A Legal Guide To Influencer Marketing Agreements

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This resource explains the legal consideration for Influencer marketing and how your business can create Influencer marketing agreements to legally and financially protect your business.

Chances are you have seen your favourite celebrity promote a product or service on social media. What do you think is the implication of such promotion on the business brand value? In simple words, your favourite celebrity, in this instance, is a brand Influencer. Their act of using social media to promote a product or service is called Influencer marketing.

In a competitive free-market economy, branding allows businesses to stand out from the crowd and build a wider audience of loyal customers. For many companies, Influencer marketing is the magic wand that will turn your brand value all around. A great example of this is how Gymshark leveraged Influencer marketing to grow its sales from $500,000 per month, back in 2013, to $52 Million in 2017. At the time of this writing, Gymshark is valued at over 1 Billion dollars.

The global business landscape has seena surge in Influencer marketing which has proven, on many occasions to be a very effective marketing strategy. However, with all the upside an Influencer marketing campaign can bring to your business, there are legal and financial risks involved.

Let’s work backwords. First, we will discuss how your business can end up in a dispute with an Influencer and then we will consider the legal ways in which you can avoid such disputes.

How Your Business Can End Up In A Dispute With An Influencer

Logan Paul’s case is a sharp reminder that some Influencers will do anything to gain more popularity, including promoting morally and legally questionable content. Logan Paul is a successful vlogger with various sensational videos to his credit. Businesses were queuing to have him promote their brands, offering to pay him hundreds of thousands of dollars. That is, utill he took “clout chasing” to another level.

Logan made, what has been called “morally repulsive content” by critics in the infamous Japanese Suicide Forest. In a YouTube video, he was seen mocking a dead man who had committed suicide in the notorious Forest. Contrary to Logan’s expectation, the video was met with heavy criticism from all corners, and brands scrambled to cut ties and dissociate from him. An important lesson to be made here is that the Infleuncer you work with, reflects your brand or business.

Globally, legal conflicts stemming from Influencer agreements seems to be on a steady rise. The PR Consulting case against Luka Sabat is a perfect example of this. Luka Sabat, a social media sensation and actor, was hired by PR Consulting to promote glasses from Snap, Inc. He was required to create original content to be submitted to PR consulting for review. He was also required to be photographed wearing products from Snap, inc. PR consulting claimed that Luka breached the Influencer agreement as he did not follow all its fundamental terms.

Another example is Bethany Mota’s lawsuit. A vlogger, Bethany Mota, was hired by Studio 71 (a company that pairs Influencers with brands) to promote a skincare brand on social media. Studio 71 argued that Bethany did not fulfil her responsibilities because her content did not align with the mutually agreed terms. Bethany asserted that she did all that was required insisting that Studio 71 was only trying to evade payment. Bethany was sued for breach of contract and fraud, to mention a few.

With that in mind, how can you protect your brand or business when it comes to Influencer Marketting?

Applicable Influencer Marketing Laws

In Australia, Influencer agreements are governed by the following laws:

  • Competition and Consumer Act: This Act imposes liability on Influencers to disclose whether a post is an advertisement and whether they are paid to promote it. It also makes them liable for deceptive advertising conduct.
  • The Australian Association of National Advertisers Code of Ethics: similar to the Competition and Consumer Act, this code of ethics imposes a non-binding obligation to disclose on-brand Influencers.

Key Clauses To Include In An Influencer Agreement

According to Statista, there are about 4.2 billion active users of social media worldwide, and there are strong indicators that this will continue to rise at a rapid pace. With such high numbers of social media users, it is no wonder that brands are including Influencer into their marketing strategy. But, if you are going to take the route of Influencer marketing, than an Influencer Agreement is absolutelty essential.

We’d advise you to always protect you interests and ensure that ththe clauses discussed below are included in your brand Influencer Agreement.

