The hottest trend in advertising is the use of social media endorsers (aka “influencers”). Caution is warranted, however, because if you and your San Diego business fail to properly disclose pertinent information, your business will run afoul of laws intended to prevent unfair and deceptive business practices and advertising.

What are Endorsers and How are They Used for Promotion/Advertising?

“Endorsers” are mildly- to very-famous individuals who promote a product or service on some social media platform like blogs, Instagram, or Facebook. Think “celebrity” endorser except that now, “celebrity” is not limited to people who are sports and Hollywood stars. You can be a successful influencer with a Twitter or Facebook or Instagram or online following of a few hundred thousand people. You are the “celebrity” for your “followers.” This is relevant to certain market segments like video and online gaming, fashion, sports, etc.

Taking a fashion example, the endorsement might be embedded in a photo of the person walking his or her dogs. The endorser is pictured wearing whatever brand or dress or shirt is being promoted or going into the store that is being promoted or using the product, etc. The idea is to be sort of causal and subtle. Usually, there is a corresponding hashtag or link that directs to viewer to the product or the brand.

This is possibly deceptive advertising because many of the endorsers are paid for their endorsements, but that payment is not disclosed.

Studies show that consumers are less likely to be influenced by a paid endorsement than if they are led to believe the endorsement is freely given and authentic.

Lord & Taylor Influencer Marketing Example

Continuing with fashion, a good example can be seen in a Lord & Taylor advertising campaign from 2015-2016 for a paisley dress (and associated accessories). As the National Law Review article describes, Lord & Taylor gave the dress to 50 fashion influencers who were paid from $1,000 to $4,000 each to take and upload pictures of themselves wearing the dress on blogs, video uploads, Instagram, Facebook, etc. Lord & Taylor signed contracts with the influencers requiring that the photos be pre-approved, be posted on a given weekend, be tagged with the “@lordandtaylor” designation and that the photo include the campaign hashtag “#DesignLab” in the caption.

What is the Influencer Marketing Problem?

Lord & Taylor and the influencers did not disclose that payment had been made or any of the other contractual requirements.

The campaign brought action against Lord & Taylor by the Federal Trade Commission (“FTC”). The FTC regulates unfair and deceptive business practices including deceptive advertising. The FTC brought suit against Lord & Taylor and eventually obtained an injuction against Lord & Taylor prohibiting nondisclosed use of paid endorsers. The proper use of endorsers and influencers continues to be in the news. Here is a report from Forbes.

The FTC has recently issued new guidelines for what must be disclosed. For the FTC FAQs, see here. Note that disclosure is required by both the brand/business being promoted and by the endorser.

Influencer Marketing Lessons for San Diego Businesses

Running your own business can be exciting and fun, but also can be a minefield of potential legal hazards and pitfalls. You need the guidance of a skilled and talented business lawyer like attorney Michael Leonard, Esq., of San Diego Corporate Law to help. Mr. Leonard has been named a “Rising Star” for 2017 by SuperLawyers.com. Mr. Leonard can help you understand your legal rights and responsibilities as a business owner. Mr. Leonard can review and draft any agreement that you might need if you plan on using endorsers and influencers. Mr. Leonard can be reached at (858) 483-9200 or via email. Call today.

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