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February 28, 2023

Five Key Legal Considerations in Influencer Marketing

Influencer marketing and the creation of sponsored content is an increasingly popular way for brands to reach their target audience. Although there is no universal definition of an “influencer,” the term is broadly used to describe people who are able to affect purchasing decisions of others through their relationship with their audience. In the context of social media and the creator economy, influencers are usually people with significant followings on platforms such as Instagram, TikTok, Twitch, or YouTube who are viewed as celebrities, opinion leaders, trendsetters, or experts in their respective field. Based on a study conducted by Nielsen in 2022, 80% of social media users in Asia who follow influencers are likely to purchase products recommended by the influencers.

Brand owners should be aware of five key legal considerations when entering into influencer marketing agreements.

1. Making informed decisions through due diligence

Every collaboration with an influencer is a business relationship. Brands must conduct thorough due diligence on potential influencers prior to engaging them. This may include deep dives into the individual’s old social media posts, as well as requests for disclosure of prior controversial incidents and existing brand associations. For example, a health and fitness brand may not want—for both legal and commercial reasons—to be publicly associated with an influencer who is a brand ambassador of electronic cigarettes, no matter how impressive the latter’s Instagram following or deadlift record is.

Brands should also ensure that their influencer marketing agreements include relevant representations and warranties that the influencer has not and will not commit a crime or act in a way that may cause negative publicity for the brand. This may include racist, extremist, homophobic, violent, or misogynistic acts, or any other acts that are obscene or against public order.

2. Clearly defining the scope of engagement

Brands must first ensure they are contracting with the correct party, as some influencers may be managed exclusively by a talent agency. Certain influencers are known for their use of various characters or personas in their content creation process, including the use of virtual characters—brands that have a preference for a specific persona to be adopted must state so in the agreement.

Every influencer marketing agreement must also contain clear commercial terms of engagement. In addition to information about the campaign period and go live dates, the agreement should describe the deliverables and the platforms on which they will be published. For example, in omnichannel campaigns, will the influencer be required to make a separate short-form video for TikTok, or can they use an excerpt of the content originally published on their YouTube channel?

An influencer marketing agreement should also define payment models and timelines, such as whether an influencer is paid a fixed rate per post across a fixed number of social media platforms, or if the influencer earns an affiliate kickback every time a consumer purchases the product through a link or uses a promotional code.

Another important consideration is the exclusivity of the engagement. Although brands may be inclined to restrict influencers from promoting competitive products or services, this may not be feasible if an influencer has a niche following, if such restrictions are against competition laws in the relevant jurisdiction, or if it gives rises to a potential employer-employee relationship under local laws. To mitigate such risks, a brand may want to limit exclusivity to only specific platforms that its target audience is most active on, or to limit the exclusivity period—such as with a fixed blackout period.

3. Addressing publicity rights and intellectual property ownership

In theory, the deliverables of an influencer may be deemed as commissioned works, for which the copyright would belong to the brand commissioning them. However, the creation of the deliverables often incorporates the use of third-party intellectual property rights, such as the use of third party-owned sound effects in the production of a video. Additionally, if the deliverables are published on third-party platforms, they are also bound by the platforms’ terms of service. For instance, certain hosting platforms may deem themselves as the assignee of the rights in the content upon publication, whereas others may require the party uploading the content to grant them a perpetual royalty-free license to use the content. In certain engagements, brands may prefer to publish the deliverables on their own platforms rather than on an influencer’s channel hosted on a third party platform. Whichever arrangement is preferred, brands must clearly define intellectual property rights ownership and publicity rights in the contracts with influencers.

Influencer marketing agreements should also contain robust intellectual property warranties from influencers, such as warranties related to the non-infringement of third party intellectual property rights. For example, brands may want to prohibit influencers from using third-party trademarks, even if authorized by the third-party trademark owner. Brands would also want to restrict influencers from using unlicensed music or other unlicensed content, and to impose further restrictions regarding inclusion or depiction of other third party materials in the deliverables.

4. Exercising reasonable control and auditing rights

Brands need to strike a careful balance between enabling influencers to present their authentic selves and exercising control for compliance with the brands’ internal policies. For example, a brand that champions body positivity may want to restrict influencers from using editing techniques that alter the influencers’ physical image, and a skincare company would want its agreement to include provisions prohibiting influencers from using photo filters that create misleading impressions of the products’ effects. Other contractual considerations include requiring influencers to obtain the brands’ preapproval before posting any content, mandating use of prescribed campaign hashtags, and reserving the right to have the influencers remove or maintain content upon request (such as at the end of a marketing campaign).

Brands would also want influencers to provide clear and accurate data on audience demographics, engagement metrics, and outcomes. For example, if a particular agreement stipulates the use of affiliate links and pay-per-click arrangements, brands should put in place systems for auditing the data, to verify whether the traffic is generated organically or through the use of bots. The agreement should therefore contain provisions requiring influencers to cooperate with brands’ audit requests.

5. Staying informed about relevant laws and regulations

Finally, brands should be mindful of the laws, regulations, and guidelines applicable in the jurisdictions they operate in, and keep themselves updated about in relevant regulatory changes. For example, advertising and consumer protection laws in certain countries mandate disclosure of sponsored content, while others have also enacted legislation regulating product placement in content. For certain regulated industries such as financial products and services, brands and influencers deemed to be dispensing investment advice without a license also risk breaching financial services laws.

Many government agencies and advertising associations have enacted regulations and guidelines to regulate influencer marketing. In the US, the Federal Trade Commission published its Disclosures 101 for Social Media Influencers guidelines in November 2019 to help brands and influencers avoid legal risks arising from unfair or deceptive acts. In the UK, the Incorporated Society of British Advertisers launched its Influencer Marketing Code of Conduct in September 2021. In June 2022, China’s National Radio and Television Administration published a comprehensive set of guidelines to regulate livestreaming activities, a popular form of social media influencing in China. In addition to prohibiting publication and promotion of IP-infringing content and products, the guidelines also prohibit livestreaming hosts from publishing content that displays food waste, and content that promotes destruction of the environment. Additionally, the guidelines state that livestreaming hosts may not publish content related to medicine, finance, law, or education unless they have the necessary qualifications or certifications to do so.

Engaging the Creator Economy

A May 2022 study by Adobe Inc. shows that more than 165 million creators have joined the creator economy since 2020. In Southeast Asia, other studies have indicated that the influencer marketing industry is expected to reach USD 2.59 billion by 2024. With the increased democratization and decentralization of the internet, influencer marketing will continue to play a huge role for brands in their marketing efforts. Therefore, brands must carefully consider the legal implications involved in these business collaborations and take proactive steps in crafting an effective, ethical, and legally compliant influencer marketing program that is aligned with their brand values.

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