The Bottom Line
- Class actions in the influencer marketing space are becoming increasingly common, and expensive, with sought-after damages ranging from the tens to hundreds of millions of dollars. These cases are targeting influencers’ and advertisers’ failure to clearly disclose when social media posts are paid advertising.
- The NAD is paying close attention to influencer activities, as evidenced by a recent wave of inquiries into influencer posts that failed to clearly disclose the material connection between the influencer and the sponsoring brand.
- Brands should review their influencer agreements and social media policies and actively monitor influencer conduct to ensure compliance with truth-in-advertising laws and the FTC’s Endorsement Guides in order to mitigate the risk of class action lawsuits and NAD actions.
Class actions targeting prominent brands using influencers to advertise their products on social media are on the rise, accusing brands and their influencers of failing to properly disclose paid endorsements.
A series of recent cases targeting brands and their influencers rely on a similar set of facts – namely that consumers paid a premium for goods recommended by influencers that they might not otherwise have purchased, believing these recommendations were based upon the genuine opinions of these influencers rather than part of a paid ad. With damages sought in the tens to hundreds of millions of dollars, these class actions are proving to be a major concern for brands that engage in influencer marketing.
Pending Class Actions Involving Influencer Marketing
Well-known brands across industries have been targeted in recent months for their alleged misleading and deceptive influencer marketing practices.
ALO Yoga
Most recently, in Sulici et al. v. Color Image Apparel d/b/a Alo Yoga et al., clothing brand ALO Yoga and 15 of its influencers have been accused of engaging in deceptive marketing practices under the FTC Act, various state consumer protection statutes and state unfair trade practices laws, because the company’s influencers allegedly failed to disclose paid endorsements in their Instagram posts.
In their complaint, the plaintiffs outline various examples of misleading influencer advertising, including using confusing hashtags such as #aloRUNNER and failing to use #ad or #paidpartner. The named plaintiffs and the class they represent are seeking to recover the difference between the price paid for ALO’s products and the market value of those products to the tune of $150 million. The class claims that they paid a premium for these products based on what they believed to be the impartial opinions of influencers on Instagram rather than paid ads. Along with the staggering dollar amount sought in damages, plaintiffs also seek restitution, attorneys’ fees and injunctive relief.
ALO Yoga is merely the latest target in this year’s slew of class actions regarding allegedly deceptive influencer marketing practices.
Revolve
In April, plaintiffs in a class action filed against fashion company Revolve, Negreanu v. Revolve Group, Inc., et al., similarly alleged that they paid a premium for Revolve products based on what they believed to be authentic endorsements from influencers on social media. Plaintiffs seek more than $50 million to redress the alleged harm claiming violations of the FTC Act and its state law equivalents in more than two dozen states, Florida’s Unfair Trade Practices Act, and California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act.
Shein
In February, fashion giant Shein was hit with a class action of its own in Bengoechea et al. v. Shein et al., alleging that influencers were compensated to promote Shein products but failed to clearly and conspicuously disclose their material connection to the brand in violation of the FTC Act and its state law equivalents in Illinois.
In this case, disclosures were sometimes made, but they were often buried at the bottom of captions or in long, hard-to-read hashtags, such as #SHEINSXYxSTAS and #sheininfluencer. Plaintiffs claim these disclosures are insufficient to meet the clear and conspicuous standard required under the FTC Endorsement Guides. Plaintiffs are seeking more than $500 million in damages, as well as disgorgement of profits and injunctive relief.
Celsius
Fashion companies are not the only target of recent class actions in the influencer marketing space. In January, energy drink company Celsius and three of its influencers were sued in a class action filed in California federal court, Dubreu v. Celsius Holdings, Inc. et al. This case alleges that those influencers failed to sufficiently disclose that their opinions were part of a paid advertisement rather than genuine and organic thoughts about the product.
As in the other cases, plaintiffs claim that they would not have purchased Celsius products but for what they believed to be the genuine opinions of these influencers. The plaintiffs are seeking an estimated $450 million in damages for class-wide relief under the FTC Act as well as California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act.
NAD Cases Involving Influencer Marketing
As these class actions continue to play out in federal courts across the country, the National Advertising Division (NAD), a self-regulatory body of the advertising industry that monitors advertising for compliance with truth-in-advertising laws, has been particularly aggressive in bringing actions against brands whose influencer marketing practices were not in compliance with the FTC Endorsement Guides.
For example, in a case involving Revolve, itself a subject of a pending class action as noted above, NAD asserted that the influencers’ use of hashtags such as #revolveme and tagging of the Revolve Instagram account were not sufficient, as these elements did not clearly and conspicuously disclose the relationship between the influencers and the brand. Moreover, NAD indicated that simply tagging a brand, particularly when multiple brands are tagged, did not serve as a sufficient disclosure.
In response to NAD’s inquiry, Revolve changed its Brand Ambassador Guidelines to include #RevolvePartner, #RevolveAmbassador, #Ad, and #Advertisement, and directed its influencers to use these hashtags early in their captions. Further, NAD reaffirmed that the clear and conspicuous disclosure of material connections between brands and their influencers is the responsibility of both parties.
The brand’s responsibility for influencer conduct is particularly salient in another NAD case involving skincare brand Drunk Elephant, where NAD found that disclosures visible only after the user clicks the hyperlink “more” were not sufficient, nor were hashtags such as “#drunkelephantpartner” where the words ran together. Instead, NAD recommended that disclosures be placed earlier in captions and as separate words, such as “Drunk Elephant Partner” rather than the hashtag. NAD also recommended that influencer videos themselves include clear and conspicuous disclosures (e.g., superimposed and audible, as applicable, where endorsements are visual and/or audible) of any brand partnerships – versus placement of the disclosure in the caption only.
Conclusion
This recent trend in class actions and NAD involvement suggests that brands are open to significant legal liability stemming from the actions of the influencers that promote their products. Davis+Gilbert continues to monitor developments as these cases (and others) work their way through the courts and NAD.