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SOCIAL MEDIA INFLUENCER CONTRACTS: ELABORATING THE MUST-HAVE CLAUSES

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Isheta T Batra   |   Published on: 05 January 2023

INTRODUCTION

The advertising industry in India is going through tectonic shifts with the rising relevance of the internet in modern-day advertising. Today, advertising has largely shifted to social media platforms where businesses advertise their products/services through social media influencers. In addition to the traditional mode of advertising, Influencer Advertising has now gotten equal attention in the advertising world. According to the ‘India Influencer Marketing Report’ by GroupM INCA’s influencer marketing industry is expected to grow at a cagr of 25% till 2025 making it a 2200cr industry. [1] The report further mentions that in India, out of 1.3 billion people, a third (more than 400 million) already had access to social media before the pandemic. This number has surely skyrocketed in the last 18 months and there is a significant shift in consumer behavior that is the real fuel for the growth of the segment. Looking at the statistics it would not be wrong to say that Influencer Advertising is ruling the advertising sector.

THE STATISTICS

India has the world’s second-largest internet user base with over 560 million internet users as of June 2021, and the number is only expected to rise exponentially in the coming years. [2] India also has the most amount of Instagram, Facebook, and YouTube users in the world. With over 190 million Instagram users [3], 433 million Facebook users [4], and 225 million YouTube users [5], India’s social media penetration is by far, the biggest in the world.

With such a large audience base, opportunities are endless for companies to advertise their products and services on social media platforms. However, advertising is a tricky affair, and getting it wrong can be devastating for the business and the person promoting/advertising its products and/or services. Any illegality in an advertisement tarnishes the image and goodwill of both the brand and the person promoting the brand’s products/services in the advertisement. Advertisements must strike a perfect balance between promoting a product/service and the legality behind the same. It is therefore imperative that social media advertisements are carried out with careful regard to consumer protection laws, intellectual property laws and industry guidelines like the recently released ASCI guidelines for Influencers.

INFLUENCER CONTRACTS/AGREEMENTS

To make sure that influencer marketing is done the right way having a robust agreement holds utmost importance. This is where influencer agreements come into the picture. An influencer agreement is fundamental in laying down the rights, obligations and compliances that an influencer and a business will be subject to during an advertisement campaign.

10 MUST-HAVE CLAUSES IN AN INFLUENCER AGREEMENT 

There are some of the most important clauses parties must include in their influencer agreements:

1. Description of the Influencer’s Performance

 

The agreement must clearly lay down the broad points that the influencer must cover in their content regarding the product/service. It must explicitly enlist the social media platforms where the advertisements are to be posted. Further, if a business is specific about the time at which the advertisements are to be posted, the same must also be mentioned clearly in the agreement.

While negotiating and drafting this clause, the business must be careful not to completely determine the content that will be produced by the influencer. The influencer must be given the creative freedom to design and execute the production of the advertisement.

 

2. Content and IP Ownership

 

The agreement must clearly define the intellectual property rights of the business and the influencer. The business, through the influencer agreement, may assign to the influencer, the rights to use their intellectual property (such as trademark, copyright, etc.) exclusively for the social media advertisement. Further, as a part of the advertisement campaign, if the business seeks to use the intellectual property(ies) of the influencer on their social media posts, the influencer may also assign intellectual property rights to the business exclusively for such posts.

 

Furthermore, the agreement must also clearly state that the content that will be produced by the influencer will be owned by the influencer. This is a very important covenant and failure to include this in an influencer agreement may lead to the treatment of such agreement as an artist agreement, where the content is not owned by the performer.

3. Restrictive Covenants

 

Advertising creates a lasting impact on the audience’s mind, and companies would not want to be associated with certain types of content such as vulgarity, profanity, violence, etc. to protect the goodwill of their brand(s). Therefore, it is important to lay down certain restrictive covenants that restrict the influencer from producing certain types of content in advertising the business’s products/services.

4. Representation against Fake Followers

 

It is extremely important to include a representation clause where the influencer explicitly represents that all his/her followers are real. A business pays an influencer for his/her reach and if the advertisement is to achieve the intended reach amongst the masses, the followers/subscribers of the influencer must be real. Purchasing fake followers is a rampant practice on social media today and companies must be wary about influencers indulging in such practices.

5. Payment

 

In a social media advertisement campaign, payments to the influencer may be made through several arrangements. The influencer agreement must mention the payment terms, timeline and conditions that have been agreed upon between the business and the influencer.

6. Approval of the Content

 

As mentioned above, businesses are extremely particular about the goodwill of their brand(s) and the way their brand/products are being broadcasted. Therefore, it is always safe for companies to include a clause wherein the influencer must post content that advertises their products/services only upon receiving the final approval of the business. This will ensure that the content is to the satisfaction of the business and will leave very limited scope for any dispute later. However, while drafting this the businesses must be careful about not hampering the creative freedom of the influencer.

