Source: https://uclawreview.org/2019/03/25/fyre-festival-aftermath-new-rules-for-influencers/?shared=email&msg=fail
Timestamp: 2019-09-17 10:47:15
Document Index: 231205646

Matched Legal Cases: ['§ 5', '§ 5', '§ 5', '§ 5', '§ 41', '§ 45']

Fyre Festival Aftermath: New Rules for Influencers? – University of Cincinnati Law Review
Fyre Festival Aftermath: New Rules for Influencers?
uclawblog409560925 March 25, 2019 March 17, 2019 General Posts
Matt Higgins, Associate Member, University of Cincinnati Law Review
In early 2019, the infamous story of the Fyre Festival reemerged and gained popularity through two competing documentaries on Netflix and Hulu, “Fyre: The Greatest Party the Never Happened” and “Fyre Fraud,” respectively.[1] Although the documentaries differ, the story told is the same. In 2017, Instagram feeds were bombarded with a mysterious orange tile linking to the Fyre Festival promotional video and ticket packages.[2] The festival was advertised as a first-of-its-kind luxury music festival on a private island in the Bahamas.[3] What followed that initial social media blast was nothing short of a nightmare: bands cancelled last minute, there were not enough beds for guests, almost nothing advertised was seen on site, and general chaos ensued.[4] The chaos of the festival went “viral” and the documentaries subsequently saw success.[5]
The media attention and documentaries also highlighted the issue of unregulated influencer marketing. In short, numerous influencers were able to (1) receive payment from Fyre Media, (2) promote the Fyre Festival on their respective profiles, (3) not disclose their financial relationship with the festival, (4) induce people to buy tickets on false pretenses about the Fyre Festival, and (5) face no consequences for these actions. The nearly $10 billion influencer marketing industry is new, still-developing, and largely unregulated.[6] The Fyre Festival serves as the perfect example for why influencers need to be regulated to ensure advertiser transparency to protect consumers from fraud and deception.[7]
An “influencer” has been described as a person who is famous for being famous. The most common example cited is Kendall Jenner, a member of the Kardashian family made famous through the reality show, “Keeping up with the Kardashians.”[8] Simply stated, a social media influencer is “a user on social media who has established credibility in a specific industry. A social media influencer has access to a large audience and can persuade others by virtue of their authenticity and reach.”[9]
On popular platforms, such as Instagram, influencers revolutionized digital marketing. For that reason, influencers are heavily compensated for their marketing partnerships.[10] For instance, Kendall Jenner was reportedly paid $250,000 for her single post about Fyre Festival.[11] Across Instagram, there are examples of influencers promoting brands to their loyal followers. The issue is that the line between promotion and organic content is often blurred, resulting in many users not being aware they are being advertised to.[12]
The Legal Aftermath Post-Fyre Festival
To the surprise of no one, lawsuits following the failed Fyre Festival piled up quickly.[13] The lawsuits that were most prominent in the headlines were the ones against the organizers of the festival, Ja Rule and Billy McFarland.[14] While the majority of the blame clearly laid with the organizers, the influencers who partnered with Fyre Festival were largely held blameless. In fact, out of nine lawsuits filed after the Fyre Festival, only one made a claim against the influencers.[15] In the class action complaint, Chinery et. al. v. Fyre Media, Inc., the plaintiffs named 1-100 “Doe Defendants” who “deliberately and fraudulently marketed and sold tickets to a lavish, tropical destination music festival.”[16]
The Chinery complaint stated that the Fyre Festival organizers compensated over 400 influencers including Kendall Jenner, Bella Hadid, Hailey Baldwin, Emily Ratajkowki, Anastasia Ashley, Mike Thomas, Corbin Kelly, and Julia Kelly.[17] The complaint then alleged that the sponsored posts were in “direct violation of the [FTC] Guidelines” because none of the influencers disclosed that they were being compensated to promote the Fyre Festival.[18] Further, it alleged that “without the widespread and uniform dissemination of the false promise described herein, [p]laintiff and class members would not have purchased their Fyre Festival Passes . . . .”[19] The complaint sought damages on numerous claims of action.[20]
The class action was filed in the Superior Court of California on May 2, 2017.[21] On February 16, 2018 the court granted the platintiffs’ request for voluntary dismissal of the entire action without prejudice.[22] The request for dismissal was filed in conjunction with a declaration by the plaintiffs’ attorney stating that none of the defendants had been served and the plaintiffs intend to refile the action in federal court.[23]
Outside of the class action filing listing Jane Doe influencers, not a single influencer has faced direct consequences for their part in spreading the misrepresentation of the Fyre Festival as a luxury festival in the Bahamas. However, multiple influencers –including Jenner – were recently subpoenaed by the Bankruptcy Trustee in the main Fyre Festival case against the organizers to uncover information regarding Fyre Media’s financial affairs (i.e. where did all the money go?).[24]
How are Influencers Regulated?
