Supreme Court sheds light on influencer advertising ahead of new unfair competition law

Whether and how influencer social media posts relating to third-party products should be classified as advertising has been widely debated, with an alarming lack of consistency between lower court rulings. The Justice Department has sought to clarify this dilemma by amending the Unfair Competition Act to make the relevant provisions applicable depending on whether or not the advertising has been paid for, however, these changes will only come into effect in May. 2022. In the meantime, some decisions of the Federal Supreme Court (BGH) aim to provide guidance.

Facts

The BGH recently issued three parallel decisions in cases from the Courts of Appeal of Braunschweig (I ZR 90/20), Hamburg (I ZR 125/20) and Munich (I ZR 126/20). In all three proceedings, a German competition association (the Association of Social Competition) sued leading German influencers Leonie Hanne, Cathy Hummels and Luisa-Maxime Huss for misleading advertising. Each of the influencers has a verified Instagram account with a large number of frequent and followed posts.

All of the influencers have used what are known as “tap tags” (that is, markers in Instagram posts that only become visible when users touch them) to display the manufacturers of the products depicted. In all three proceedings, the plaintiff charged the respective defendants with illegal clandestine / misleading advertising and made claims for injunction and reimbursement of costs.

Two of the three cases (I ZR 125/20 and I ZR 126/20) concerned such positions for which the influencers had not received any financial incentive from the producers or distributors of the advertised products. In these cases, the plaintiff’s claims were dismissed by the respective courts of appeal. In the third case (I ZR 90/20), the influencer had been paid for her position, and the complainant’s claims were initially accepted.

Decision

On appeal from the underlying parties, the BGH upheld the three district court decisions and sought to clarify ongoing discussions triggered by inconsistencies between Germany’s telemedia law and the deceptive advertising law. The advice provided can be summarized as follows.

An influencer who offers goods and services and promotes them through social media (e.g. Instagram) acts regularly among others for the benefit of the company with advertising displays. If consideration is received for such messages, the influencer acts for the benefit of the advertised business. In this case, the failure to indicate the advertising character is considered misleading under German law.

On the other hand, if no financial incentive (whether for a free product or a financial contribution) is received by the advertising influencer, a publication on social networks is only susceptible to attack. if, and to the extent, it is excessively promotional as a whole. impression (i.e. if promoting a third party’s business is more than just collateral). To determine whether a so-called ‘ad surplus’ exists, a full case-by-case assessment is necessary, taking into account all of the circumstances of the individual ad, including the interaction of the specific design of the post on. the social networks in question (eg, posting of product photos, editorial context, links to third-party company websites).

In the specific cases, the use of tap tags to designate the manufacturers of the products represented does not necessarily entail an advertising surplus. This can be assumed in the case of a link to a website of the manufacturer of the displayed product, even if the linked page does not directly offer the purchase of the products. It is because the link in itself already regularly leads the consumer to make a business decision that would not have been taken otherwise, namely to click on the advertised link.

In such cases, a clear reference to the commercial purpose of an advertising display is therefore required. To successfully avoid being misleading, this reference must stand out at first glance and make it clear to the average consumer that the post is in fact an advertisement. A reference to the commercial purpose, simply in the text of an article published on social networks, is in any case insufficient to identify the commercial purpose of a tap tag on an image. The Celle Court of Appeal has already reached the same conclusion in 2017 regarding the hashtag “#ad” placed in a hashtag cloud (ie a group of hashtags); she felt that this was insufficient to indicate the business purpose of an Instagram post.

Comment

The decisions of the BGH are decisive and will likely remain applicable even after the entry into force of the changes to the law on unfair competition in May 2022. Whether advertising influencers receive financial incentives for their contributions will be the deciding factor for the future evaluation of advertising by social media influencers. However, cases of advertising surplus or insufficient reference to the commercial purpose of an advertising display are probable. Therefore, to minimize liability risks, it is strongly recommended that companies collaborating with influencers review the contractual basis of agreements, as these should clearly require advertising vehicles to comply or ensure compliance with applicable advertising provisions. .

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