Influencer Marketing Horizon Scanning – Navigating change and understanding the key legal issues

By Ted Powell, Amelia Darbro and Claire Jowett

It’s an exciting time for those working in the influencer marketing space, as the industry continues to establish itself. Back in 2016, the industry was valued at $1.7 billion. Fast-forward to 2020, and it was valued at $9.7 billion and this rapid growth is set to continue in the years ahead. With approximately 17% of companies spending over half of their marketing budget on influencer deals in 2020, it is clear that influencer marketing is delivering return on investment, and is very much ingrained in the future of e-commerce.

Looking forward, the evolution of the industry is likely to be driven by ever-shifting consumer behaviours and demands, following changes brought about, in part, by the global pandemic. But what impact will this have on influencers and brands, and what legal issues could arise as a result?

Cause-led marketing and content

The change

The number one trend identified in the Talkwalker and HubSpot 2021 Social Media Trends Report is the rise in socially conscious consumers; whereby purchasing decisions are motivated by a commitment to making a positive social, environmental or economic impact. Such trends have, and will, cause influencers to produce cause-led content, which draws on the positive social impacts of a brand or product, to remain relevant and maintain strong engagement levels. Likewise, brands will feel pressure to move towards creating cause-led marketing campaigns and products, in order to attract increasingly conscious consumers, whilst demonstrating a commitment to making socially-responsible corporate decisions. In fact, many brands are increasingly striving for B Corp status (a powerful marketing tool in itself); a certification that recognises businesses, such as Patagonia, that meet the highest standards of verified social and environmental performance.

Topics such as global warming, politics, equality, diversity, education, mental health and animal rights are frequently discussed on social media amongst Gen Z users. However, it’s not all talk and no action, as Kantar’s research has revealed that Gen Z, for example, are 1.4 times more likely to pay a premium for eco-friendly products. Influencers have the ability to tap into this demand, and have a positive impact in relation to important causes, due to their highly-engaged and far-reaching audiences.

However, cause-led content and cause-led marketing campaigns need to be approached sensitively. As social causes are discussed more openly on social media, there is a risk that influencers might promote controversial or offensive points of view. There are positives and negatives of doing so; many influencers want to challenge misconceptions, but if brand partnerships are important to them, they need to be mindful as to how their opinion may be construed, and whether this has scope to cause reputational damage to both the influencer and the brand.

The legal issues 

Most influencer agreements contain terms that prevent the influencer from doing anything that could bring the influencer or the brand into disrepute. This is a broad requirement, and so should be approached with caution, as a breach of such a provision could allow the brand to terminate the agreement and withhold payment. In certain circumstances, the brand may also be able to claim damages from the influencer to address the financial detriment suffered by the brand as a result of reputational damage caused by the influencer.

Back in 2017, PewDiePie was the world’s highest paid YouTuber. PewDiePie earned around $15 million a year due to lucrative deals with large brands, such as Disney. However, Disney severed ties with him due to several anti-Semitic jokes made in his videos. This demonstrates the serious consequences that may result from offence content being produced.

In light of this, when producing content, influencers  should carefully consider whether the content could damage the reputation of the brands associated with them. Influencers may wish to obtain a second opinion prior to posting; whether this is from a brand’s approval team, or from their agent.

Increasingly, we are seeing that brands wish to include more restrictive influencer warranties which limit what the influencer can and can’t say. A balance needs to be struck between limiting the influencer’s authenticity by denying certain messaging, whilst also ensuring the brand has a level of damage-control built into the contract.

Live shopping and social commerce

The change

Live shopping and influencer-marketing-driven social commerce are set to become one of the key trends in 2022, partly as a result of the pandemic-related surge in online shopping. In a 2020 survey, two-thirds of Chinese consumers had bought products via a livestream in the previous year. Whilst retailers in Europe and the US are yet to demonstrate similar levels of uptake in live commerce, early movers are beginning to benefit from significant sales, and social media platforms are increasingly launching innovative shopping tools to facilitate such change.

It is likely that brands will make sizeable investments in this area, as industry experts anticipate that live shopping will account for as much as 10 – 20% of all e-commerce by 2026. The convenience of live shopping and social selling also aligns with changing buying behaviours, and enables consumers to discover a product and purchase it within minutes; all on the same app. Brands will need to revaluate their purchasing paths offered, and explore the opportunities of engaging influencers to work with them in QVC-style shopping or by promoting purchasing through new seamless in-platform shopping offerings.

The legal issues

With live shopping, the brand has less control over how the influencer promotes their product or service. Therefore, a brand is only likely to collaborate with an influencer in this regard if they consider them trustworthy, and a genuine advocate of the brand.

With lack of control comes more stringent contractual restrictions on the influencer. It is important that the influencer agreement stipulates the extent of an influencer’s ‘honest review’ that may be provided, and any key product information that must be included in the paid-for content. There is also a need for the influencer’s messaging to be accurate, and not to misrepresent any aspects of the product or service; as even though the live content can be deleted once posted to the influencer’s or the brand’s channel, the damage may already be done if the influencer gets it wrong.