The highest authority regulating social media influencers is the Federal Trade Commission (“FTC”). The FTC has enforcement or administrative responsibilities under more than seventy laws. Its primary authority was granted under the Federal Trade Commission Act.[25] The FTC’s endorsement guidelines, through the FTC Act, apply to social media influencers.[26] Therefore, influencers must comply with the guidelines.
If an influencer is being paid by a company to promote its product on social media, it must be disclosed somewhere on the post that the influencer is being paid.[27] Generally, a simple disclosure to indicate to the reader or target audience that the post is sponsored content is effective for compliance.[28] If an influencer and a company have a “material connection,” it needs to be disclosed.[29]
If an influencer does not disclose a material connection, the FTC can take legal action alleging violations of § 5 of the Federal Trade Commission Act.[30] However, the FTC has only gone this far on one occasion.[31] More commonly, the FTC just sends a warning letter to the influencer.[32]
Instead of holding influencers accountable, the FTC has made more of an effort to enforce regulations against the companies that pay them to post their content.[33] For instance, the FTC pursued a claim against Warner Bros. for hiring influencers to promote one of its games without disclosing that they had been paid.[34]
Influencers are also regulated by the terms and guidelines of the social media platform they post on. For instance, Instagram’s parent company has a specific “branded content policy.”[35] Facebook and Instagram also have a “branded content tool” which allows influencers to utilize the “paid partnership with [company]” tags on their posts.[36] The FTC guidelines state that a branded content tool is only effective if it “clearly and conspicuously discloses the relevant connection [to the company].”[37] Failure to comply with the terms and conditions of the social media platform may result in a termination of the influencer’s account.
Remedy 1: The FTC Needs Teeth
The FTC does little or nothing to enforce their influencer guidelines. By merely sending warning letters to influencers reminding them to comply with FTC regulations, the FTC is sending a message that influencers do not really need to disclose when they are being paid by a company to post. To prove this point, one study shows that only a quarter of influencers disclose sponsored content.[38] The FTC’s inaction has actively aided in an unregulated market which is ripe for consumer deception.
To remedy the situation, the FTC needs to actually enforce its influencer guidelines. Sending warning letters should be the first step to eventually filing a § 5 claim against a non-complying influencer. Each violation of § 5 is a monetary fine up to $10,000 and other equitable relief deemed appropriate by a district court.[39] While there may be other legal issues implicated, the FTC should choose high profile influencers not in compliance with its guidelines and file claims under § 5 of the Federal Trade Commission Act against them to send a message to the industry that nondisclosure will no longer be tolerated. The Kardashian family or high-profile fashion bloggers being heavily sanctioned would likely deter other influencers from violating FTC guidelines in the future because of monetary penalties and harm to reputation.
Furthermore, the FTC should hold influencers to the same or a similar standard the Federal Communications Commission (“FCC”) holds broadcasting networks. The FCC holds broadcasters responsible for selecting the broadcast material that airs on their stations, including advertisements.[40] The FCC expects broadcasters to be responsible and ensure advertisements its stations air are not false or misleading.[41] The FTC eventually determines what is false or misleading advertising and allows consumers to file complaints.
Influencers should also be held responsible for selecting content that is posted on their profiles and ensure it is not false or misleading. Placing this responsibility on influencers limits the possibility for a Fyre Festival type advertisement campaign to be spread far and wide on social media timelines.
Finally, Congress should introduce meaningful legislation to increase the regulation of influencer marketing, properly staff the FTC to enforce its guidelines, and bring this issue into public debate.
Remedy 2: Continuing Private Causes of Action Against Influencers
When influencers are partially to blame for disseminating fraudulent content which injures consumers, they should bear some of the blame. Cases such as Chinery should continue to be filed against influencers to force the courts to weigh in on this issue. In Chinery, the plaintiffs alleged that they would not have been inclined to purchase a ticket had they known the influencers were being paid to post the content. This claim could lead to multiple legal outcomes that could change influencer marketing. For instance, a court could hold that an influencer has an affirmative duty to investigate a product or company before posting on their behalf. A different court could hold that not disclosing sponsored content is per se misleading under various state advertising laws. These possibilities are not achievable unless aggressive plaintiffs challenge non-disclosing influencers in court.
Of course, influencers should not be held as responsible for the actual perpetrators of the fraud, such as the organizers of the Fyre Festival. But, they should be held moderately responsible for their role in assisting and disseminating fraud.
