Influencer marketing boom raises compliance issues for luxury brands

20 Dec 2021 , 5:26pm

As brands deepen relationships with influencers, contracts are becoming more complex, web seminar finds

The influencer marketing industry is expected to be worth almost $14bn this year, up from $1.7bn in 2016, as brands increasingly turn to online personalities to help promote their products. That growth is also intensifying scrutiny from regulators.
 
“Influencer marketing is a very fast-growing industry and one that is changing a lot, so it’s certainly staying ahead of legislation,” Craig Giles, a partner at Bird & Bird, told a recent web seminar jointly hosted by the Luxury Law Alliance – which is affiliated with The Global Legal Post – and Bird & Bird.
 
“What we are also finding,” he added, “is in territories across the world it’s not just the core legislation you have to look at, you also have to look increasingly at a set of guidelines that various regulatory authorities have set up to better regulate influencer marketing and keep up with its development.”
 
The online event Influencer Marketing: Trends, Tips and Opportunities for Luxury Brands featured guest speakers Sara Citterio, group general counsel at Trussardi, Monica Kristensen, senior legal counsel at Loro Piana, and Suzanne Stal, head of digital at the advertising agency UPR Netherlands. The panel was chaired by Milan-based Bird & Bird counsel Rita Tardiolo.

The web seminar heard how brands must be ever alert to new guidelines and reflect them in their influencer agreements if they are to ensure they remain on the right side of the regulations. The need for transparency is a key part of the equation.

Social media advertising

“When you are posting an ad on any form of social media you have to make it absolutely clear that it is an advert,” said Giles.
 
“In the UK, for example, influencer marketing is usually considered to be an ad if there are two elements present – the first is you have to be paying your influencer in some way, either in cash or in-kind, and the second is the advertiser has to have an element of control over the post.”
 
If brands gift products to an influencer, even if there is no element of control over how the influencer talks about the product, that would still be considered a commercial relationship which needs to be made clear in any posts, said Giles. Different territories might also require disclaimers to be posted in the local language, as well as ensuring they are displayed prominently, he added.
 
“You need to consider the timing and place of your disclosures. In the UK there are decisions by the regulators that look at that – for example if you have a string of hashtags, you should include one that says this is an ad at the start rather than burying it somewhere later on. Similarly with video content, it should make it clear that it is a commercial message right at the start of that video rather than at the end when people might miss it.”

Enforcement
 
Regulators have also been stepping up their enforcement efforts. The Competition and Markets Authority (CMA) in the UK, for instance, has increasingly focused on influencer marketing over the past two years. In 2019, it sought formal commitments from 16 celebrities including Rita Ora and Ellie Goulding to clearly state on future posts if they have been paid or received gifts or loans of products they are endorsing. 
 
In 2020, the CMA also took action against Instagram to force the social media platform to make it harder to post hidden ads, such as extending its ‘paid promotion’ tool to all users.
 
“We’re definitely seeing a move now from regulators trying to look at not only influencers but trying to work more with platforms to help them regulate in this area,” said Giles.

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Bird & Bird contributed the Hong Kong, Singapore and Spain chapters of the Law Over Borders Fashion Law comparative guide; click here for answers and insight into the law around the business of fashion in 18 jurisdictions around the world

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Contracts

Running parallel to this regulatory scrutiny has been a professionalisation of the relationship between brands and influencers.
 
For example, some organisations are now seeking pre-approval before influencers publish any posts to ensure they are complying with regulations and that the tone is aligned with the brand. This professionalisation has naturally led to greater input from in-house legal teams.
 
“Loro Piana has recently entered in the world of collaboration with influencers,” explained Kristensen, “and is seeking the right balance in contractual terms with influencers in order to ensure the right brand image is communication to consumers.”
 
Citterio added: “We’ve been working with influencers and micro influencers since the beginning of 2015 and back then there was no legislation whatsoever in Italy except for the rules on advertising that were generally applicable to these sorts of relationships. There was a lot of misapprehension around this and a lot of contracts had been left to simple exchanges and emails with indications about the nature of the collaboration.”
 
Italy’s competition authority soon after began sending moral suasion letters to some of the country’s top influencers and brands undertaking this type of marketing to ensure such communications were clearly labelled as sponsored ads.
 
“In Europe there are slight variations from country to country on how to disclose commercial relationships so you just have to pay attention when you’re engaging with a local influencer to make sure that you have understood everything that has been written in respect to the disclosure of cooperation,” said Citterio.
 
Contracts are also becoming heftier as provisions increase and brands seek to protect their commercial relationships with influencers, such as introducing exclusivity clauses.
 
“Companies might want to lock the influencer out from working with certain named competitors or a certain section of the market to stop competitors riding on the coattails of the success of an influencer marketing campaign,” said Giles.

Morality clauses

Companies are also increasingly inserting morality clauses into influencer contracts to safeguard against negative publicity – not just for high-profile influencers but also micro-level influencers, Giles explained.
 
“There are probably certain types of behaviour that organisations don’t want their brand associated with and so they might want the opportunity to sever ties with that influencer,” said Giles. “Brands also need to think about what are the most appropriate mechanisms for contractual breach – it may be that getting the influencer to take down posts is easier than trying to sue for breach of contract.”
 
The nature of influencer partnerships is broadening and deepening at the same time, with some brands striking up ever-closer partnerships with influencers.
 
UPR’s Stal said: “There are various ways of collaborating with influencers – from low-intensity, low brand loyalty and mostly unpaid local profiles coming to brand events or receiving products, to high-intensity high brand loyalty collaborations with internationally known personas for brand ambassadorship on long-term partnerships.”
 
Some brands are now offering performance-based contracts where influencers get paid commission according to the success of their campaign, as well as establishing brand ambassadorships and co-creator relationships.
 
“These are just some of the reasons why influencer contracts are becoming much longer and much more complex,” Giles concluded.

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The Law Over Borders Fashion Law comparative guide, which is published by Global Legal Post, features three chapters written by Bird & Bird lawyers.

The authors are as follows: