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Influencer marketing has grown so much that French lawmakers passed a bill in June 2023 to regulate influencers. Prohibiting the promotion of medical procedures, devices, and even betting and gambling — influencers and brands will now have to follow specific legal guidelines in the country. 

So, more than ever before, you need to be aware of the influencer marketing legal issues when running a campaign. Like, in 2022, Kim Kardashian, America’s most successful social media influencer, was sued for $1.26 million for promoting cryptocurrency on social media without disclosing how much payment she received for the endorsement from EthereumMax. 

The lawsuit reminds brands and influencers to adhere to influencer marketing legal guidelines. As more and more brands dive into influencer marketing, it has become essential for them to practice authentic influencer advertising on social media. 

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But without a clear understanding of the influencer marketing legal issues and guidelines, it can be challenging for you to ensure genuine content. So here’s a list of the most prominent influencer marketing legal issues reported in the past, why you must follow guidelines, and how to keep your brand safe from potential lawsuits. 

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What are the legal issues with influencer marketing?

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Here’s a list of the influencer marketing legal issues you should be aware of:

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1. Material connection disclosure 

Material connection refers to a financial partnership between influencers and brands. According to the Federal Trade Commission (FTC), “A ‘material connection’ to the brand includes a personal, family, or employment relationship or a financial relationship such as the brand paying you or giving you free or discounted products or services.” 

Influencers are required to disclose any material connections with the brand to their followers, stating clearly if they received compensation or free products for the endorsement. Failure to disclose such information can result in fines and reputation damage of influencers and brands. 

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Example:

In December 2022, Superstar influencers such as NFL quarterback Tom Brady, supermodel Gisele Bündchen, former basketball star David Ortiz, and 11 other celebrities faced lawsuits for promoting cryptocurrency without fully disclosing their financial arrangements with FTX, once the third-largest and now bankrupt cryptocurrency exchange company. 

The lawsuit is a classic example of influencers violating consumer protection laws and partnership disclosure guidelines. Crypto investors sued celebrity influencers for promoting misleading information without conveying that they are part of a paid advertisement. In fact, one of the investors lost over $30k in crypto exchange after the endorsements by these A-list influencers. 
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Source: FTX

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2. Misleading endorsements

Influencers often share deceptive endorsements with followers. This can include sharing incomplete information, reviewing products without using them, faking real experiences and opinions, using unsubstantiated statements about a product’s performance, and so on. 

Such influencer marketing legal issues not only damage the brand and influencer reputation but also invite potential lawsuits. According to FTC influencer guidelines, all endorsers must share honest experiences and reviews about products and services. 

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Example: 

Shein, the Chinese fast fashion retailer, recently faced backlash for using influencers to whitewash its online reputation as a company using unethical labor and environmental practices to make a fortune. The brand organized an influencer trip to one of its factories in China. The influencers used this opportunity to talk about how the claims against Shein are not true. 

But the social media audience saw right through the facade. The influencers who shared content after the trip faced scrutiny for sharing misleading content without doing proper research on Shein’s practices. 

Although the influencers didn’t face any lawsuits, they did come across significant backlash damaging their reputation and influence on social media. 
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‍3. Copyright infringement 

Copyright infringement occurs when you use someone’s original creative work without permission. Copyright infringement cases often make headlines in the influencer marketing sphere, highlighting how brands or influencers used copyrighted work to advertise products and services. It can be an image or a song used in branded content without acquiring proper licenses. 

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Example: 

Warner Music, the multinational record label company, sued Bang Energy in 2022 for using their music to create social media and influencer content without permission. This was the energy drink maker’s third lawsuit over music copyright infringement. Sony Music Entertainment and Universal Music Group claimed that Bang Energy made millions of dollars by using over 200 copyrighted recordings without obtaining licenses. 

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Why does influencer marketing need regulation? 

In the last few years, the position of influencers has transformed from content creators to value-driven marketing partners. Influencers are now trusted professionals who: 

• Hold a position of authority and influence
• Create educational and promotional content in a specific niche 
• Amass a wide following of fans on social media 
• Have an influential voice that can shift consumer purchasing decisions 

Influencers have become the top advertising channels for brands. And with the rapid dissemination of information through influencers, it has become essential to have regulatory laws in place for influencer marketing. Guidelines such as content disclosure, influencer agreements, copyrights, and more:
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• Protect consumers from deceptive advertising
• Ensure influencers don’t hide their “material connections” to brands 
• Mitigate the spread of misinformation in the name of content 
• Enable brands to establish authentic connections with the consumers 
• Allow brands to form real influencer partnerships 
• Help brands earn credibility with their target audience 

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Who regulates influencer marketing? 

Influencer marketing is not a “one size fits all” solution. It is an evolving advertising discipline that varies from country to country and culture to culture. For example, influencer marketing in the USA can differ entirely from the practices people follow in Germany. Influencers in a particular region can have different opinions about branded content than in another. So every region has its influencer marketing guidelines depending on respective market behaviors. 

