Triple Threat: Range of Legal Liability for Influencers
Triple Threat: Range of Legal Liability for Influencers
While the world was busy criticizing millennials for being glued to their phones, they were busy creating a multi-billion-dollar industry . . . on their phones, of course.
Brand marketing is no novel idea but the booming influencer industry sure is. Thanks to social media platforms like Instagram and Facebook, brand endorsement is no longer just for the rich and famous. Seemingly anyone with a large enough following on social media can become an influencer with an income—getting paid for any number of posts, videos, or other agreed-upon endorsements. Glass half full? Absolutely. There’s a clear market, a proven demand, and a great many brands that have already tapped into this industry’s potential. Half empty? Thousands of people are signing endorsement contracts without fully understanding just how far their potential liability stretches—not simply to the brand that’s paying them, but to the federal government and to consumers across America, as well.
Brand or Company
An influencer’s main source of liability stems from the terms of the employment contract he/she signs. The specific language within such contracts is vitally important because it provides the foundation for a breach of contract lawsuit down the road, should either party pursue one. An employment contract may stipulate the design, type, format, and number of social media posts the influencer is expected to publish. For example, in a lawsuit filed by Studio 71, LP against Bethany Mota, a Dancing With the Stars alum with over 10 million YouTube subscribers, Mota was accused of breaching the terms of her influencer contract with Studio 71 by failing to incorporate several creative components into the YouTube video she was paid to produce. Studio 71, LP v. Mota, No. BC672871 (Cal. Super. Ct. Aug. 18, 2017). In the video, Mota was expected to promote a well-known skincare brand by, among other things, incorporating specific footage that had been shot at Studio 71, LP’s expense. When the final product failed to include this footage, Studio 71, LP sued Mota for breach of contract. This is merely one example of the importance of knowing the terms of your contract and consulting an attorney beforehand to fully understand both parties’ expectations.
Failure to abide by an influencer contract’s terms may also serve as the basis for additional causes of action including, but not limited to, fraud, negligent misrepresentation, and breach of the covenant of good faith and fair dealing.
Federal Agencies
Another huge potential for liability is with various federal agencies including, but not limited to, the Federal Trade Commission (“FTC”), the Food and Drug Administration (“FDA”), and the Securities and Exchange Commission (“SEC”). Endorsements and testimonials, even in the form of influencer posts and videos, constitute forms of product advertising which are regulated by the FTC. “Endorsers, influencers, and other marketing partners shouldn’t assume legal compliance is someone else’s job,” warns the FTC. Lesley Fair, FTC-FDA warning letters: Influential to influencers and marketers, FTC (June 7, 2019 11:59 AM), https://www.ftc.gov/news-events/blogs/business-blog/2019/06/ftc-fda-warning-letters-influential-influencers-marketers.
For several years now, the FTC has more vigorously policed social media marketing through educational letters, warning letters, and formal complaints. See FTC Social Media Actions, truthinadvertising.org, https://www.truthinadvertising.org/ftc-social-media-actions/ (last updated Aug. 29, 2019). The most recent warning letters, sent in June of 2019, were addressed to sellers of e-liquids—the nicotine liquid used in vaping devices. Id. The complaints stemmed from social media posts featuring the e-liquids that were posted not by the companies themselves, but by influencers marketing the companies’ products on social media. Because e-liquids contain nicotine, they fall within the purview of the Food, Drug, and Cosmetics Act and, as such, all advertisements of e-liquids—including those made on social media by endorsers—must include an FDA-required warning. Noncompliance exposes both the company and the influencer to liability with (1) the FDA, for failure to include the warning; and (2) the FTC, for unfair or deceptive practices. If influencers are endorsing products regulated by the FDA—anything from dietary supplements and tobacco products to nail polish and skin moisturizers—they are responsible for ensuring that all mandatory FDA disclosures, labels, and warnings are included in their posts. As such, it is incredibly important that you know the type of product you are endorsing and consult an attorney to determine which federal and state laws regulate the sale and advertisement of that specific product.
Influencers can no longer hide behind the guise of ignorance and neither can the companies hiring them. FTC publications and sound business practices maintain that companies should have written social media advertising policies in place that set out what endorsers need to do when posting to be compliant with federal regulations. Companies should have these policies written out before hiring influencers and should expressly incorporate them into their influencer contracts. The FTC has made clear that companies have a duty to educate their influencers on FTC compliance and to vigilantly monitor what their influencers are posting throughout the duration of their employment. In turn, influencers cannot shirk their own duty to comply with federal advertising guidelines by shifting the blame onto the company they work for. Because both parties have an independent duty to stay informed and to comply with federal regulations, companies and influencers alike are encouraged to seek legal advice.
Consumers
Although lawsuits by members of the general public are not common, they are nevertheless an option. When influencers post content on social media endorsing certain brands or products, they are under a legal obligation to keep such content truthful. This is, in part, because the goal and function of an endorsement is to convince, or influence, consumers to purchase the product being advertised. As such, consumers are likely to rely on the statements and representations made by influencers. Untruthful, misleading, or otherwise fraudulent endorsements can give some consumers adequate grounds to personally sue an influencer based on fraud, negligent misrepresentation, breach of contract, and/or breach of the covenant of good faith and fair dealing. As discussed above, such misrepresentations are also likely to subject an influencer to disciplinary action by federal agencies like the FTC.
The lawsuits that arose out of the infamous Fyre Festival are a prime example of the legal liability that influencers may incur for misleading social media endorsements. The music festival made national headlines in 2017 when thousands of festival-goers purchased tickets and flew to The Bahamas for the event, only to find a “lack of adequate food, water, shelter, and medical care,” among a list of other shortcomings. See Chinery v. Fyre Media, Inc., No. BC659938 (Cal. Super. Ct. May 2, 2017) (available at https://www.manatt.com/Manatt/media/Media/PDF/Newsletters/Advertising%20Law/Chinery-v-Fyre-Media,-Inc.pdf). Disappointed attendees thereafter filed a class action lawsuit against not only the organizers of the event, but against the social media and celebrity influencers who endorsed the Fyre Festival, as well. Id. Specifically, the complaint alleged that “[w]ithout the widespread and uniform dissemination of the false promise” created by festival organizers and the influencers they hired, members of the public would have never purchased tickets to the event. Id. Influencers can, not surprisingly, be on the hook for the effects that their influence has on the public.
In sum, the fledgling influencer industry makes it ripe for legal action. Endorsers and companies face a range of legal issues in the scope of their employment and the importance of consulting with an attorney cannot be overstated.
For more information on the above or to secure representation, feel free to contact Johnson | Dalal at (954) 507-4500 and ask to speak to one of our qualified attorneys at no charge. We look forward to answering any questions you may have.
