Influencer marketing is a growing industry, with predictions that it will become a $5-$10 billion dollar market over the next 5 years. As with any rapidly growing industry, influencer marketing has endured a few teething problems, such as FTC violations and contract breaches, as people try to navigate the legalities. Over the last 18 months, there has been a spate of influencer lawsuits, too.
The FTC has made their position on deceptive influencer actions known. Influencers, marketers, and brands are now privy to the FTC expectations, regulations, and contract guidelines. However, there are still influencers and brands who try to skirt the FTC requirements.
The stakes are high. With large sums of money on the line for brands, they–and the FTC–aren’t letting influencers off easy. Macro-influencers often receive more than $50,000 for a single post, so it is vital that influencers play by the rules. When brands pay for a service, they expect influencers to do the work for which they have been paid. It should not be any surprise to see brands actively pursuing cases of influencer contract violation.
On the surface, influencer marketing should be simple. There is a clear process: brands contract influencers to promote them, influencers make the agreed number of posts and make it clear to their audiences that they have received payment for these posts. Unfortunately, things are not always this clear-cut.
Influencers violate industry standards in two main ways:
The FTC was the first to express concern. Influencers were making product endorsements without disclosing that they had a “material connection” to the brand, i.e., they failed to disclose the paid nature of their promotion.
Influencer contract breaches, meaning the influencer fails to adhere to their contract’s terms and conditions, are a growing issue. For example, a brand requires that an influencer make a certain number of posts or a particular number of personal appearances in exchange for an agreed upon payment. Yet, some influencers fall short of such requirements, which has plagued the industry with a flux of influencer lawsuits.
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One of the first cases of alleged influencer breach of contract involved YouTube star Bethany Mota. Studio 71 claimed that she did not uphold her end of an endorsement deal, so it sued both her and her father (who acts as her manager) as a result.
Studio 71 argued that Mota agreed to create videos and posts to promote a skincare brand across several social media sites. In return, they promised to pay her a talent fee of $325,000. Studio 71 contended that the video should show Mota applying the product while getting ready for her day on location in Kauai. It should also be noted that Studio 71 flew Mota and her dad, Tony Mota, to Hawaii to film for the campaign.
Studio 71 asserted that Tony Mota encouraged his daughter to ignore her responsibilities. The result was that the Kauai footage was not included in the YouTube video, and Bethany Mota did not make the posts. Instead, the video included only a shoutout.
As a result, Studio 71 is suing the pair for breach of contract, fraud, and a few other issues. In response, The Motas’ attorney Michael Weinstein claimed that the Studio 71 lawsuit “is nothing short of a preemptive tactic to avoid payment of hundreds of thousands of dollars we believe are owed to Ms. Mota.”
The case is still pending, and it will be interesting to see how the judge rules.
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Another influencer to face legal action was Grown-ish actor, Luka Sabbat. Sabbat apparently made an agreement to promote Snap’s Spectacles on none other than its arch nemesis, Instagram. Snap Inc.’s public relations firm PR Consulting alleges that they expected Sabbat to “create original content for a minimum of four (4) unique posts: one (1) Instagram Feed post and three (3) Instagram story posts.” Sabbat was supposed to have made these posts during various fashion shows, including New York Fashion Week. PR Consulting claims to have paid Sabbat $60,000 upfront for the posts.
In the end though, Sabbat only made one Instagram Feed post and one Instagram Story post. He also failed to be photographed wearing the Snap Spectacles at any of the agreed fashion shows, as was the alleged agreement.
PR Consulting claims “Sabbat admitted his default but nonetheless, refused to return any of the funds paid by to him PRC.”
Interestingly, Snap made it clear that it is not part of the legal action. TechCrunch reports “PRC’s suit probably cost Snapchat more than $90,000 in reputation.”
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As one of the most notorious influencer debacles to rear its head in the social media world, the Fyre Festival sparked immense excitement only to burn out before it began. Celebrity influencers promoted Fyre Festival as a luxury music festival on a private island in the Bahamas in April 2017. Unfortunately, it set itself ablaze and ended up a disaster that was anything but luxurious for those who attended, some of whom had spent up to $12,000 for VIP packages. After problems on the first day, the organizers officially postponed the event and canceled all inbound charter flights to the island.
It affected many wealthy people, so it was inevitable that there would be legal consequences. However, it was not just the festival organizers in the legal firing sights. Three festival attendees filed a class action lawsuit against 100 influencers for failing to disclose that they were profiting from publicizing the festival. Their social posts gave no indication of being paid posts. They appeared to be genuine endorsements from the influencers, implying that the guest list would be full of celebrities and the social elite.
Because of this, the FTC took the opportunity to remind influencers that they are required to disclose sponsored or other promotional posts where they have received payment or gain. As for the organizer, Billy McFarland, he recently was sentenced to six years in Federal Prison.
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It goes without saying, but while the vast majority of influencer marketing contracts work without blunders, a few falter. And when influencer marketing contracts go wrong, severe consequences ensue that can be costly for a brand’s reputation.
Brands must carefully consider brand safety. If they select the wrong influencers, they risk losing considerable goodwill and brand value. As Snap has discovered in the Luka Sabbat case, brands don’t even need to be part of a lawsuit to suffer from the fallout. Adding to the complexity of it all, brand safety can be hard to police:
“If you spend $100,000 on YouTube, you’re running on 600,000 videos. If 0.5 percent have problems, your client has 3,000 problems.”
Is this concern likely to steer marketers away from influencers back to traditional ads, which they can have more control over? It’s unlikely, as the power of influencer marketing still trumps traditional marketing in many ways–but the industry’s fate remains in the balance.
Lawsuits are a last resort. They are expensive, take a long time, and there is no guarantee of winning the case. It is notable that despite there being much publicity about the 2017 cases referred to above, none have made it through the court system to date.
As a safety measure, brands can protect themselves preemptively by documenting all agreements and confirmations in writing. Routines, such as writing up notes after a phone call to ensure everyone’s expectations align, can help things run smoothly.
There are differing opinions on whether brands should pay influencers on a prorated basis as opposed to upfront. With prorated payment, the brand would only pay influencers after they post, for those posts they actually make. However, in reality, different situations call for different payment terms. Ultimately, everyone should be comfortable with the agreement and prepared for worst-case scenarios to avoid any last resort influencer lawsuits.
As a precautionary measure, brands need to create rock-solid influencer agreements and establish long-term influencer partnerships. These go hand-in-hand, as it’s vital that brands undertake due diligence to research influencers to ensure they’re likely to uphold their end of the contract. Likewise, it’s essential for brands and marketers to have strong and smart legal teams.
Brands who are explicit in contracts about deliverables, as well as what happens if someone breaches the contract or doesn’t deliver the agreed-upon services, are able to cover their bases and avoid a legal catastrophe.
One of the advantages of working with an experienced influencer marketing agency like Mediakix is that agencies know which influencers have proven to be good, reliable partners. Nonetheless, brands should invest in strong legal relationships and long-lasting influencer partnerships to avoid shelling out loads of money on influencer lawsuits.
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