Here’s a list of legal specifics followed in different regions: 
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1. USA follows the official influencer marketing guidelines laid down by the Federal Trade Commission (FTC). According to the FTC influencer guidelines, it is the brand’s and agency’s responsibility to ensure influencers share accurate information with followers, and disclose all business relationships. 
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2. In India, Advertising Standards Council of India (ASCI) regulates the influencer marketing industry. Here, the influencers and creators are responsible for maintaining trust with brands and audiences. 
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3. The UK has two regulatory organizations - the Advertising Standards Authority (AMA) and the Competition and Markets Authority (CMA). According to them, payment and compensation of any kind are ruled as an ad and require disclosure in posts, videos, and stories. 
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4. In June 2023, France passed a law requiring influencers to disclose all their paid content, with a disclaimer if it has been altered or filtered. Influencers cannot create paid content promoting cosmetic surgeries, online sports betting sites, or financial products like cryptocurrencies. 

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‍How to keep your brands safe from influencer marketing legal issues?

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1. Perform thorough market research

Understanding the market you wish to advertise in is the first step in avoiding influencer marketing legal issues. A thorough market research includes an in-depth study of the market trends, the audience, and the geography you choose to share your branded content in. 

Here’s a list of questions you can answer a thorough market research:
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• What are the influencer marketing guidelines in the country you want to target? 
• What type of content does your target audience prefer? 
• What is the brand messaging that you wish to communicate?
• What kind of influencers can help you share your brand messaging? 

Answering the above questions will enable you to share inclusive and fair content with your target audience, reducing the risk of facing legal claims. 

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2. Partner with honest influencers 

The right influencer collaborations can boost the effectiveness of your campaigns. Partnering with influencers who are experienced, know their followers’ preferences, only share genuine content, and steer clear from unethical practices ensures safe and honest campaigns. 

But out of millions, what influencers should you partner with? There are many ways to find that out. But using data-backed insights is hands down the best way to land the perfect collaboration. 

‍Influencer marketing platforms such as affable.ai provide in-depth insights into an influencer’s community and content. Data such as influencer engagement rates, follower growth, brand affinity, and suspicious follower rate allow brands and agencies to make informed decisions while choosing an influencer. 

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3. Draft a detailed influencer contract 

Whether a one-off engagement or a long-term influencer partnership, brands should always have a written agreement with influencers. An influencer agreement includes the duration of work, negotiations, payment terms, copyrights, and other legal aspects that protect brands from future influencer disputes. 

Here’s a checklist you can use to create your influencer agreement: 
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• Scope of work 
• Branding requirements 
• Campaign goals 
• Content deliverables 
• Preferred social media platform 
• Publishing frequency 
• Deadlines 
• Legal guidelines 
• Privacy policies 
• Reasons for cancellation or termination 
• Intellectual property rights 

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Pro Tip: Make sure to ask for permission to use and repurpose influencer content on brand websites and social media pages. 

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4. Encourage influencers to disclose the paid partnership 

Non-disclosure of paid partnerships between brands and influencers is the most prominent influencer marketing legal issue. The Influencer Monitoring Report published by ASA in 2021 states that only 35% of influencers disclose material connections with brands in Instagram stories, highlighting the inconsistency in disclosures. Moreover, a 2019 study showed that around 28% of influencers were asked by brands not to disclose financial partnerships. 

It is the brand’s responsibility to encourage influencers to disclose paid endorsements to consumers. The best way to do this is by adding this as a clause in your influencer agreement to ensure influencers follow the guidelines. 

‍Pro Tip: Go through the content creation guidelines shared by social media platforms as the disclosures defer from platform to platform. For example, Instagram allows creators to put “Paid Partnership” banners on the posts, while on other channels influencers use #ad or #sponsored in the descriptions. YouTube, too displays an “Includes Paid Promotion” label in its sponsored videos. 

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5. Avoid using copyrighted content 

Using copyrighted content is another influencer marketing legal issue that can land you a million or even a billion-dollar lawsuit. There are two ways to avoid this: 

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A. Ask influencers to create original material 

Ask influencers to use their creativity instead of simply copying and  pasting someone else’s work. You can cross-check the content for plagiarism to be sure. Be it an image, video, or sound, encourage influencers to churn fresh content. 

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B. Attain proper licenses for copyright content 

If you have to use copyrighted material like trending songs for creating videos, obtaining a license from the owners is best. 

Considering the popularity of sound in marketing videos, YouTube and TikTok have made it easier for brands and influencers to license music and avoid copyright infringement. TikTok’s Commercial Music Library and YouTube’s Creator Music are excellent for obtaining music licenses for creating trending videos on these platforms. 
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6. Review all influencer posts 

 
With several examples of growing backlash on influencer content, it is wise to review influencer content before publishing. Amidst the rising debate over providing creative freedom to influencers, it can seem controlling to review influencer content. But to avoid risking your brand reputation, you must review influencer content without making too many edits to keep their creative voice intact. 

Still unclear on editing influencer content? Learn from the experts! 

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To Summarize

Influencer marketing is a powerful advertising tool, provided you use it accurately. The best way to practice brand-safe influencer marketing is to make data-based decisions. Influencer marketing platforms like affable.ai assemble all the important insights in one place so you can make informed decisions. Be it choosing the right influencers, establishing communication, and ensuring genuine partnerships —  influencer marketing platforms like affable.ai can help you streamline the process. 

‍Book a free trial with our experts to learn more! 

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