Influencer Marketing – Effective Promotion with Legal Uncertainties
Marketing in the digital age is dominated by new technologies that enable tracking and automated profiling. This leads to targeted marketing and tailor-made advertising, constantly improved by self-learning algorithms: digital marketing in the personal environment of the consumers through their mobile phones, tablets or digital assistants at home. However, experience has shown that it is ultimately content that grabs the attention of the consumer and convinces him or her to buy. If the content is entertaining and a distraction from everyday business, the consumer will be more likely to follow its call. The most effective impact, however, is achieved if the product or the service is promoted by a person in whom the consumer trusts. While until recently testimonials of athletes and actors were used, exploiting their fame and credibility in the promotion of the marketing message, today the personal recommendation can be more targeted and more effective through the use of influencers and their impact on their followers.
Digital technology has made it possible for every niche expert in fashion, food, sports, games, family matters or special interests to produce their own blog, with high quality photos and/or video. Thousands of Bloggers on YouTube or Instagram are considered interesting enough for people with similar interests to follow every post and trust the influencer’s recommendations. Of course, there are the well-known influencers with several millions followers, easily reaching a million likes for a single post within hours. However, there is also a not-so-well-known blogger community , which has a no less effective, smaller but well-matched crowd of followers who possibly identify even more with their influencer. All such influencer marketing works best if the promoted product is carefully chosen to fit to the influencer, their blog and the followers.
Representative market research of the German Association for the Digital Economy (BVDW) shows that almost one fifth of all Germans have made a purchase decision influenced by influencers. Looking at the peer group of young adults of age 16-24, 43% of those asked indicated that they have bought at least one product because of influencer marketing. It is no wonder, that already in 2017 68% of the companies of another survey stated that they have planned a budget for influencer marketing.
Legal Situation in Germany
The legal situation in Germany is complex since several different statutes can apply directly or indirectly. Influencers are partly regulated by state media controland may assert freedom of speech and press rights but will also be considered as regular advertisers if they market products or services of third parties or their own. Some influencers are not of legal age and do not know the applicable rules whilst other experienced professionals know how to advertise correctly. In any event, most video or photo blogs of influencers on YouTube, Instagram, Twitter or other social Media have the look and feel of private blogs including personal thoughts and impressions of a person, even if photos, stories and longer videos are often presented with impressive quality due to the digital possibilities of today.
In practice, two legal rules are paramount for influencer marketing:
- the principle of separation of editorial and commercial content, and
- the obligation to mark influencer promotion as advertisement (if not apparent from the advertisement – which is almost never the case if promotional posts look like all other content of the influencer).
Furthermore, in Germany, there are legal discussions and diverging court decisions on whether professional influencers have to mark posts other than paid advertisement as commercial communication due to the “private” appearance of posts in their channels. Leaving it however, unclear up until now what exactly qualifies influencers as being on the one hand ‘commercial’, e.g. due to the number of followers, and on the other hand apparently not professional, e.g. due to the number of followers. An overview about the recent courts decisions can be found in our Plugin #19 feature “Update on influencer marketing”.
Actions by Media Control
In 2016, the German State Media Authorities contacted the video-bloggers with the most followers on YouTube to discuss legal boundaries. As promotion and other content was often mixed-up on blog-posts, e.g. in a video-post of an influencer, commercial products of the influencer or promotion of third party products was seldom marked as advertisement. When the first influencer was fined around EUR 10,000.00 the influencer scene understood that this was serious. Today, most video bloggers are aware of the rules and follow at least the published Guidelines of the German State Media Authorities (an updated version of November 2018 can be found here. However, these non-binding guidelines may give an indication of how the authorities will apply the law (until further notice). They do not, however, bind the German courts or restrict claims based e.g. on unfair commercial practices by competitors or associations.
Actions by Consumer Associations
More recently, consumer associations have started to send warning letters to influencers if they believe that posts are commercial advertising and not marked with “Werbung” (advertisement). Mostly Instagram photo posts were affected. Some of the influencers were actually posting content paid for by companies for promotional purposes (either the post itself or at least the products given to the influencer cost-free for this purpose). Such posts of influencers must, of course, be labelled correctly as “advertisement”.
