsel should be consulted as soon as possible to address potential legal issues and understand the applicable laws and regulations governing influencer marketing. You can protect consumer confidence and avoid FTC investigations by doing so.
Wrapping up influencer law
Influencers and brands must understand the legal environment to navigate this dynamic field effectively as influencer marketing continues to grow and change. Following the ten legal must-knows in this extensive guide will help influencers and brands build risk-free, fruitful partnerships that safeguard each party’s interests and promote mutual gain.
Making legal compliance a priority involves more than averting possible legal actions or fines. It also involves ensuring that influencer-brand alliances are carried out honestly and openly and concerning the rights of consumers. Influencers and brands can establish a solid reputation by practicing a legally compliant strategy. They can earn the audience’s trust and ultimately achieve their marketing goals ethically and sustainably.