7. Compliance with the ASCI Guidelines & Proper Disclosures

 

The ASCI Guidelines set a benchmark concerning the disclosure requirements of influencers while advertising on social media. Rather than a clause that merely states that the influencer is liable to adhere to the ASCI Guidelines, the influencer agreement must include the compliance requirements given in the ASCI Guidelines. This ensures clarity and leaves little scope for disputes in the future.

8. Confidentiality

 

In some cases, an influencer may be involved in a product/service launch. In such cases, the knowledge about such product/service is very limited and any pre-mature leak of the details of the product/service may be economically detrimental for the business. Therefore, in case of product/service launches, or in any other scenario where the details of the product/service are to be kept confidential, the parties must ensure that there is a confidentiality clause that requires the influencer to keep product/service details confidential.

9. Exclusivity

 

An influencer endorsing a business’s competitor’s products/services will be extremely detrimental to the goodwill of the business. Therefore, it is advisable that an exclusivity clause be included in the influencer agreement that restricts the influencer from endorsing any product/service of the business’s competitors. However, influencers must be careful with such clauses, especially while dealing with FMCG companies. The term of the exclusivity clause must not be unreasonable and the exclusivity must only be limited to the product/service advertised and must not extend to all the products/services of the competitors.

10. “Continuity of persona”

 

There have been instances wherein it has been found that social media influencers post some controversial comments or posts or any images that might hamper the goodwill of the brand. The “Continuity of persona” clause is one such clause that should be there in the contract.

 

INFLUENCER AGREEMENT – PRACTICES ACROSS THE WORLD

 

Here’s a look at how relevant influencer contracts are in social media marketing across the world.

 

INDIA

 

Currently, in India having an influencer agreement is not a popular choice.  The arrangement between the brand and influencer is defined by modes like emails, WhatsApp/Instagram messages or verbal communications. However, considering the importance of such advertisement campaigns in the dynamic world, it is advisable that influencer agreements be executed as a standard industry practice, rather than a practice only followed by a selective set of companies and influencers.

 

Recently, the Advertising Standards Council of India (ASCI) issued a set of guidelines for influencer advertising on digital media (ASCI Guidelines). [6] The guidelines, to help consumers differentiate between paid promotional content and influencer generated content, lay down certain disclosures to be made by influencers when they advertise products/services on social media and also require influencers to conduct a due-diligence exercise on the advertiser to satisfy themselves that the advertiser is in a position substantiate the claims made in the advertisement.

 

Although the ASCI is a self-regulatory body that issues guidelines for its members, Courts on a couple of occasions have held that the ASCI’s guidelines can be extended even to non-members. [7]

 

Apart from the ASCI’s guidelines, the Consumer Protection Act, 2019 enables the Central Consumer Protection Authority (CCPA) to take the following actions in case of any false or misleading advertisement endorsed by a person:

  1. Impose a fine up to Rs. 10,00,000 (In case of repeated violation, fine up to Rs. 50,00,000); and/or

  2. Prevent a person from endorsing any product up to a period of 1 year (In case of repeated violation, ban up to 3 years). [8]

UNITED STATES OF AMERICA (USA) 

 

In the USA, social media influencers can register themselves as members of The Screen Actors Guild - American Federation of Television and Radio Artists (SAG-AFTRA). SAG-AFTRA is a U.S. labor union that represents over 160,000 actors, recording artists, radio personalities, singers, and other media professionals.

To register themselves as a member of SAG-AFTRA, influencers have to enter into an influencer agreement with the union that broadly lays down the limitations within which they must advertise products of companies. A membership with SAG-AFTRA entitles influencers to avail the support of SAG-AFTRA’s representatives to advocate on their behalf and also ensures that the influencers have collective bargaining power and SAG-AFTRA’s assistance in case of any labor, payment, or contractual disputes with a business. Upon registering as a member with SAG-AFTRA, influencers can seek the assistance of the union in negotiating and executing influencer agreements with brands.

 

Apart from SAG-AFTRA, the Federal Trade Commission (FTC) has issued a non-binding disclosure guideline for influencers. The guidelines lay down certain disclosures which have to be made by an influencer when they promote/advertise a product on social media. It also clearly provides for the manner and form in which such disclosures have to be made. Although it is non-binding on the influencers, there have been several instances where the FTC has held companies liable for advertising their products on social media through influencers without proper disclosures. [9] It has therefore become a common practice in the USA to incorporate such disclosure requirements into the influencer agreements between companies and influencers. This contractually binds the influencers to be compliant with FTC’s disclosure requirements and companies can be assured that their products will be advertised within the FTC’s guidelines.

