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Influencer marketing isn’t a new concept in the retail industry. Yet it’s grown to wildly popular levels in the past few years. With one billion monthly users on Instagram and global influencer advertising spend exceeding $5.7 billion, the race for authentic, influencer-generated content is increasingly competitive. Driven by the need to create content that effectively engages with audiences, companies of every kind are pressured to engage social media influencers who can distinguish their brands and solidify their online presences. However, connecting with consumers through influencers is fraught with legal pitfalls that can have unexpected negative business consequences. 

In short, influencer marketing is a relationship between a brand and an “influencer”—a person who has a social media presence with a substantial audience, enabling the individual to persuade others to act on his or her recommendations. The influencer promotes the brand’s products or services through various social media platforms, such as Instagram and YouTube. Not to be confused with celebrity endorsements, influencer marketing does more than just attach a well-known celebrity to a brand. Influencers must be trusted figures within a niche community and a loyal following. In addition, they typically possess knowledge or experience about what they are advertising, allowing them to “naturally” or “authentically” promote brands through their posts. 

Despite the natural feel of an influencer’s post, the content is inarguably subject to Federal Trade Commission (FTC) regulations prohibiting unfair and deceptive acts or practices. As a threshold matter, that means all material connections between the brand and the influencer must be disclosed. Although the endorsement disclosure can be made in a hashtag or through context, it must be clear and conspicuous. Also, there is a growing body of authority on what suffices. And posts cannot convey, express, or imply a representation that would be deceptive if made directly by the brand or a traditional advertiser. Plus, posts can’t omit required representations. Bottom line: If the brand can’t say it, neither can the brand’s influencer. 

While companies expend significant efforts and resources to finely tune advertising campaigns and build brands in traditional marketing outlets or even social media, influencer advertising is less controlled—and therefore, riskier. Influencers operate independently, creating their own content and integrating a company’s advertising specifications into it. The influencer is in control of the brand’s message, choosing how he or she would like to portray it, which correspondingly underscores authenticity. While monitoring an influencer can be challenging, it is essential that brands do so to prevent an influencer from posting offensive, immoral, or age inappropriate content. Brands also must determine if the influencer is infringing intellectual property rights. 

All of these risks can and should be addressed in a comprehensive influencer agreement that avoids creating an employer-employee relationship. Judgment calls will need to be made, but there are some specific areas where companies can greatly reduce their exposure, or at least contract for indemnification.

With the FTC taking a more public enforcement stance and companies actively monitoring for intellectual property infringements, failure to address influencer advertising risks could lead to litigation, regulatory sanctions, and significant brand damage.

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.