Marketing Your Business through Influencers?

In today’s entrepreneurial world, digital and social media have become undeniably effective marketing tools particularly for businesses and individuals navigating the entertainment space. The more creative the business or individual, the more creative are their efforts in capitalizing on digital and social media. Utilizing influencers or becoming an influencer have become marketing targets for many individuals or businesses who aim to raise their visibility on highly saturated social and digital platforms. There are obvious benefits to relying on high profile influencers to promote your products and services but the marketing budget to accommodate this strategy will vary considerably and businesses and individuals must proceed with caution. Social media marketing, digital and content related services via influencers should be spelled out contractually in an agreement (the “Influencer Agreement”) by and between the business or individual procuring the influencer’s services (the “Marketer”) and each influencer providing the services (the “Influencer”).

The Federal Trade Commission’s Guides Concerning Endorsements and Testimonials in Advertising (“FTC Guides” 16 CFR Part 255) address application of Section 5 of the FTC Act codified at 15 U.S.C. 45 and provide a legal framework for influencer activities helpful to both the Marketers and the Influencers themselves. Transparency is key. When Influencers are blogging, tweeting, posting or otherwise publishing content about a Marketer’s products or services, to be legally compliant, the FTC Guides recommend the following:

  1. Clear and prominent disclosure from the Influencer that his or her statements are being made pursuant to an endorsement and constitute paid advertising. Consumers must be able to read and see this disclosure. For example, if an influencer posts on his or her Instagram account regarding products or services for which the Influencer is receiving compensation to advertise, the Marketer should require the influencer to place a hashtag such as #paid, #ad or #sponsored at the outset of the post or at a minimum, in a clear and conspicuous portion of the post – NOT buried. See The State of Texas v. Google, LLC; In the Matter of Warner Bros. Home Entertainment, Inc., a corporation. The material connections between the Client and the Influencer must be revealed by the foregoing clear and prominent hashtags. Examples of material connections are benefits or incentives (i.e. money), free products or services, in-kind gifts, or access privileges) flowing from a Marketer to an Influencer. The Influencer Agreement must require this of each Influencer.
  2. The Influencers statements must be factual and must constitute an honest opinion. In other words, the influencer should not fabricate events, results or stories and the influencer should not fabricate his or her opinion of a product. Although, this FTC Guide is often hard to gauge, the prominent placement of the hashtag coupled with the requirement of honesty and fact at least serves to put the consumer on notice to be diligent in his or her assessment of the credibility of the Influencer’s statement. See Chelsea Chinery, et al. v. Fyre Media, Inc. The requirement of honesty also puts a burden on the Marketers to have realistic expectations surrounding paid testimonials and incentivize them to seek influencers who “fit” what they are selling. The Influencer Agreement must require this of each Influencer.

To avoid unnecessary backlash from what can be a solid marketing strategy and to avoid unnecessary legal snares, the Influencer Agreements should further contain the following parameters on Influencer activities :

  1. Influencers must not only comply with the FTC Guides but must also comply with all terms, conditions and guidelines of the digital platforms and websites they use for their promotional voice. Marketers need to shift this responsibility and all related liability by the Influencer Agreement to the Influencers.
  2. Influencers must respect all third-party intellectual property rights. Although the Marketers often will grant limited licenses to Influencers to use their copyrights, trademarks, tradenames in the marketing and advertising of their products and services, the Influencers must be careful not to integrate any third party owned and controlled materials into their blogs, tweets, posts or other promotions. Each Influencer Agreement should dictate this and place the responsibility for third party clearances and third-party licensure on each Influencer so that this liability falls to the Influencer not the Marketer for the Influencer created content.
  3. The Influencer Agreement needs to clearly state that Influencers must not send email messages on the Marketers’ behalf unless specifically requested to do so.
  4. The Influencer Agreement should suggest that the Influencers protect their personal information and always respect the privacy of any third person or entity.

Additionally, the Influencer Agreement should specifically set forth that any work product or any testimonial, endorsement or marketing materials created by the Influencers in relation to the services performed are “work made for hire” under the U.S. Copyright Law and are owned by the Marketer. And the Influencer Agreement should contain a reasonable contractual time frame surrounding the continued display of any work product– in other words, the Influencer should only agree to allow the work product remain on any websites, social media or digital platforms for a time certain as otherwise : (i) the Influencer could be accused of no longer being a bona fide user of the product or services; (ii) or the Marketer could be accused of running an advertisement longer than its Influencer or endorser remains a bona fide user, both then would be in violation of the FTC Guides $255.1 (c).

In the Influencer Agreement, each Influencer should warrant:

  1. That the Influencer has the rights to assign the work product to the Marketer;
  2. That the work product will be original;
  3. That the services will be rendered in a first-class manner by the Influencer;
  4. That the Influencer for a reasonable period of time will not market competitive products or services;
  5. That the Influencer will not in any way disparage the Marketer and/or the Marketer’s products and services;
  6. That the Influencer’s statements and posts are true and factual;
  7. That the Influencer’s statements and posts will not be obscene, libelous or defamatory.
Bottom line is that marketing and promoting goods and services online is tricky and is subject to federal legislation and regulation. The foregoing summary of an Influencer Agreement and its contents is by no means exhaustive. So if you choose to use a third party’s voice - an Influencer- to do your advertising, marketing and promotions whether the Influencer be a professional athlete, a musical superstar or merely a hugely followed TikTok star, HAVE a contract. Despite the potential upside Influencers may provide, as a business or entrepreneur you can be held accountable for the actions of that third party Influencer if you do not provide contractual parameters and shift your potential liabilities.