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What Are The Legal Implications Of Influencer Marketing?

What Are The Legal Implications Of Influencer Marketing?

Engaging with influencers to market your business can be a real driver of growth. This article contains some important legal considerations for businesses using this marketing strategy.

23rd June 2020
Reading Time: 3 minutes

The use of ‘Influencers,’ or social media celebrities has grown into a highly popular marketing practice over the last decade. Businesses engage in influencer marketing because advertisements by well-known influencers are often of great benefit. Followers of influencers trust and respect their opinions about products. Therefore, a business correctly using the power of influencers can increase their brand reach, loyalty, and overall goodwill.

While there are obvious benefits, this marketing practice carries significant legal risks. These arise largely where the legal relationship between influencer and business is not clearly defined through enforceable agreement. Overall, it is important to be aware and avoid these issues when engaging influencers on social media platforms.

Legal Considerations

1. Is it a #sponsoredpost?

Influencer marketing commonly takes the form of the influencer posting an honest review about a product they have been freely provided or have been paid to try on their social media. Influencer honesty is the pinnacle of success for this form of marketing. However, it is important for the influencer to disclose the content originates from a commercial relationship between themselves and the product or service provider. Australia Post failed to do this in 2015, where it did not require influencers to disclose the paid relationship between them. Aside from appearing sneaky to consumers, this type of conduct falls foul of the Australian Association of National Advertisers (AANA) Code of Ethics. Additionally, it may also constitute misleading & deceptive conduct under the Australian Consumer Law. This opens the advertiser and influencer up to potential legal action.

To avoid liability, the influence must disclose the presence of the relationship between themselves and the supplier of products. This may occur through the use of hashtags such as #sponsoredpost, #paidAd, or #advertising. In addition, any other similar conduct that effectively conveys the commercial relationship to the general audience is effective.

2. Message Content

Businesses must set clear boundaries for what content may be posted as part of the agreement to avoid breaking the law. In particular, posts must not convey false or misleading representations about the goods or services the influencer has been provided with. There is a lack of court cases regarding influencer misrepresentation. However, it is likely that both the influencer and the business may be liable under the Australian Consumer Law where the influencer knowingly posts incorrect or misleading material.

There are also significant intellectual property concerns for marketers when engaging influencers on platforms such as TikTok and Instagram. Influencers on these platforms frequently build their success through infringing uses of copyright material. Therefore, engaging these influencers to advertise to their followers carries some risk of being sued for copyright infringement. As this material is often the basis for influencer success on platforms such as TikTok, creating engaging content without infringing copyright may be very challenging.

There are numerous other regulatory concerns for industries such as the gambling and alcohol industries that make influencer advertising a risky exercise. The best method of alleviating the above concerns is clearly communicating what influencer posts may contain. The Australian Competition & Consumer Commission sets out clear guidelines on what is acceptable to communicate to consumers.

3. Business’ use of influencers

Businesses must be careful to avoid using influencer’s brands in a manner not sanctioned by the influencer. An example of this may be photoshopping a product into an influencer’s photo, or falsely claiming an influencer uses a product or service. Commonly known as ‘influencer hijacking,’ this practice may open businesses up to liability under consumer and IP law. To avoid this situation, influencer content should not be used in advertising without permission.

4. Challenges for Marketers

Marketers using this strategy look to engage influencers with high levels of follower engagement. High numbers of followers, likes, views and comments on their profiles indicate high engagement. However, these measures may be frequently and easily faked through pay-for-follow schemes. Therefore, marketers face the risk of engaging a fraudulent influencer where the positive effects of the arrangement are significantly less.

Influencer Agreement – the benefits

The most effective way to avoid the above legal issues is to create an enforceable Influencer Agreement between the influencer and your business. Our Influencer Agreement clearly explains the rights and responsibilities of both parties. This greater clarity will translate into greater benefits for your business using influencers to market your goods and services.

Don’t know where to start?
Contact a Lawpath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Alistair Maclennan

Alistair is a Legal Intern at Lawpath. He is currently studying a Bachelor of Laws at Macquarie University. He is primarily interested in how changes in the digital space influence business activity, privacy, and freedom of speech.