What Influencers Need To Know and Do When Recommending Someone Else’s Products or Services!
When an influencer recommends another person or promotes, shares or sells a third party’s products or services, she may be exposing herself to liability. This concept also applies to influencers who appear to be representing a product or service by their endorsement or “taking over” a person or company’s social media account.
Before we get started, please keep in mind that although I am a lawyer licensed to practice law in California, I’m not your lawyer. No legal advice is given in this article, and you should consult a qualified lawyer in your state with your questions or needs.
Having gotten that little California State Bar requirement out of the way, I’d like to share the following thoughts with you. This is a complicated and developing area of the law. Conflict of law issues together with new court holdings make it important for influencers to stay on top of these legal issues. With this in mind, I hope you find value in this post.
Recommendations of People, Products, and Services
You are an influencer who is asked to recommend or use a third party’s products or services.
While each case is different, under both State and Federal law, anyone who recommends another person or company’s product or service, can potentially be held legally responsible for damages sustained by an end user. If someone in your audience reasonably relies upon your recommendation and suffers harm because of negligence or even an intentional act such as fraud by the client who hired you, then the victim(s) could potentially point the finger at you for making that recommendation. Theories of liability differ in each state but may include negligence, fraud, breach of express and implied warranty and defective product theories including strict liability. Special, general and even punitive damages may be available to victims showing harm, damages, and losses.
If you’re going to do an endorsement or recommendation, I recommend that you (1) first do your due diligence and (2) use a signed Agreement of Understanding (what you’re going to do) and (3) enter into a “Release, Hold Harmless and Indemnity Agreement” (see template below).
While most victims will seek redress against the manufacturer or supplier of an unsafe, dangerous or defective product, cases have been brought against celebrity endorsers premised upon the above theories. Expanding this concept to social media and live streaming and my take-away is for all Influencers to be very careful about what you say, what you do, and who or what you endorse when it comes to third party products and services.
Influencer Based Promotions
You are an influencer who is approached to help promote a third party’s products or services.
The Federal Trade Commission (FTC) has disclosure rules you need to follow. This applies to individuals, a PR company or digital agency. Sponsored links, blog and social media posts, including live streaming, all fall under this disclosure requirement. In my opinion, social media take overs (when an influencer takes over someone another person or company’s account) also can fall into this category. Influencers, brands, and agencies all need to make sure there is full transparency and disclosure.
This obligation for clear and conspicuous disclosure exist regardless of the platform. If you can’t disclose the true relationship in a 140 character tweet, then it’s not OK to send the tweet. If a client will not allow you to give full disclosure, then don’t do the deal. The goal of the FTC disclosure rule is to make consumers aware of the fact that what they are reading or clicking on is an advertisement or they may be relying upon a business arrangement possibly influencing the communicated information.
If you’re an influencer who makes available your product, service or content to a third party for the above reasons, then you need to make sure that third party can and will include the appropriate disclosures. Everyone in the chain of distribution could potentially face liability should something go wrong and harm to the end user takes place. Again, contact a lawyer in your state for more information.
Influencer Related Giveaways
You’re an influencer who is asked to share, promote or otherwise support another person or company’s promotion or giveaway.
Giving away stuff and promoting or selling other people’s products and services for a fee (think incentive and affiliate programs) are popular on the internet and social media. The laws that apply to this these types of activities may very well apply to you if (1) you are an influencer and (2) you participate in the activity.
Usually, this activity falls under three different promote and giveaway categories (hereinafter all referred to as “P&G”). The first is a sweepstake where a winner is chosen by the luck of the draw. The second is a merit contest when the winner is selected based upon a certain criteria (best article, best picture…). The third is a lottery where people pay money for a chance to win. Each state has different laws controlling these P&G activities.
Sweepstakes are controlled under Chapter 30 of Title 39 of the U.S. Code. Your P&G must have “official rules” that are prominently posted with easy to find links. Each state requires you to include specific language in your rules such as “no purchase necessary” the “number of prizes” and dozens of additional terms and conditions. P&G items valued at $600 or more may require a 1099.
Your Business Entity, Contracts, and Insurance
To add to your liability protection, influences should always do business as a corporation or LLC. See my prior post for details. When done correctly, this will protect your personal assets from exposure to business liabilities. Please consult with a lawyer in your state to determine the best business entity for you.
Influencer liability can be managed and controlled by the proper use of contracts. Before allowing your name to be used, make sure you utilize a proper contract defining the full scope of your participation in the activity. Putting your agreement into writing is a good way to protect your interest and document the understanding of the parties. Doing this will also help you avoid misunderstandings down the road. Note that the agreement I’m referencing is different than the “Release, Hold Harmless and Indemnification” Agreement posted below.
