Social Media Influencer Marketing and Legal Considerations
You may have heard of or even use “Social Media Influencers.” This is where businesses sometimes try to reach a broader audience by enlisting “social media influencers,” a term for people who have achieved some level of popularity or recognition online. Social media influencers endorse a product or service offered by a business on platforms like Facebook, Instagram, Twitter, YouTube, or TikTok. In exchange, the business provides them with money, free products or services, or a combination. There are four main tiers of influencers:
- Nano Influencers: 10,000 or fewer followers
- Influencers: 10,000 to 100,000 follower
- Macro Influencers: 100,000 to 1,000,000 followers
- Maga Influencers: 1,000,000 or more followers
Using Social media influencers can be a creative and cost-effective marketing strategy, but it does not come without potential problems and risks. The Federal Trade Commission (FTC) has provided key guidelines in this area. Businesses and sometimes influencers may face legal trouble if they fail to comply with the guidelines. Moreover, poorly created contracts between businesses and influencers can lead to disputes between them. Each side should understand their legal rights and obligations to the public and to each other before entering into a business relationship.
Section 5(a) of the Federal Trade Commission Act prohibits unfair or deceptive acts or practices that affect commerce. This law empowers the FTC to regulate endorsements. The FTC released guidelines concerning the use of endorsements and testimonials in advertising, which affect the activities of influencers. The guides define “endorsement” broadly as any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of someone other than the sponsoring advertiser.
Among other things, the FTC guides provide that an endorsement should reflect the honest opinions, findings, beliefs, or experience of an influencer or other endorser. An endorsement should not convey a representation that would be deceptive if made by the business. It should not be presented out of context or otherwise distort an influencer’s opinion or experience. An influencer should have been a good faith user of the product when the endorsement was given if an advertisement represents that the influencer uses the product.
When an advertisement says or implies that an influencer is an expert with respect to the endorsement message, their qualifications should give them the expertise that they are represented as possessing. For example, an endorsement of skin care products by a person described as a “doctor” would be deceptive if the doctor is a brain surgeon. An expert should actually exercise their expertise in evaluating the product’s features or characteristics.
An influencer should fully disclose any connection with a business that might materially affect the weight or credibility of an endorsement. This might be a personal or employment relationship, such as when the influencer is a relative of the business owner or is a full-time employee of the business. More often, the relationship is financial, such as when a business provides an influencer with money or free products. The FTC has released specific disclosure tips for social media influencers.
CONTRACTS BETWEEN INFLUENCERS AND BUSINESSES:
Creating an agreement with an influencer to market a product or service may seem straightforward, but the contract should require the influencer to comply with applicable laws and cooperate with the business in any regulatory action related to the contract. Other terms that should be included relate to messaging, content restrictions, content editing, content removal, and morals and behavior clauses. The contract should designate the influencer as an independent contractor rather than an employee or partner. However, a business still should avoid exercising too much control over the influencer’s work, since this could lead to their classification as an employee even if the agreement says otherwise.
Kelly Bagla, Esq. is an award-winning Business Formation and Asset Protection Lawyer in San Diego.