Are you a social media influencer? Perhaps you are considering monetizing your influence by establishing partnerships with brands you like. Perhaps you already have lucrative brand partnerships set in motion. Either way, there are some very important legal considerations that you must be aware of. Congratulations on building up your influence to the point that you are educating yourself on the law surrounding social media influencer marketing, it is a good problem to have!
Below are some things you should consider when thinking about entering into sponsorship agreements with businesses. There can be consequences for your brand and your wallet if find yourself on the wrong side of these laws.
1. There are Marketing, Competition and Tax Laws You Need to Follow
In Canada, social media influencers must follow strict rules for advertisements and competition. Let us talk about Jasmin, she works for a big brand clothing company, she is cool and trendy, and she has a couple of thousand followers on her Instagram account and YouTube channel. As a micro-influencer, her views and opinions on products will influence her followers. These rules are particularly important to Jasmin because she has just had a clothing company offering to sponsor her YouTube videos. For anyone who wants to be or is being paid or given some compensation, like free products or event access, there are specific laws that must be followed.
Ad Standards is a non-profit that administers the Canadian Code of Advertising Standards and offers advertising preclearance. They issued Disclosure Guidelines for Influencer Marketing. These Guidelines include some of the disclosure obligations contained in the Code for influencers. As an example, under the Code there is an obligation to be clear and accurate.
For Jasmin, this means that her post must not be deceptive or misleading, and it must show a material connection with the company making the product or service available to the public. Jasmin would be in violation of the Code’s rules if she were to endorse a product online from the company that she works at without making it clear they are her employer. The Guidelines are a great resource and they set out examples of “do’s and don’ts'' for posting on different social media platforms.
In addition, the Competition Bureau of Canada (“The Bureau”) lays out additional rules you need to know and they even have a page dedicated to influence marketing. The Bureau requires you to be transparent in the disclosure of your relationship with the sponsor compensating you, so that your followers can make educated decisions about the products or services that are being promoted. This means you need to be clear if you are being compensated in any way. For example, you paid for your services as an influencer (#ad) or you have received the product or service for your own use for the price of a mention in your Instagram stories (#gifted).The Bureau also issues Digests: a collection of relevant information on a specific topic. One of particular importance to a person like Jasmin is The Deceptive Marketing Practices Digest – Volume 4: Influencer Marketing. There is a pretty neat checklist located in the Digest that should be bookmarked by every influencer promoting a business, product or service, if they do not want to get into hot waters.
Advertising and competition are topics that are extremely regulated in Canada, which means that you can be found liable or fined for posts that are not compliant with the relevant laws and regulations on marketing applying to social media influencers. The Competition Act Part VII.1 on Deceptive Marketing Practices is one example of an important piece of legislation that you understand or discuss with your lawyer to ensure that your posts are compliant. The Act lists the monetary penalties that can be imposed on a person violating the Act and the penalties range from $750,000 to $1,000,000. That’s a lot of money gone just because you didn’t understand the law.
Lastly, on the taxation front, social media influencers should take special care in keeping track of their sponsorships, advertisements, and other compensation from their social media channels. You do not want to find yourself having unreported income come tax season! The Canada Revenue Agency (the “CRA”) confirmed in December 2020 that their auditors are keeping an eye out on social media influencers that are earning an annual income of more than $500,000. Under the CRA’s gaze is all income and taxable benefits that the influencer receives and that includes free trips, donations and gifts. The CRA has a page dedicated to explaining tax obligations of social media influencers, if you are unsure about what income you need to disclose check the Compliance in the Platform Economy on the CRA website.
2. You Need to Respect Other People’s or Company’s Content
When creating content on social media, there are other legal considerations you need to keep in mind including respecting other individuals or company’s Intellectual Property (“IP”) rights. IP means a person’s or company’s rights on inventions (patents), on their original creation (copyrights) or their brand (trademarks – can be a word, design, a logo). With this in mind, social media influencers should think through what they post. When Jasmin posts a picture on her social media, she needs to think about who owns the rights to the picture. If she took the picture herself, she is likely safe and nobody’s IP rights have been violated. On the other hand, if her friend or a professional photographer took the picture, she will have to think through the legal implications of posting it. What if the picture goes viral? (Congrats Jasmin!), but who will be paid if the picture is picked up by a brand: Jasmin or the friend? Understanding IP law by talking to a lawyer will ensure you are protecting your work and have the proper contracts in place so that there are no surprises in the end.
Another important thing to be aware of are the laws around expressing an opinion about a business, product, or service that you are not associated with. If you aren’t careful, you may end up unknowingly violating their individual or businesses’ rights. There can be serious consequences such as being sued for breaching their rights or defamation suit if you make any false statement on their products or services.
3. Protect Yourself Against Risk, And Get the Best Deal
Making sure that you are following the laws that apply to social media can be tricky and dealing with the legal implication of partnering with a sponsor can be even trickier. You want to ensure you think through the legal implications of signing a deal to promote any products or services.
When you sign on with a company, they will likely send you a long contract with complicated language that may as well be written in another language. It is important that you are able to understand what you are signing and particularly to be on the lookout for restrictive clauses, such as exclusivity clauses that can limit your ability to be hired by other brands in the same industry as the one you are currently promoting. You should also be on the lookout for the term of Work Product and its definition. Questions like what will be considered as Work Product? Does include it include ownership of your social media account? Is it just a post? A picture? We have all heard the horror stories of some famous influencers being locked out of their social media accounts and you should definitely avoid finding yourself in a similar situation.
When partnering with a brand, it is important to fully understand your role in the campaign, do you get paid a portion of any money that the campaign makes? Will the brand be using your images for their own marketing and promotion? There are many considerations and we can’t cover them all here which is why working with a lawyer to help you review your contracts is so important to ensure that you and your brand are protected.
How Can Momentum Help You?
We offer a wide range of business law services like among other things:
i. contract drafting, review and / or negotiation,
ii. review your social media post for compliance,
iii. incorporate your business – if you feel your sole proprietorship has run its course.
Please do not hesitate to reach out to us if you have any questions, you have been approached by a business or you are already monetizing your online presence, we will be happy to chat with you!