UNITED KINGDOM (UK)

 

Social media marketing in the UK is governed by the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code). It was formulated by the Advertising Standards Authority Ltd. (ASA), UK’s independent advertising regulator. Although the ASA is a non-government body and cannot enforce legislation, most provisions of the CAP Code are underpinned by legislation, including the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). [10] The CAP Code applies in full to ads in all non-broadcast media, including digital platforms, such as Instagram, Facebook, YouTube, Snapchat, Twitter and TikTok. Further, the ASA had even issued a set of guidelines for influencers laying down the required disclosures to be made while advertising a product/service and how such disclosures must be made. [11] Despite such efforts from the ASA, several Instagram influencers were found to be non-compliant with the CAP Code during the 3-week monitoring of such Instagram accounts by the ASA. Upon detecting such non-compliance by influencers, the ASA has warned of sanctions that will be imposed on influencers and the companies that advertise their product/services through such influencers. [12] The sanctions of the ASA include:

  1. Publishing the name and details of the non-compliant influencers and companies; and

  2. Targeted search engine results that highlight the advertisement problems of the non-compliance influencer and companies.

 

Owing to the potential detrimental effect that the sanctions of the ASA may cause, most companies and influencers now execute influencer agreements that lay down inter alia the disclosure that the influencers are supposed to make under the CAP Code.

 

SINGAPORE

 

In Singapore, social media advertising is governed and regulated by the Advertising Standards Authority of Singapore (ASAS), a non-governmental body. The ASAS has issued a set of Guidelines for Interactive Marketing Communication & Social Media, that lays down the standards on advertising and marketing communication that appear on interactive and social media. [13] Similar to the FTC’s guidelines and the CAP Code, the guidelines issued by the ASAS too, require influencers to make certain mandatory disclosures and adhere to certain standards while advertising products/services on social media. [14] Similar to the UK’s ASA, the ASAS too, can issue sanctions on influencers and companies if their advertisements are not compliant with the guidelines issued by the ASAS. Needless to say, in light of a sound regulatory and enforcement regime, social media advertising in Singapore is largely carried out through influencer agreements.

CONCLUSION

In light of the regulatory environment, it becomes essential for influencers and businesses to enter into influencer agreements to carry out social media advertisement campaigns. An influencer agreement informs the influencer about the rights, responsibilities, and liabilities that he/she will be subject to while advertising a product/service online. This ensures that the advertisements are legally compliant and there are no risks to both the influencer and the business.

 

REFERENCES:

  1. https://www.groupm.com/newsroom/india-influencer-marketing-report/

  2. Number of internet users in India from 2010 to 2020, with estimates until 2040, Statista, July 2021.

  3. Leading countries based on Instagram audience size as of July 2021, Statista, July 2021.

  4. Leading countries based on Facebook audience size as of July 2021, Statista, July 2021.

  5. Leading countries based on YouTube audience size as of September 2021, Statista, September 2021.

  6. Advertising Standards Council of India, Guidelines for Influencer Advertising in Digital Media, 01.06.2021, Accessible at: https://ascionline.in/images/pdf/guidelines-for-influencer-advertising-in-digital-media-final.pdf.

  7.   See: Metro Tyres Ltd. V. ASCI, Del HC, CS(COMM) 1484/2016 (2017). Also See: Primordial Systems Private Limited v. ASCI, Del HC, CM(M) 546/2016 (2017).

  8. S. 21, Consumer Protection Act, 2019, Accessible at: https://egazette.nic.in/WriteReadData/2019/210422.pdf.

  9.   FTC, Lord & Taylor Settles FTC Charges It Deceived Consumers Through Paid Article in an Online Fashion Magazine and Paid Instagram Posts by 50 “Fashion Influencers, 15.03.2016, Accessible at: https://www.ftc.gov/news-events/press-releases/2016/03/lord-taylor-settles-ftc-charges-it-deceived-consumers-through.  Also see: Mediakix, A History of FTC Violations in Digital and Social Media Marketing, Accessible at: https://mediakix.com/blog/ftc-influencer-marketing-violations-cases-history/.

  10.   Advertising Standards Authority Ltd., Influencer Ad Disclosure on Social Media, March 2021, Accessible at: https://www.asa.org.uk/uploads/assets/dd740667-6fe0-4fa7-80de3e4598417912/Influencer-Monitoring-Report-March2021.pdf.

  11.   Advertising Standards Authority Ltd., Influencers’ guide to making clear that ads are ads, 06.02.2020, Accessible at: https://www.asa.org.uk/uploads/assets/9cc1fb3f-1288-405d-af3468ff18277299/INFLUENCERGuidanceupdatev6HR.pdf.

  12.   Supra Note 6.

  13. Advertising Standards Authority of Singapore, Guidelines for Interactive Marketing Communication & Social Media, 29.08.2016, Accessible at: https://asas.org.sg/Portals/0/Guidelines%20for%20Interactive%20Marketing%20Communication%20and%20Social%20Media%20%28web%29.pdf.

  14.   Supra Note 9.

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