With summer approaching, celebrities and creators will be working overtime to lend their clout to brands and products, recommending the hottest swimwear, beverages and destinations for the season.
Let’s hope they’ve been careful.
Influence is about exposure to your brand, but it’s about legal exposure, too.
Whether you’re a creator who creates 100% of your content, a movie star or a fashion influencer busy with collaborations, you can face legal consequences if you don’t follow the law.
And based on the growing flurry of lawsuits against creators, it’s clear that many of them are dangerously unaware of the risks involved.
Here’s what brand marketers, creators and their managers need to know to avoid hefty consequences.
The creator economy is attracting more legal scrutiny
The creator economy is changing marketing fast. According to the Winterberry Group’s Outlook for Advertising, Marketing and Data 2023, US online marketing spend for influencers alone in 2023 will be $6.9B, up 17.5% YOY.
The influence of creators is real, and regulators are taking note.
But the more influence you have and the more harm you might do, the more likely you are to stumble into legal cross-hairs.
Last year, the SEC fined Kim Kardashian $1.26 million for failing to disclose how much she was paid to promote a cryptocurrency in Instagram posts.
Jimmy Fallon and NBC were sued for failing to tell viewers that a “purportedly organic segment on the Tonight Show was in reality a paid advertisement for the BAYC [Bored Ape Yacht Club] collection of NFTs and MoonPay,” according to the complaint.
But it’s not only big names who are at risk. Smaller creators need to be careful, too.
Last year, travel influencer Cassie De Pecol was sued by the consumer protection group Travelers United over allegations that she told “increasingly bold lies” to gain more followers and repeated those lies to sell products for brands like GoDaddy, Venus Razors and Quest Nutrition. Also, she did not always disclose financial relationships in accordance with FTC guidelines.
The state of Texas sued influencer Brittany Dawn Davis, seeking up to $1 million in penalties and court fees, claiming the “individual coaching” courses she sold were nothing more than “generic and non-substantive” feedback, such as “That’s my girl! You’re killing it!”
Highly regulated industries may pay well – but boost the risk, too
If you’re promoting a lower-cost product like toothpaste using #ad, the stakes are fairly low. Consumers aren’t at much risk of making a bad decision. But there are much more stringent regulations about advertising for financial services, and for good reason: Consumers can lose substantial amounts of money, even their entire life savings.
Punishments for those not being careful can be swift and certain.
For one thing, you can attract the attention of the SEC. The Securities and Exchange Commission charged eight influencers in a $100 million securities fraud scheme in which they used Twitter and Discord to manipulate exchange-traded stocks.
You can also be sued. Just ask DJ Khaled, who touted disgraced cryptocurrency venture Centra Tech as a “game changer” and boxer Floyd Mayweather, who told his followers, “You can call me Floyd ‘Crypto’ Mayweather from now on.” Investors in Centra Tech sued both. Neither influencer disclosed that Centra Tech paid for their posts. And the lawsuit claimed that if the celebrities hadn’t used their influence to promote Centra Tech’s cryptocurrency, the securities and wire fraud perpetrated by the company’s owners wouldn’t have been so successful.
And it’s not just crypto content that can land creators in hot water. Tough regulations apply to any investment vehicle. And other industries – especially healthcare – are heavily regulated to guard against consumer abuse.
Push boundaries, but don’t break laws
Influencer marketing is here to stay. The biggest advertisers in media recognize creator content as premium content.
But as it rises in importance, influencers and their managers need to slow down and understand the necessary disclosures and labels. While some creators worry that labeling a post or story as advertising will impact engagement or authenticity, the legal and financial consequences will be far worse. Disclosures exist to protect creators and the people they influence.
It’s easy to run into trouble with the FTC or SEC. And that kind of legal trouble can cost creators their reputation and their audience’s trust.
The good news is there are clear guides available to keep creators on the right side of the law. The FTC has published a smart, plain English guide – it’s a useful resource for influencers and their advisors.
When everyone follows the rules, the future of the creator economy is bright.
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
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