Proper business liability insurance may offer additional protect for valid and frivolous claims that are brought against you not only by clients, but also third parties. Contact a reputable business insurance agent or broker in your state for more details.
Becoming an influencer takes hard work and effort. People look up to influencers and place a great deal of weight on what an influencer recommends, supports and formally endorses.
With influence comes the potential for profits, notoriety, responsibility and unfortunately, liability. It’s the various legal issues I reference above where I see most of the mistakes being made.
To best protect yourself, always use proper “Agreements of Understanding” and if possible, always use a proper “Release, Hold Harmless and Indemnity Agreements” before allowing your name or company to be associated with another person’s product or service. This is also good advice to follow if you are an influencer and are asked to promote, share, endorse or sell another person or company’s products or services.
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Related Post: “21 Clauses That Should Be In Every Influencer Marketing Contract”
Mitch Jackson is a 2013 CA Lawyer of the Year and a 2009 OC Trial Lawyer of the Year. He is a legal change evangelist who shows lawyers and entrepreneurs how to use social and live streaming to disrupt, hack and improve their practices and businesses. Connect with Mitch on Twitter @MitchJackson | Facebook, and via his law firm Jackson & Wilson, Inc.
Template Release, Hold Harmless, and Indemnity Agreement (California short form)
Warning: DO NOT use this form without first having it completed and approved by an experienced lawyer in your state. This is simply a template to give you an idea of what you may want to use to protect yourself or your business from claims. Each case is different and as such, certain state or industry specific language not included in this form may be necessary to protect your legal interest.
This Release, Hold Harmless, and Indemnity Agreement (hereinafter “Agreement”) is entered into between the below indicated Client (name of third party company) and Influencer (name of influencer or Influencer Company). Together the client and influencer may be referred to herein as (“parties” or “the parties”).
In consideration of the payment of the total sum of $_________________, or for all consideration described as follows:_________________________________________________ the client hereby releases, acquits, discharges, holds harmless and agrees to indemnify influencer, and all influencer related parties officers, directors and shareholders, heirs, executors, attorneys, insurance companies, insurance adjusters, administrators, successors and assigns, agents and employees (hereinafter “influencer”), from any and all claims, actions, causes of action, liabilities, debts, awards, judgments, sums of money, controversies, indebtedness, breaches of contract, breaches of duty of any relationships, acts, omissions, promises, agreements, representations, damages, and any demand of any type, nature, kind or description, whether in law or in equity or otherwise by reason of any matters, causes or things, whatsoever, whether known or unknown, suspected or unsuspected, heretofore or now existing or which could, might or may be claimed to exist from the beginning of time until the date of the tasks relating to retention. It is understood and agreed that this agreement entered into to secure the services of Influencer and is applicable to all real or doubtful and disputed past, present and future claims, if any.
It is further understood and agreed that all rights under Section 1542 of the Civil Code of California and any similar law of any state or territory of the United States are hereby expressly waived. Said section reads as follows:
“Section 1542. General Release- – Claims Extinguished. A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”
Final Release, Hold Harmless and Indemnification Agreement: The undersigned further acknowledges that this agreement and its reduction to final written form is the result of good faith negotiations between the parties, and involving their respective counsel.
Hold Harmless and Indemnification: The client agrees to be solely responsible for all claims, litigation and legal matters, if any, past, present or prospective, asserted by any person or entity not a party to this agreement. In the event of any legal action or proceeding of any nature instituted by any third party against the parties referenced in this agreement, the client agrees to defend, hold harmless, and indemnify Influencer for all related matters including all said third party actions.
Entire Agreement: The parties to this agreement further declare and represents that no promise, inducement or agreement not herein expressed has been made, and that this agreement contains the entire agreement between the parties hereto, and that the terms of this agreement are contractual and not a mere recital.
Venue: All claims, disputes and rights under this agreement shall be determined, mediated, arbitrated and litigated in the County of _______________, State of _______________.
Attorney Fees: If legal action is brought for the enforcement of this agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorney fees and other costs incurred in that action or proceeding, in addition to any other relief to which they may be entitled.
A digital signed and dated copy of this agreement is valid as an original.
DATED: _____________ Client _____________________________
DATED: _____________ Influencer _____________________________
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Update 04-19-17: FTC Tells Paid ‘Influencers’ to Disclose When Instagram Posts Are #Ads https://www.buzzfeed.com/katienotopoulos/ftc-reminds-celebrities-about-instagram-ad-guidelines?utm_term=.uuVm90ez9d#.xnpPDzVEDr