Influencer Marketing: Compliance Considerations for Brands Engaging on Social Media

Increasingly, brands in every industry are incorporating social media influencers into their marketing campaigns. By 2022, companies are expected to spend up to $15 billion on influencer marketing.¹ As research reveals that 63% of consumers trust influencer endorsements more than company advertising,² even highly-regulated financial service brands are investing in influencer marketing campaigns on Instagram, Twitter, Facebook and YouTube.

These campaigns can also include celebrity involvement in hybrid and virtual events. Yet, brands and businesses cannot ignore the risks associated with influencer marketing. The potential for reputational risk, as well as various regulatory laws and policies should be considered alongside any potential engagement with influencers – celebrity or otherwise. This includes the Federal Trade Commission (FTC) Social Media Endorsement Guidelines, Federal Financial Institutions Examination Council, Social Media Consumer Compliance and Risk Management Guidance.

What are social media influencers?

While celebrities with huge followings, like Kim Kardashian West and Kylie Jenner, may have been the original influencers, the market has grown to include micro-influencers with niche following organized by region or interest, nano-influencers, kid-influencers, gran-influencers, gaming-influencers and virtual-influencers (computer-generated influencers). As consumers make social media an ever-increasing part of their lives, daily activities, including shopping and product or service considerations, are occurring on social media platforms. In general, companies should identify influencers who have used or liked their product or service, or who have authentic connections with their brands.³

Potential Risks and Regulatory Guidelines

Regardless of which type of influencers companies engage with, they should not assume that a younger age or smaller number of followers make the potential risks associated with influencer marketing any less significant. All campaigns should be treated equally from a legal protection standpoint, with legal and compliance departments involved in campaign planning, execution and monitoring.⁴ Potential risks and mitigating strategies include the following:

• Lack of data security – Platforms, like TikTok, which cannot guarantee the privacy and security of user data, should be regarded with caution from a risk standpoint. Data protection agreements requiring influencers to adhere to General Data Protection Regulations (GDPR) and California Consumer Privacy Act (CCPA) standards may help mitigate this risk
• Fraudulent influencers – People who create social media posts alleging the content is sponsored by a business sometimes have no agreement with the brands they are promoting. They can leverage fake deals to secure real contracts with other businesses. Brands should ask for referrals with verifiable contact information before entering into a service agreement or contract with a new influencer
• Fake followers – Some influencers create multiple accounts and buy followers to justify higher rates from brands. Followers should be examined closely to verify their legitimacy
• Copyright infringement – Permission is needed from content creators for all photo, video and written assets used in influencer, social media and digital marketing campaigns. Assignment agreements, instruments that transfer ownership in intellectual property rights from the owner to the new owner, or license agreements, which do not transfer ownership but do provide permission, should be secured in writing with influencers and content creators. One of the foremost intellectual property rights concerning content creators is copyright, which, “protects the expression of ideas in…artworks, literary works, songs, video recordings, photos, films and more.” While brands may pay for content, they will not own that content unless ownership is expressly given to them in writing. Separate assignment agreements are helpful when multiple people (e.g., influencers and the content creators they involve in their work) are involved in the creation of contente.⁵
• Problematic content – This can include smoking, nudity or other behaviors that might create reputational risk for brands. Ethical commitment agreements binding influencers to adhere to particular ethical policies of a brand may be helpful in mitigating the risk of undesirable content.

The Federal Trade Commission (FTC) in the United States and the Competition and Markets Authority (CMA) in the United Kingdom have released guidelines for social media influencers, under the larger umbrella of online advertising. Specific social media platforms, such as Instagram and YouTube, also provide guidelines to their ad policies for businesses and content creators. A number of these regulations and documents to aid in further investigation into and consideration of regulatory concerns are available online at the Library of Congress’ Influencer Marketing Research Guide.⁶

Recommended Next Steps

While concern is called for with any exploration of influencer marketing, and more broadly, social media marketing, brands should not necessarily avoid this activity. Risks should be thoroughly considered and mitigated with the following steps.

1. Form a multidisciplinary team of specialists in legal, compliance, technology, information security and privacy, human resources and marketing to spearhead the decision on whether or not to engage in influencer marketing and to manage its activity after implementation.
2. Create an internal social media policy that complies with all relevant regulatory guidelines from the FTC and other bodies, including the social media platforms’ own guidelines for branded content.
3. Thoroughly vet potential influencers for brand alignment, authenticity and legitimacy. Weed out fraudulent influencers and fake followers before engagement.
4. Put agreements and contracts in place, including relevant documents from those described above (e.g., assignment agreements, data protection agreements, ethical commitment agreements, license agreements, etc.)

How EPIC is Positioned to Help

Partnering with a broker who understands a firm’s unique risk profile is essential. EPIC specialists apply innovative and tailored solutions to each situation, along with cutting-edge analytical tools and a collaborative litigation strategy to ensure clients are fully prepared and ideally situated for positive outcomes.

Engage with confidence! Contact EPIC today to ensure that your organization is prepared to handle risks associated with influencer marketing.

¹ “Influencer Marketing: Social Media Influencer Market Stats and Research for 2021” Business Insider. Published January 6, 2021.
² “Social Media & Influencer Compliance for Financial Institutions.” JDSupra. Published December 8, 2020.
³ “6 Dangers of Influencer Marketing.” Olivia Iurillo, Social Media Today. Published July 11, 2019
⁴ “Influencer Marketing Legal Concerns and Your Agency.” Sharon Toerek, Legal+Creative. Published March, 2019.
⁵ “The Legal Issues That Influencers and Marketers Must Get Right.” Hester Bates, The Drum. Published February 28, 2020.
⁶ “Influencer Marketing: A Research Guide.” The Library of Congress.