Kurt Klaus headshot

Brian Medich headshot

By: Kurt R. Klaus, Partner at Dunlap Bennett & Ludwig, & Brian Medich, Associate Attorney at Dunlap Bennett & Ludwig

Perhaps a bit cliché (?), but, … knowledge really is the ultimate gift that gives back – hands down. Consider this thinking in the context of exercise equipment (and media) company Peloton and its now infamous and controversial commercial, “The Gift That Gives Back.”  In case you don’t know, this ad features a woman keeping a video log of her Peloton workouts over the course of a year- the Peloton exercise machine was given to her by her male partner.  Critics on social media have fairly loudly viewed this ad as sexist or weight shaming.   As of the time of this writing, the ad has over 9.4 million views on YouTube, with 22,000 “thumbs up,” 24,000 “thumbs down.”  It is interesting to also note, … the ad’s YouTube public comments section has been disabled.  Has the ad gained millions of viral views for all the wrong reasons?  Is this a reputational nightmare?

Then again, as it is said – “One person’s trash is another person’s treasure.”  In context, Ryan Reynolds, actor, and Aviation American Gin company owner, took Peloton’s failure and published a responsive ad, “The Gift That Doesn’t Give Back,” that features actress Monica Ruiz (the same actress featured in the Peloton ad), to promote Aviation American Gin.  Instead of a workout gaze, Ruiz reflects pure satisfaction with Aviation American Gin. The Reynolds’ ad came out only three-weeks after the Peloton commercial, and as of the time of this writing, has over 6.1 million views on YouTube, with 90,000 “thumbs up,” 3,900 “thumbs down.”

The Aviation American Gin stunt demonstrates not only how agile digital production and digital advertising have become, but also that in an active social media market where there are winners (e.g., Aviation American Gin) and losers (e.g., Peloton), being cognizant of digital branding’s potential rewards as well as potential risks is essential to successfully building a brand and maintaining a positive and supportable online presence.  Almost uniformly, risks related to the public reception of ads, even if pre-tested, are very difficult to predict.  Fortunately, however, advertisers choosing to produce audiovisual (“video”) ads for digital platforms have some great controls to mitigate certain other, related risks.

Prior to today’s widespread online branding efforts, in-house marketing teams didn’t need to closely focus on risk management relative to video productions. But in today’s ever-evolving scheme of things, such is no longer the case. When considering business and legal affairs aspects of commercial audiovisual production and publication, risks take forms other than and in addition to reputational exposures (demonstrated above). Some of the areas through which risk can be proactively managed include usage interruption, copyrights, trademarks, rights of publicity, rights of privacy, personal injury, breach of contract, FTC compliance, compliance with laws of states, compliance with terms of service, and corporate liability. The discussion that follows focuses predominantly on compliance, and how understanding procedure can help mitigate substantial risks.

Beyond educating marketing personnel and production companies on how to anticipate risks, and effectively address such risks; and, beyond purchasing proper insurance lines to protect producers and marketers, alike; and, beyond structuring contracts to shift away risks — marketers and production companies should consider establishing processes for complying with relevant regulations – both state and federal laws. Nearly 70% of marketers have not yet formalized such processes, and nearly 70% of marketers are unnecessarily leaving themselves open to potential, but otherwise mitigateable risks.

Applicable federal law, enforced by the Federal Trade Commission (FTC), prohibits unfair or deceptive acts or practices in- or affecting- commerce. Advertisers can run afoul of such federal statutes in a number of ways – for instance, by advertising misleading and unsubstantiated brand claims. If the FTC notices or is alerted to noncompliance issues, typically the FTC will provide a letter of education to the noncompliant concerns (e.g., the influencer, the production company, the advertiser, the agency), to let them know the FTC recognizes potential issues and how to remedy them. If the FTC’s initial education effort is ignored or fails, a stronger warning will likely issue. Now, if a warning fails, the FTC could take numerous enforcement actions including cease and desist orders; prosecution; other injunctive relief; civil penalties; or, settlements or consent orders featuring onerous terms.

As a substantiation/false claim example, in the 1970s, (reminder, … this was well before online social media), the FTC brought the mouthwash juggernaut that is Listerine to court for advertising misleading and unsubstantiated claims. For decades Listerine had advertised that using Listerine helped prevent colds, cold symptoms, and sore throats. A surefire minty fresh benefit. The problem? There was no proof, no substantiation, and the FTC ended up victorious. Listerine had not complied and was ordered to use its next $10 million worth of advertisements stating that their product “will not help prevent colds or sore throats or lessen their severity.”

For a more current discussion, consider social media influencers who post what amount to endorsements (in the eyes of the FTC (and others)) without disclosing their relationship with the advertiser/brand.  Generally, such disclosure may (if appropriate) take the form of “#Sponsored” placed isolated and early, i.e., “above the fold, with no links” in association with the endorsement.  This seems simple but is often overlooked or omitted.  It is important to also note that advertisers may not realize they are just as responsible as their agency and the influencers at issue to monitor such endorsements for purposes of compliance.

The federal Consumer Review Fairness Act also presents compliance issues.  In the context of hiring social media influencers, for example, an influencer engagement agreement cannot: disallow or restrict an influencer’s ability to review the brand/product; impose a penalty on an influencer for their review; and, cannot require an influencer to give up their intellectual property rights in the content of their review. In other words, a brand can’t stop or tend to stop honest reviews.

Don’t let lack of knowledge hurt your brand or your business.  Knowledge is the gift that gives back. Compliance with applicable state and federal laws in brand marketing is very doable – be prepared, don’t be hasty, and seek out qualified outside legal counsel when needed.

Posted in: Media & Entertainment