Remedy 3: Users Need to Be Vigilant and Skeptical
One positive outcome from Fyre Festival is that some influencers may have lost credibility with their followers. Credibility and trust are the key to effective influencer marketing. The aftermath of the Fyre Festival showed that influencers are more motivated by money than superior products or amazing experiences. Therefore, users on social media sites such as Instagram should be vigilant and skeptical of posts from influencers.
If a user sees a post that is likely an advertisement, but the influencer fails to disclose it, the user should report it to the social media site for being in violation of its terms. Until the FTC decides to pursue action against influencers, the burden is on users and social media companies to pressure influencers to disclose sponsored content. If enough users report noncompliant posts, influencer profiles may be suspended or deleted. Without profiles, influencers will lose their revenue stream. The possibility of this happening would deter influencers from not disclosing sponsored content.
A Fyre that did not Burn
For influencers, the aftermath of Fyre Festival was minimal. The influencers that posted on behalf of Fyre Media faced no consequences from the FTC and social media platforms did not enforce their policies against nondisclosure. The documentaries shed a light on how unregulated influencer marketing is and may have diminished influencers’ trust and credibility with users. However, until the FTC decides to enforce its influencer guidelines, little will change and many influencers will continue to post sponsored content without disclosing that they were paid to post. The consequence of this is continued consumer deception and possibility for fraud.
[1] Sonia Rao, Your guide to Hulu and Netflix’s dueling Fyre Festival documentaries, Washington Post (2019), https://www.washingtonpost.com/arts-entertainment/2019/01/18/your-guide-hulu-netflixs-dueling-fyre-festival-documentaries/?utm_term=.7b9729e1c33b (last visited Mar 15, 2019).
[2] Rupert Hawksley, Fyre Festival: the Story Behind the World’s Greatest Party that Never Happened, The National (2019), https://www.thenational.ae/arts-culture/television/fyre-festival-the-story-behind-the-world-s-greatest-party-that-never-happened-1.818165 (last visited Mar 15, 2019).
[3] FYRE (Netflix, Jerry Media, Library Films, Vice Studios 2019); FYRE FRAUD (Hulu 2019).
[4] Complaint at 5-8, Chinery et al v. Fyre Media, Inc., (2017), BC659938.
[6] Simon Owens, Is It Time to Regulate Social Media Influencers?, Intelligencer (2019), http://nymag.com/intelligencer/2019/01/is-it-time-to-regulate-social-media-influencers.html (last visited Mar 15, 2019).
[7] The influencer industry also has a pervasive fraud issue between influencers and companies. In short, many influencers inflate their reach by purchasing ‘bot’ accounts to increase their follower numbers. This makes it difficult for companies to accurately assess the impact of their investment and is fraudulent. While it is an interesting topic, only the issue of disclosure and advertiser transparency will be covered in this blog.
[8] Keeping Up with the Kardashians, IMDb, https://www.imdb.com/title/tt1086761/fullcredits?ref_=tt_ql_1 (last visited Mar 15, 2019).
[9] Definition: What is a social media influencer?, Pixlee, https://www.pixlee.com/definitions/definition-social-media-influencer (last visited Mar 15, 2019). For the non-internet savvy reader, the following simile may be helpful: an Instagram influencer is like the popular kid in high school. Most people want to be like the popular kid, so they replicate their persona by wearing similar clothing or copying their haircut. Now, imagine the same scenario except the popular kid is being paid by Nike to wear the latest shoe style, TRESemmé to style his or hair, and a popular clothing boutique in town to show off its newest clothing. This is essentially what a social media influencer does. They create a brand off of their own lifestyle and use that popularity to “influence” others to purchase the brands they use or are being compensated to use. Social media users aspire to the live the lifestyle of the influencer, so they replicate it through wearing what they wear, etc.
[10] Shane Barker, How You Can Make a Full-Time Living Just From Instagram, Forbes (2018), https://www.forbes.com/sites/forbescoachescouncil/2018/07/09/how-you-can-make-a-full-time-living-just-from-instagram/#378ee84764bd (last visited Mar 15, 2019).
[11] Rachel Paige, Kendall Jenner’s Fyre Fest Instagram May Have Actually Changed Influencer Culture, Refinery29, https://www.refinery29.com/en-us/2019/01/221813/kendall-jenner-fyre-festival-lawsuit-instagram-ads, (last visited Mar 15, 2019). See also Fyre and Fyre Fraud, supra note 3.
[12] The Blurred Lines Between Advertising and Social Media, IABC (2016), http://gh.iabc.com/blurred-lines-advertising-social-media/ (last visited Mar 15, 2019). (discussing the context of Canadian regulations).
[13] Instagram ‘Influencers’ Face Peril in Fyre Festival Lawsuit,Fortune, http://fortune.com/2017/05/07/fyre-festival-lawsuit/ (last visited Mar 15, 2019).
