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Fashion Week eBulletin: Sponsored content, Ryan Lochte, Karen Millen and other industry developments over the Summer

19 September 2016

“Spon Con”: This Summer the Authorities have been cracking down on sponsored posts

This summer’s global spectacles, from Glastonbury to the Olympics and Euro 2016, have been a huge commercial platform where brands have proactively marketed products through social media. With target markets becoming immune to traditional forms of advertising, it seems this method of marketing is having a greater effect.

Some, but by no means all, of these posts contained the words ‘ad’ or ‘spon’ to make consumers aware that the post contains brand sponsored content. As the rules in this area become more stringent and the sanctions for breaking them increasingly harsh, what legal steps can brands take to protect themselves from social media slip ups moving forward?

What are the rules?

If you have paid for, or been paid to post, editorial content to promote a product, you have to make it obvious to the consumer that it is sponsored content. This comes under the Consumer Protection from Unfair Trading Regulations 2008. The UK’s Competition and Market’s Authority (CMA) also prohibits ‘cherry picking’ favourable reviews, meaning consumers must have access to all lawful and relevant reviews.

And what happens if you break them?

The Government has given the CMA a wide remit to improve and maintain consumer confidence in brands. It recently secured undertakings from Social Chain (a UK-based marketing company that arranges advertising for businesses through social media) not to post or arrange for others to post sponsored content without informing consumers that there is a commercial relationship at play.

Following a separate investigation, the CMA has secured undertakings from Woolovers Limited, a knitwear retailer, that it will stop selectively publishing reviews on its website, and that all genuine, relevant and lawful customer reviews will be available to consumers.

If either entity fails to comply with the undertakings they have given they could face civil or even criminal penalties. Criminal sanctions can be imposed against individuals, corporate bodies or directors of corporate bodies, and the penalties can include a fine or a prison sentence of up to two years. Brands engaging in this practice are potentially at risk of facing criminal sanctions in the next few years as the CMA is encouraged to use these powers when a particular practice has become widespread to the detriment of consumers and they consider that criminal enforcement will send a strong deterrent message.

So how can a brand protect itself?

Here are some legal steps that UK brands can take to stop themselves facing sanctions:

  • Use the contract with the digital influencer to protect themselves from any liability that they may incur as a result of the digital influencer’s actions
  • Sit down with their chosen influencer in advance of big events and plan a detailed strategy of which post will go out when, and what it will say, and include this wording in the contract. This practice is called ‘moment advertising’ and is a good way for brands to ensure that everyone stays on message
  • Ensure that they have a robust and enforceable take down right allowing them to immediately request the removal of any unsanctioned content.

If the digital influencer still fails to comply with the above requirements despite them being in place, and the brand finds itself with a financial sanction imposed on it by the regulator, it could seek to recover all or part of that liability from the digital influencer under the contract. Failing that, it could simply exercise the right to terminate the commercial relationship immediately if it felt that the digital influencer’s actions could, or have, damaged its brand.

If a brand takes precautions it could mean that, even if one misjudged tweet slips through the net, they are well equipped to demonstrate they took measures to try and prevent this from happening.

Written by May Delaney

INSIGHTS

  1. “We cannot condone behavior [sic] that is counter to the values this brand has long stood for” read Speedo’s statement announcing the end of their endorsement agreement with US swimmer Ryan Lochte in the wake of his infamous run-in with a Brazilian petrol station toilet (to read the full story click here). Given that the prime motivator for sponsors entering into individual endorsement agreements is the enhancement of positive brand values, it stands to reason that unacceptable activities should trigger a right of termination.  For sponsors, the key element in one of these so called “morality” or “behaviour” clauses, is the ability to assess the behaviour in question and react accordingly; if the sponsor believes its own brand has been damaged, whether directly or through association with the individual, it should have the contractual right to terminate the agreement.  Whether it chooses to do so, or decides instead to let the storm blow over is a matter for the marketers; it is up to the lawyers to make sure the sponsor has the ability to make that choice. For more information on sponsorship and branding please contact Bob Mitchell.
  2. Retailers operating across multiple European jurisdictions should review governing law clauses contained in their consumer terms to ensure that they are not at risk of being deemed unfair and therefore invalid. In the recent case of Verein für Konsumenteninformation v Amazon EU Sàrl C-191/15 the CJEU addressed the criteria for national courts to apply when considering whether governing law clauses meet the requirements of good faith, balance and transparency imposed by the Unfair Term in Consumer Contracts Directive. Whilst suppliers may prescribe the governing law of their choosing in consumer terms, this case confirms that these clauses will be deemed unfair to the extent that their wording or characteristics create an imbalance between suppliers and consumers. According to the CJEU, this will include clauses which give consumers the impression that their mandatory local law consumer protections are overridden by the supplier’s choice of governing law and also clauses which are not drafted in plain and intelligible language. For more information on consumer contracts please contact Rebecca Collard or Natalie Smith.
  3. The judge in the recent High Court case of Millen vs Karen Millen Fashions Ltd made some interesting observations on the retail industry, and the unique nature of the British High Street, when deciding Karen Millen could not use her own name for any product lines. He variously described the brand as a “bridge luxury” brand, a “niche specialist retailer” brand, a “quintessentially British” brand, a “top end of the high street” brand, (and) a “lifestyle” brand. He argued consumers are now much more comfortable with the idea of high street brands like Zara moving in to home wear, whereas ten years ago this was the preserve of luxury labels. He added, however, that the issue was additionally complicated by the fact that the concept of a ‘high street’ is a uniquely British phenomenon. To read more on the judge’s decision please click here. For more information about our Retail and Fashion groups please visit our website.

IN OTHER NEWS:

Sandi Simons is attending the Retail Week General Counsel Summit on 14th October, if you or someone from your organisation is also attending please do not hesitate to contact Sandi.

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