Prof. Stefan Engels. Photo: Courtesy

"It is the influencers who are responsible for their posts, not the company”

Prof. Stefan Engels, an expert in e-commerce law, advises countries and companies on how to deal with the hot potato of advertising through the use of influencers. In an interview with Calcalist, he explains why those who have more followers have more obligations

Social networks in Israel have been in an uproar in recent days due to a claim that businesswoman Ruthy Leviev Yelizarov paid female Israeli celebrities to promote the observance of monthly ritual cleansing in their posts. The exposure led to an online discussion about the promotion of religious observances by secular celebrities, but the very reality in which influencers publish content which has an economic interest behind it, without disclosing it to the public as required - was taken for granted.
In 2019, companies spent $6.5 billion on influencer marketing worldwide. In 2021, this market was valued at $13.8 billion. According to some estimates, this type of marketing will cover approximately 70% of sales by 2025. Despite the significant growth of the field, its regulation, in Israel and around the world, has lagged behind, and accordingly, the laws related to it.
"Influencer marketing is currently an important part of every company's marketing operations. No one can afford not to use influencer marketing anymore and the phenomenon continues to grow because the younger generation can only be reached through social networks, as they barely consume classic TV," explains Prof. Stefan Engels, an expert in e-commerce law, and among the world's most prominent consultants in the field who advises companies on how to deal with any legal issues that may arise. Engels is a partner at DLA Piper, which has been operating a representative office in Israel since 2009.
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פרופ' ד"ר סטפן אנגלס
פרופ' ד"ר סטפן אנגלס
Prof. Stefan Engels. Photo: Courtesy
As the phenomenon spread, there have been more and more risks associated with it. Whether it relates to influencers who market a particular product without disclosing that they haven’t tried it themselves and yet receive payment for such promotion (such as the issue for which Kim Kardashian was sued at the beginning of the year), or marketing digital currency in order to profit as its value goes up or paying doctors to market certain medicines even if it were not the drug they would have normally recommended. "It is appropriate to consider an influencer as a journalist," Engels stated during an interview with Calcalist. "You follow a person because you like his content, trusting that his content was chosen due to his opinion of it and there has been no manipulation behind it. If an influencer recommends a product just because he was paid to do so, he is misleading us, the consumers, about it."
The path to protecting consumers from social media marketing content is long and complicated, in a world where countries are finding it difficult to regulate technology that is only continuing to improve. "Right now, the major regulations that exist on the subject deal with the prohibition of misleading your audience. In some countries, the larger the audience, the more obligations there are. Many times, the legal obligation does not come at all from a particular country, but from the social network itself. It is important to remember that the influencer does not operate in the real world, but within the virtual world which is subordinate to the social network executives. For example, there was no law in the U.S. that would have caused Trump’s suspension from Twitter, however, it was a decision that Twitter was authorized to make. The next question that needs to be asked is to what extent social networks have the right to delete an influencer when companies have already invested a lot of money in him or her. The only penalties that currently exist in the world are a type of reprimand, which means that the user must not repeat a certain action, or fines.
"The German approach and court-rulings are generally not prohibiting influencer marketing but are requesting clear transparency when a product is presented by an influencer with commercial interest. Therefore, an influencer has to express to his audience visibly and clearly that his post is an ad. Companies should be aware of that and request clear transparency also from the influencer presenting their product. This is also important to avoid liability as an accomplice or as an assistant in potential violations.”
Different countries have different approaches and various degrees of regulations when it comes to working with influencers – what would be ideal?
"Influencer marketing raises a problem between the rights and interests of the companies to adapt their advertising methods in new and highly competitive marketplaces on the one hand and the rights of social media users and potential customers to not be deceived, whether an influencer is expressing his true opinion on a product or is only talking on behalf of a company trying to sell products. In my opinion, the right degree of regulation must consider both interests.”
According to Engels, there are some countries that are more stringent in regulation in this field. "In the U.S. the FTC provides specific guidelines for influencers on how to disclose their commercial actions on social media. In Germany the BGH ruled in several decisions that influencers violated the unfair competition act by hiding the commercial character of their product-presentation. The influencer is responsible for this violation and in consequence exposed to claims for damages and can be fined for regulatory offenses.”
When an influencer with a large audience publishes a post, it reaches all over the world. How can he know which law he is subject to?
"If, for example, an influencer from Germany advertises a product in German, and the Israeli public can buy this product as well, assuming that there are German-speaking Israelis, then this content is relevant to them as well. Does this mean that its content should be adapted to Israeli regulation? In order to avoid asking the question at all, a very specific audience should be targeted. For example, if an influencer speaks English or says a sentence like, ‘Hello to my friends in Israel’, and is aware that Israelis follow his content, then the content is considered to be directed at Israelis as well. Before advertising any product through influencers, one should think carefully about the type of audience the company wants to reach and study the regulation in that country.
"In general, international influencers can simply make sure they do not target a specific country and then they just have to make sure they do not violate international and social network laws.”
The real problem is enforcement. Most influencer posts are organic, which means that the social network does not have to approve them in order for them to be posted. How is enforcement carried out in cases such as these?"
"The first question is whether the platform can check every organic post before it is posted. The second is whether the person responsible for the content is the influencer and not the company that has paid for the content. The answer to the first question is no - it is difficult to enforce organic content unless someone reports it. Regarding the second question, there are difficulties in deciding whether complaints may be brought against a third-party user when the person or persons actually responsible are part of the company which has paid the money. In the EU, an influencer can only be punished if he breaks the law or publishes a false or libelous post.”

Legally speaking, who is responsible for the content that was published by the influencer? Is the responsibility on the influencer or the company behind the product?
"The influencer is generally responsible for his own post and therefore at risk of violating antitrust laws if he is not disclosing the commercial aspect of his post. The companies are responsible for their products but generally not for the behavior and possible violations by the influencer. But in certain cases, it is also possible that the company would be liable as an accomplice or as an assistant in the violations. That depends on the specific case and the relationship and design of the contract between influencer and company.”
Are there restrictions on certain products, such as cigarettes and alcohol?
"The FTC in the U.S. has provided guidelines, based in which influencers are not allowed to advertise a product with their own experience which they have not tried. Influencers are also not allowed to lie about a bad product being 'terrific'. It is also prohibited to make claims about a product, that the company itself cannot prove.
"In Germany the guidelines for influencers have the same restrictions. A problematic topic is political advertising, e.g. for a specific political party. Influencers are not allowed to be paid by them and endorse a party or its agendas. The prohibition applies in videos or audio contents.”
Along with the growth of influencer marketing, is traditional marketing on a path to become obsolete?
"Although influencer marketing is now well established, it is much more likely that there will be a coexistence with traditional marketing methods for the foreseeable future. Although influencer marketing leads to more and longer reception of advertisements from a consumer perspective, traditional advertising will not become obsolete. There is still the need for traditional marketing to reach the largest number of potential customers.”