[14] Laurel Wamsley, Fyre Festival Hit With $100 Million Suit; Organizer Says ‘We Were A Little Naive” NPR (May 1, 2017 2:58 PM), https://www.npr.org/sections/thetwo-way/2017/05/01/526392280/fyre-festival-hit-with-100-million-suit-organizer-says-we-were-a-little-naïve.
[15] UPDATED: Fyre Festival is Facing 9 Lawsuits, FBI Investigation, Organizer ArrestedThe Fashion Law, The Fashion Law ( Jul. 3, 2017), http://www.thefashionlaw.com/home/a-list-of-all-of-the-fyre-festival-lawsuits-that-have-been-filed-so-far.
[16] Complaint at 2, Chinery et al v. Fyre Media, Inc., (2017), BC659938.
[19] Id. at 8-9.
[21] Complaint at 1, Chinery et al v. Fyre Media, Inc., (2017), BC659938.
[22] Order at 1, Chinery et at v. Fyre Media, Inc., (2018), BC659938.
[23] Plaintiffs’ Request for Voluntary Dismissal of Entire Action Without Prejudice at 2, Chinery et at v. Fyre Media, Inc., (2018), BC659938.
[24] Edward Helmore, Kendall Jenner and Bella Hadid facing possible subpoenas over Fyre Festival, The Guardian (2019), https://www.theguardian.com/culture/2019/jan/29/kendall-jenner-bella-hadid-fyre-festival-subpoena-money (last visited Mar 15, 2019).
[25] 15 U.S.C. §§ 41-58.
[26] The FTC’s Endorsement Guides: What People Are Asking, Federal Trade Commission (Sep. 2019), https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking#SocialNetworkingSites.
[29] Lesley Fair, Three FTC Actions of Interest to Influencers, Federal Trade Commission (Sep. 7, 2017 11:11 AM), https://www.ftc.gov/news-events/blogs/business-blog/2017/09/three-ftc-actions-interest-influencers.
[30] In re Csgolotto, Inc., Docket No. C-4632, https://www.ftc.gov/system/files/documents/cases/1623184_c-_csgolotto_complaint.pdf.
[31] CSGO Lotto Owners Settle FTC’s First-Ever Complaint Against Individual Social Media Influencers, Federal Trade Commission (Sep. 7, 2017), https://www.ftc.gov/news-events/press-releases/2017/09/csgo-lotto-owners-settle-ftcs-first-ever-complaint-against.
[32] Fair, supra note 29.
[33] Simon Owens, Is It Time to Regulate Social Media Influencers?, Intelligencer (Jan. 17, 2019), http://nymag.com/intelligencer/2019/01/is-it-time-to-regulate-social-media-influencers.html.
[35] Branded Content Policies, Facebook, https://www.facebook.com/policies/brandedcontent/ (last visited Mar. 16, 2019).
Facebook Pages and profiles and Instagram accounts must comply with the following:
1. Don’t include pre, mid, or post-roll ads in videos or audio content.
2. Don’t include banner ads in videos or images.
3. Don’t include title cards within a video’s first three seconds. Interstitial ad cards outside of a video’s first three seconds, such as mid cards or end cards, must not persist for longer than three consecutive seconds and must not be included within Facebook Stories or Instagram Stories.
4. Show Pages must not include branded content in showmarks or trailer videos.
5. Don’t use the branded content tool to tag a Page, brand or business partner without their prior consent.
6. For Facebook Pages and profiles, don’t accept anything of value to post content that you did not create or were not involved in the creation of, or that does not feature you.
7. Comply with all applicable laws and regulations, including by ensuring that you provide all necessary disclosures to people using Facebook or Instagram, such as any disclosures needed to indicate the commercial nature of content posted by you.
[36] Kerry Flynn, Finally, Instagram is getting serious about influencers tagging (Nov. 7, 2017), https://mashable.com/2017/11/07/instagram-sponsored-content-not-disclose-paid-promotion-tag-/#IchUn91QsGqu.
[37] The FTC’s Endorsement Guides: What People Are Asking, Federal Trade Commission (2019), https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking (last visited Mar 15, 2019).
[38] A Year After Major Actions, FTC’s Influencer Marketing Guidelines Still Overlooked, Morning Consult (2018), https://morningconsult.com/2018/10/04/a-year-later-ftcs-influencer-marketing-guidelines-still-largely-ignored/ (last visited Mar 15, 2019).
[39] 15 U.S.C § 45(I).
[40] Complaints About Broadcast Advertising, Federal Communications Commission (2019), https://www.fcc.gov/consumers/guides/complaints-about-broadcast-advertising (last visited Mar 15, 2019).
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