However, some posts attacked were just recommendations, enthusiastic reports, pictures of stores, hotels, cafés and restaurants, tags in photos linking to other brand channels on Instagram. Although the consumer associations suspected paid advertisement – and such posts were surely able to influence a follower to make a commercial decision – many of these where just regular links and references as is common in social media platforms like Instagram. The consumer associations submitted additional arguments, that the influencer’s post may not be advertisement paid by third parties but, nevertheless, advertisement for the influencer itself and its professional blog as well as the influencer’s potential role in future promotions on its blog. Such commercial posts would therefore need to be marked as ‘commercial’ if they do not show their commercial character otherwise. When the District Court of Berlin followed these arguments in May 2018 there was an outcry from the influencer scene. Money was raised in crowd funding to aid influencers who were attacked with these arguments. Above all, whenever a post included a brand or a name of a company or business such posts were marked by way of precaution “advertisement due to brand naming/unpaid” or similar. The result was that almost all posts were marked as advertisement and nobody knew anymore what was paid advertisement and what was editorial content of the blogger. Furthermore, the associations continued to send out warning letters which resulted in dozens of on-going court proceedings in Berlin and elsewhere.
When the Court of Appeal of Berlin finally overturned the decision (Kammergericht, 8 January 2019 5 U 83/18) everything became clear: posts of influencers should not be treated differently from the content of a women’s magazine: editorial fashion coverage and other reportage may include links to stores and online shops as reference and still stay editorial. Advertisements, however, that is paid for or otherwise steered by third parties must be marked as an advertisement if the form of the advertisement does not evidently show its commercial character.
However, despite this welcomed decision of the Court of Appeal of Berlin and similar decisions by other courts, e.g. by the District Court of Munich (see Plugin #19 update on influencer marketing, the legal situation in Germany remains uncertain. Other courts (e.g. Court of Appeal of Braunschweig, District Court of Karlsruhe) still decide more strictly, considering posts of professional influencers as “commercial communication” which is not apparent due to the private character of the posts and the appearance of the blogger and, as it is suitable to influence a commercial decision of the follower, any such posts must be marked as commercial or advertisement.
Therefore, the legal situation in Germany remains uncertain for influencers until the Federal Court of Justice – or the European Court of Justice – has clarified the situation. Most likely, however, it will take more than one decision until we know which blogger (with how many followers, professional approach, agents or other criteria) qualifies as a professional influencer whose posts are therefore commercial communication and when such posts need to specifically be marked accordingly.
New Legislation to protect Influencers?
To protect active influencers and those that want to become influencers the German government announced it will draft legislation clarifying that not all posts of (professional) influencers must be considered commercial communication. The draft wording published in 22 July 2019 proposing to add a sentence to definition of commercial communication in the Telemedia Act (Sec. 2 1 No. 5 b) TMG), however, only covers links from natural persons to profiles of other natural persons – not links to brand channels. Nevertheless, the draft legislation expressly refers to the decision of the Court of Appeal of Berlin embracing its reasoning also with respect to links (in photo tags) to other commercial social media profiles. The forthcoming discussion of the draft legislation will show whether this (limited) attempt to settle the uncertainty for influencers will pass through parliament and fulfil its purpose. After all, the responsibilities according to general unfair commercial practices law most likely remains unaffected, as well as the liability of company advertising.
Liability of the Advertising Company
Having laid out the situation for influencers and their risks when posting and tagging it should not be overlooked that the businesses that use influencer marketing in any form are also liable for shortcomings of the influencer related to the promotion of the businesses’ products. When the Court of Appeal of Celle decided in June 2017 that a company whose sales promotion was advertised by a influencer was held liable because the influencer only marked the commercial post with “#ad” below the post within a crowd of 6 or more hashtags, companies in Germany woke up and understood that influencer marketing is not that easy after all, even for the companies. If the advertisement is not correctly marked as an advertisement not only the influencer but also the company is liable and be subject to warning letters and court proceeding based on unfair commercial practices law.
Steps to take
Businesses that use influencers to market their products should therefore always enter into a written agreement with the influencer detailing the responsibilities and outlining exactly what the influencer should and should not do with respect to the promotional posts. Clear guidelines and instructions to influencers may prevent costly warning letters, fines by authorities and court proceedings. This includes especially instructions to the influencer on how to mark the relevant posts as an advertisement, and that promotional posts should be clearly separated from other (editorial) content. In Germany, the advertising labelling is quite strict. Abbreviations like “#ad” or English wording like “promotion” or “sponsored by” or marketing speech like “advertorial” will not suffice (at least if the post itself is German). According to well-established case law in Germany only the German words “Anzeige” (advertisement) and “Werbung” (promotion) show clearly enough the promotional character of the post. All other markings are at least at risk of being tested in court. As influencers are currently being observed quite closely by consumer associations and competitors the legal risks should be evaluated before any cooperation with an influencer and e.g. minimized by clear instructions in the cooperation agreement as mentioned. Apart from the legal uncertainties influencer marketing remains an exciting and rapidly evolving new means of advertising in the digital age – and its risks can be steered by the advertising company.