  • Scope of work: The scope of engagement must be detailed in unambiguous terms. Is the Influencer going to be engaged on a one-off campaign, or on an ongoing basis? When is the Influencer required to publish content? For how long will it stay on their social media page? What hashtags will be used? How many posts will the Influencer create, and where will it be posted? Who is the target audience?
  • Disclosure: As previously discussed, the Australian Competition and Consumer Act imposes a duty of disclosure on Influencers. The Agreement must stipulate whether the advertisement is paid or otherwise. This can be done through hashtags like #paidpartnership, #sponsored etc. It is also important that the agreement states the liabilities of parties for deceptive advertising.
  • Payment: This clause stipulates what compensation the Influencer is entitled to and the terms of payment. Consider questions like: will the Infleuncer paid a lump sum amount or per post, Will they be paid based on leads generated by the post and, what payment method will be used?
  • Non-disclosure: During the engagement, some confidential information may be leaked to the Influencer. They must agree not to disclose such confidential information except as expressly permitted.
  • Quality of content: It follows international best standard practice to stipulate the quality of content. Parties must agree on a content resolution, duration of videos, products to be included in the post etc.
  • Exclusivity: Is the Influencer allowed to promote other brands while engaged by you? Can they work with competing brands in the same niche? To avoid conflicts, exclusivity along with other terms should be clearly stipulated and agreed on.
  • Morality Clause: one cannot always trust Influencers to be morally responsible at all times. Including clauses that allow brands to cut ties if morally unacceptable content is posted will protect your brand reputation’s (remember the Logal Paul Saga discussed above?). This clause may also be extended to prohibit the Influencer from posting content that is against the brand’s values.

Key Copyright Issues

Influencers would typically create content to promote a business or brand. But who do you think owns the copyright of the created content?

The creator of copyright content owns its intellectual property. This is not to suggest that the intellectual property cannot be transferred to the business. Whether the Influencer will transfer the copyright to the brand or not, that will depend on mutually agreed terms.

As a business owner, we suggest the following copyright clauses be included in your Influencer agreement.

  • Transfer or licence: The Influencer Agreement must stipulate whether the Influencer retains copyright ownership or whether it will be transferred. If it will be transferred, what percentage will be transferred? It may also contain clauses that grant the license of the copyright to authorised third parties.
  • Liability for copyright infringement: Your Influencer may infringe on a third party’s copyright in the course of creating content. Who becomes liable in this case? The Influencer Agreement must stipulate the liability of parties for a third party’s copyright infringement. In the absence of any express provision for liability, the court will consider whether the Influencer is an employee or an independent contractor. The brand may be liable if there is evidence to prove that he or she is an employee. The Influencer will be liable if there is evidence to prove that he is an independent contractor.

To ensure your Influencer marketing Agreement is bulletproof, we suggest that you speak to a business lawyer about your requirements and campaigns to help you structure and create the right Influencer agreement.

Difference Between Influencer Agreement And Endorsement Agreement

There is a fine line between an Influencer Agreement and an Endorsement Agreement. While an Influencer Agreement typically entails promoting a brand on social media, an endorsement agreement involved more. It covers the promotion of a brand on social media and outside social media. The monetary consideration in an endorsement agreement is usually more than an Influencer Agreement.

The decision to opt for an Influencer Agreement or an Endorsement Agreement depends on the business size and objectives. Large scale enterprises typically favour Endorsement Agreements, while small scale businesses favour Influencer Egreements.

Liability And Indemnity

Who do you think bears liability for legal issues and challenges arising from an Influencer Agreement? Like any other agreement, an Influencer Agreement may lead to money-draining lawsuits. Who bears liability depends on the responsibilities of parties under the agreement.

As previously discussed, it makes sense that the Influencer assumes liability for the content and materials they create. To protect your business against financial risks, make sure you do not indemnify the Influencer against self-inflicted loss or damages that may arise from the work they produce for your business under the agreement.

Talk To A Legal Expert

A poorly drafted Influencer Agreement may destroy a brand reputation, cause conflict and leave a big hole in your company’s finances.

Consulting a legal expert to draft an agreement that best represents your interests can save you a significant cost in dispute settlements and help you recruit the right brand Influencers that are willing to comply with your company vision and guidelines.

If you need assistance with drafting an Influencer marketing Agreement, reach out to one of our business lawyers, and they will be able to assist you with your requirements.

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Mark Lazarus

Mark Lazarus

Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.

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A Legal Guide To Influencer Marketing Agreements