Likes Before Lawsuits

By Ong Pei Ching

While influencer marketing is not new, the law is still playing catch-up in many areas.

Videos of children and their antics mean serious money. Just ask 12-year-old Ryan Kaji. He unboxes and reviews his latest toys in Ryan’s World, one of top 10 most-subscribed YouTube channels in the United States. One of his videos has been watched over 2 billion times. He is the highest-paid YouTuber, earning around US$30 million annually. And that figure does not cover the estimated US$200 million he collects from his Ryan’s World branded toys and clothing, which include Marks & Spencer pyjamas. Or the undisclosed haul (likely to be in the millions) for his Nickelodeon show.

Businesses and consumers alike cannot get enough of influencers, and not just the young’uns. Consumers see them as a refreshing alternative to over-saturated, in-your-face traditional advertising media. Businesses see them as a way to reach out to a generation that spends more time scrolling through TikTok than watching TV.

It’s easy to see why. Influencers curate – or appear to curate – the smorgasbord of options for any given product category, presenting their choices as personalised recommendations to their followers. These followers, which can number in the millions, are self-selecting, viewing influencers they follow as aspirational or relatable figures.

Through vignettes of their personal lives on social media, influencers lend a human face to a brand. They show followers how a product fits in with their lifestyle and satisfies their wants or needs. In other words, influencers talk about what their followers desire, and encourage them how to buy it, often by way of affiliate marketing link, complete with handy personalised discount codes.

The influencer marketing industry was estimated to be worth US$21.1 billion dollars in 2023. Celebrities like Cristiano Ronaldo have made headlines for charging more than a million dollars to endorse a product on Instagram.

However, beneath the glossy exterior of influencer partnerships lies many legal questions for both content creators and businesses. For example, there is scant protection for child influencers like Ryan Kaji, if his parents squander all his money before he reaches adulthood. In August, Illinois passed a law requiring parents of child influencers to put half of the money earned from videos featuring their children into a trust fund. We examine other potential challenges, as well as how parties can protect themselves.

 

Ad Awareness

The main, unique selling point of influencers is the authenticity they can bring to a brand’s advertising. However, the effectiveness of engaging an influencer may suffer if followers feel that they have a high saturation rate, that is, the ratio of sponsored posts to an influencer’s total content output.

In October, an Everton Park baker disclosed that widely followed food blogger Seth Lui had solicited fees for a spot in a listicle on the best places to eat in the neighbourhood, saying that the cash-for-review offer was “incredulous” and questioned the authenticity of his articles. She had also alleged that the paid nature of some of his stories was not disclosed, which Lui disputed.

Not disclosing sponsorships can erode trust in a brand’s chosen influencer, and result in industry sanctions against the brand. The Advertising Standards Authority of Singapore regulates social media advertising through guidelines in the Singapore Code of Advertising Practice. These emphasise that marketing posts must be clearly distinguishable from personal opinions and should include full disclosure of commercial relationships and sponsorships, especially those that may materially affect the credibility of endorsements. Non-compliance could land brands in hot water with industry sanctions and negative PR.

One area where non-disclosure may risk breaking the law however, is in the realm of financial influencers or #finfluencers. These give advice on financial topics, including stock market trading and riskier ventures like cryptocurrency speculation. Youths looking for financial advice may be attracted to the pithy soundbites, sports cars, and screenshots of bank accounts flush with cash that often feature on such #finfluencers’ posts.

In March this year, the United States Securities and Exchange Commission fined several celebrity influencers, including Lindsay Lohan, Jake Paul and Soulja Boy, for illegally touting the tronix (TRX) and bitTorrent (BTT) cryptocurrency tokens on social media without revealing they had been paid to do so.

Singapore has also taken a firm stance against such behaviour, with the Monetary Authority of Singapore stipulating that digital payment tokens should not be advertised, among other methods, through the engagement of social media influencers.

Besides regulatory actions, influencers may also be sued in civil court if they endorse the wrong financial product. With the rapid collapse of FTX and the vanishing chances of recovery from its founder Sam Bankman-Fried, some creative investors have started class action suits to seek compensation from the celebrities and influencers who endorsed the beleaguered crypto exchange. Besides one against Gisele Bundchen and other A-list stars, another has also been started against YouTuber Kevin Paffrath of Meet Kevin fame and other social media influencers. If a product is too good to be true, it probably is, even if influencers say otherwise.

 

Brand Boundaries

Influencers often seek to work with businesses that mesh with their personal brand identity. From a business’s perspective however, it is just as important to find an influencer who aligns with their public brand values. The positive publicity of working with a well-regarded influencer can just as quickly turn sour if that influencer comes under criticism for bad behaviour. In 2021, allegations of workplace harassment surfaced against Sylvia Chan, co-founder of popular local YouTube channel Night Owl Cinematics. Brands like Colgate and Milo, who had worked with Chan, swiftly cut ties with her.

This highlights the importance of crafting termination clauses to not only protect your brand but also best position your company values in the public spotlight. Morality clauses can set out grounds for termination if influencers conduct themselves in a manner offensive to public standards of decency or morality. Such clauses may range from being limited to actual illegal acts to including any behaviour that the brand deems inconsistent with their values. It is important for both parties to agree on the scope of behaviour that would justify termination.

Important considerations may also include whether misbehaving influencers are given a grace period to publicly apologise or make reparations, and the degree to which a brand will conduct its own investigations or wait for a proper finding on allegations made against influencers before terminating partnerships. As part of brand protection, businesses should also consider including exclusivity clauses to prevent an influencer from endorsing a competitor.

 

Copyright Concerns

Under Singapore’s Copyright Act 2021, the default copyright owners for all types of commissioned content pivots from commissioning parties to content creators. These could include photos of a brand’s product taken by the content creator, the caption accompanying the photo, or even a voiceover describing the product.

That’s good news for influencers. Savvy brands will have to negotiate separate licensing or assignment arrangements of copyright residing in that sponsored post to reuse them for their marketing purposes on their brand’s website or social media. Failure to do so would expose the brand to the risk of being sued for copyright infringement by the influencer.

One thing is for sure: these won’t be the last pieces of legislation concerning influencers. After all, the influencer marketing industry has more than tripled in the past four years. It is perhaps apt that writer-lecturer Dale Carnegie’s 1936 iconic self-help book “How to Win Friends and Influence People” made the number 19 spot on one of TIME’s list of the 100 best and most influential nonfiction books.

His key lesson on influencing people is as relevant today as it was nearly a century ago – “The only way on earth to influence other people is to talk about what they want and show them how to get it.”

STAY AHEAD WITH FOREFRONT: BY TSMP

TSMP law corporation