Brands will likely be spending up to USD15 billion on influencer marketing by 2022, up from USD8 billion in 2019, according to Business Insider Intelligence estimates based on Mediakix data. These figures are not really surprising, given that nearly 4 billion people (as of July 2020) are using social media and, despite the pandemic, 96% of US and UK social media users say they are engaging with influencers the same as or even more than they were pre-pandemic.

The existing challenge

Influencers provide a huge opportunity for brands to grow their brand following but, at the same time, they create a potential brand protection risk, in particular from a reputational perspective. For example, the Advertising Standards Authority (ASA) 2019 annual report, published in June 2020, found that a quarter of all online complaints about UK ads last year related to influencer posts.

In the UK, it is well established that when the ASA finds a breach of rules, it will hold both influencer and brand responsible for an influencer post relating to a brand. This is the case even if a brand has an agreement and policies in place requiring an influencer to post on social media in accordance with advertising rules.

The new challenge

In addition to these known risks of partnering with influencers, brands should be aware of a new form of scam that is emerging whereby influencers are being targeted to help unwittingly promote counterfeit products – which is particularly relevant given the rising volume of counterfeit goods being sold online.

According to a survey on the purchasing of physical counterfeits published by the UK IPO in September 2020, 16% of consumer respondents had unintentionally purchased counterfeit goods. No doubt if more influencers fall into this trap, this figure is likely to increase.

Use of influencers in this way could divert sales from legitimate goods, but perhaps more worryingly, when seeing these posts alongside posts for legitimate goods and brands, consumers may think counterfeit goods promoted by influencers have been vetted and are legitimate. If a consumer is persuaded to purchase goods which then turn out to be faulty or substandard or which never turn up, this is a serious reputational issue for the influencer and in turn, potentially, for any brand associated with the influencer.

What can advertisers do?

To address this risk, brands should take steps to:

  • conduct appropriate due diligence to make sure the influencers they are working with are prudent and their previous actions may not come back to bite the brand;
  • include appropriate obligations on influencers with an effective mechanism for review of posts and an effective communication channel to achieve swift removal of posts that break the rules;
  • make sure their influencers are aware of this type of scam;
  • consider whether it is appropriate to have exclusivity with the influencer for a particular period/(s) e.g. so posts about other brands (or that unwittingly promote goods for third-party counterfeiters) don’t tarnish their brand; and
  • include appropriate termination provisions in their agreements with influencers should this be necessary.

Powers to fight counterfeiters

Interestingly, powers to fight counterfeiters are currently under the spotlight. Two sets of draft sentencing guidelines (one for individuals and now also one for organizations) were published for consultation in July 2020 by the Sentencing Council. They relate to the offence of unauthorized use of a trademark contrary to s92 of the Trademarks Act 1994. This catches not only possession or sale of counterfeit goods but also possessing the means of counterfeiting goods without the trademark owner's consent and with a view to making a gain or causing a loss. If implemented, these draft guidelines would replace the current guideline published in 2008, which only applies to individuals and is used in the lower courts, the magistrates’ courts.

The draft guidelines were developed with current sentencing practice in mind and were not intended to increase or decrease sentence levels overall but to provide greater certainty and consistency in sentencing approach. That being said, it could lead to an increase in the penalties imposed, in particular, in more serious cases. As such, if the goods of a brand are the subject of this type of scam by counterfeiters, these proposed amends to the sentencing guidelines may mean a better result can be achieved against counterfeiters in future.

In terms of the impact of these new sentencing guidelines on influencers, the first thing to consider is whether the s92 offences could apply. The wording of s92 speaks in terms of deliberate wrongdoing for financial gain. As such, where an influencer unwittingly promotes counterfeit goods, this is unlikely to be an offence under s92 and/or the statutory defence in s92(5) (reasonable belief of non-infringement) should apply. In contrast, where they knowingly promote counterfeit goods, it will then be necessary to consider all the circumstances to see if an offense has occurred e.g. the nature of the post(s), whether the brand’s registered trademark is used, whether they gain from it e.g. a substantial fee for the posts.

For brands, unlike the established practice of being held jointly liable for their influencer’s posts that breach advertising rules (even where the influencer acts against the brand’s stipulations), there is no equivalent practice for s92. Nevertheless, what this issue highlights is the importance of taking steps to ensure the influencer is someone that it is appropriate for a brand to work with and be associated with to avoid potential reputational harm to the brand.