Influence At Your Own Risk: Navigating Influencer Contracts

It is important for business owners and media creators to be aware of this rapidly evolving regulatory landscape as they leverage new marketing opportunities to keep their brands fresh and engaging.

Working with influencers can, at best, amplify a brand’s message, attract new customers, and drive sales, and at worst, tarnish a brand’s reputation. In this alert, we discuss three essential legal concepts brand owners should consider when partnering with influencers.

1. Effective Disclosures

The FTC has published Endorsement Guides, guidelines that govern the relationship between advertisers and endorsers, including influencers, that require that any material connection between the brand and the influencer be clearly and conspicuously disclosed. The goal is to ensure that consumers understand when they’re being marketed to, enabling them to make informed decisions. Effective disclosures often include the use of hashtags (#Ad, #SponsoredContent, etc.) at the start of social media posts.

 2. Advertising to Children

Many social media users are children under the age of 12. The FTC has specific rules for content directed at this audience, intended to address and prevent “stealth advertising.” Influencer content dealing with areas of potential interest to children is at higher risk than other types of content, especially when the relationship between the advertiser and the influencer is not clear.

3. Brand Protection

A company’s intellectual property is often a powerful asset whose value needs to be protected. The following are a few concepts brand owners may consider when building relationships with influencers.

• Approval Rights. It is important to clearly outline who has control of creative content the influencer posts about the brand, including establishing approval timelines and determining whether the brand has final say. A company with approval rights can ensure that content accurately represents the brand and aligns with its image. Approval rights also position the brand to verify that posts comply with FTC guidelines and other laws.
• Exclusivity. Exclusivity clauses are used to prevent influencers from endorsing competitors of the brand. These clauses must strike a balance between the brand’s interest in avoiding confusion with other brands and the influencer’s interest in maintaining opportunities for future endorsement deals. The parties should negotiate the length of exclusivity, the definition of who is considered a competitor, and any situations where the influencer is permitted to be involved with a competitor. 
• IP License. In order to protect a brand’s intellectual property, influencer agreements should clearly establish the trademarks and brand content the influencer can use, the permitted channels and methods of use, and the period of use, including if posts or other uses are required to be deleted or taken down after a certain period of time.
• Morals Clauses. A brand should consider the potential for an influencer to say or do something that does not align with a brand’s values, particularly if brand’s IP will remain displayed on the influencer’s social media pages for an extended period. Brands often attempt to mitigate this risk through so-called “morals clauses.” The parties should negotiate triggering conditions, as well as remedies and actions available if a clause is triggered. These can include immediate removal of content, financial consequences, and termination of the agreement.
• Risk-Reduction. Although the FTC holds influencers liable for their content, companies are not immune to liability for influencer action. Not only could a brand face potential fines or monetary liability, but an influencer who runs afoul of FTC regulations can damage the reputation of the brands they have endorsed. Making sure that influencers are aware of the regulations that govern their behavior and monitoring their posts can help reduce the risk of future FTC intervention.

Influencer contracts and endorsement deals can have powerful implications for any business collaborating with influencers. Moreover, poorly drafted agreements carry big risks for influencers and advertisers alike. Failure to comply with FTC regulations can result in hefty fines and damage to brand reputation.

If you would like to find out more about risk-reduction and whether you or your business’ influencer arrangements are FTC compliant, please reach out to your ArentFox Schiff contact or any member of the AFS Advertising and Promotions team.