Buyers may have a claim against the brand under the Consumer Rights Act 2015 if the products they purchase do not match the description provided by the influencer on the live stream, or if the products do not conform with the product featured in the content. As a result, brands, agents and influencers should work together to select the right influencers for live shopping events and ensure they are fully briefed about the product. Attaching a comprehensive brief to the contract, or arranging a meeting with the influencer in advance of the content creation, are practical steps brands, agents and influencers can take to reduce the risk of miss-selling a product.

It’s also important to check for indemnity clauses in contracts, which could make the influencer liable to the brand if the brand is sued because a product doesn’t match the influencer’s description. These clauses could result in significant exposure for the influencer and, as a result, a balance should be struck to cap the influencer’s liability under the clause whilst protecting the brand’s position.

Video-first 

The change

Whether it’s short-form or long-form, video is expected to dominate social media engagement in 2022; through its ability to demonstrate authenticity through storytelling, whilst also being engaging and easy to digest.

TikTok was the most downloaded app in 2020 and lots of platforms have attempted to follow in its easily-editable and musically-inherent footsteps. In June 2021, the need for social platforms to compete with TikTok was evident, when the Head of Instagram, Adam Mosseri, announced (via an Instagram video post) that Instagram is “no longer just a square photo-sharing app.”, and acknowledged that video content can be more entertaining. As social media platforms pivot to a more video-focused approach, influencers and brands are likely to start producing more sponsored video content.

However, as platforms continue to develop new video offerings at such a pace, they will need to create and test creator monetization tools that sit behind them in order to compete. Instagram has recognised this, and has introduced an alternative revenue stream for influencers through ad revenue associated with in-stream video ads on IGTV. Once fully rolled-out, there’s scope for video creators to earn 55% of ad revenue generated from their videos; in line with YouTube’s ad revenue share. On the flip side, such change also creates additional opportunities for brands, whose adverts can feature in the videos, and allows for greater audience targeting.

The legal issues 

In influencer brand deals, the deliverables are the key outputs that the influencer needs to produce under the agreement. With video content, it is crucial that brand expectations are made clear in the description of the content; even more so than with static posts, particularly because video content usually commands a higher fee (and therefore higher expectations from the brand).

Influencers should carefully review the contractual terms to understand the specifications of the video that they’re required to produce. Such requirements might relate to the style and format of the video, its length and the key messaging included. To minimise the risk of disputes arising in relation to video content, care should be taken when negotiating the description of the deliverables in the agreement, to ensure it is in line with what the influencer can, and is willing to, actually produce.

The brand’s approval rights should also be reviewed and possibly negotiated. The influencer should consider whether they would be willing to re-shoot video content (or just re-edit it), as well as how many rounds of approval that they will be comfortable agreeing to given the increased time required to shoot and edit video content. 

Influencers should also be alive to the intricacies of disclosing paid-for content on, or within, video content. Most platforms now offer a paid promotion disclosure option, which assists with this, but appropriate ‘AD’ labelling is still required under the advertising rules. Where a small segment of the video contains material that counts as advertising, this should be clearly distinguished from the remaining editorial content of the video; so that consumers recognise when the ad begins and ends. Where the entire video is an advertisement, ‘AD’ should feature in the video title (and possibly the thumbnail, as appropriate), or prominently on the video where viewers can click onto the video without necessarily viewing the video title.

The Advertising Standards Authority (ASA) has adopted a stricter approach to addressing non-compliance with the advertising rules in recent months, after finding that the rules were only being followed  by influencers 35% of the time. The ASA’s sanctions include naming and shaming for breaching the ASA rules, or requiring the removal of the content from the influencer’s channel.

Removal of content and the breaching of advertising rules and regulations could also cause the influencer to breach their contract with the brand, which may result in the reimbursement of fees paid (or the withholding of future fees by the brand), claims for damages, and reputational damage to the brand. In this scenario, future brand partnership deals will also be jeopardised, and so there is a long-term incentive in getting it right. It is therefore crucial that influencers and brands monitor changes to, and ensure the content is fully compliant with, the advertising rules. Where the application is unclear to the type of content being produced, particularly in respect of the new content tools on offer, legal advice should be sought in advance of posting the relevant content.

Summary

There is a lot to look forward to in the influencer marketing pipeline and a great deal of change on the horizon for both influencers and brands. In light of this change, it’s important that brand deals are not rushed into, and appropriate provisions are incorporated into the contract to reduce risk and ensure expectations are clear. Taking time in such a fast-paced industry can be difficult, but there is huge value for both parties in doing so; especially where there are motivations to build a long-term working relationship between the influencer and the brand.

Irwin Mitchell provides legal support to some of the best known influencers, podcasters, agents and brands in the influencer marketing space. For further information in relation to the points discussed above, or to find out more about our services, please contact Ted Powell (ted.powell@irwinmitchell.com) or Amelia Darbro (amelia.darbro@irwinmitchell.com) from our Media & Entertainment Team.

It’s important that brand deals are not rushed into, and appropriate provisions are incorporated into the contract to reduce risk and ensure expectations are clear.”