While influencer marketing is thriving, there are many challenges that come with the territory, according to Procter & Gamble's Associate General Counsel Thomas Adams. He touched on several thorny issues in the space that can sometimes turn into legal risks at the Association of National Advertisers' Law & Public Policy Conference in March, including a lack of control over content, the need for disclosure, the murky legal landscape of product ownership and balancing marketers' needs against influencer independence.

Not too long ago, the possibilities social influencers held were promising, but brands were somewhat reluctant to hand over the reins to an unfamiliar representative. Now, 51% of marketers believe influencer marketing is an integral part of their arsenal that outperforms brand-created content. However, in their eagerness to explore new ways to connect with elusive consumers in an era of apathy toward traditional ads, marketers may be opening themselves up to potential legal issues. 

Below are five key contract considerations Adams outlined for brands both big and small where they're dealing with social influencers:

What constitutes an endorsement?

A brand's relationship with the influencers it chooses to sponsor isn't as cut and dried as finding someone with a large following and letting it fly from there. The process is more complex, Adams said, and the first step boils down to defining some of the legal nitty-gritty of what exactly constitutes an influencer endorsement.

The U.S. Federal Trade Commission says an endorsement is "any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings or experience of a party other than the sponsoring advertiser." According to Adams, this can be simplified to any material or paid connection between influencer and advertiser that could impact the credibility or weight of the message in the minds of consumers.

Addressing the FTC's disclosure crackdown

Consumers, especially those from younger generations, crave authenticity when it comes to content they interact with. Sixty percent of people surveyed by eMarketer said they rely on blogger recommendations when making purchasing decisions, making influencer powerhouses key to building brand awareness and trust through digital word-of-mouth. But brand ambassadors or influencers who don't adequately disclose their paid relationships with sponsors make themselves and the brands that sponsor them vulnerable to fines by the FTC or class action lawsuits by consumers who claim they were duped by disingenuous advertising, Adams said.

Last year, the FTC shared specific guidelines for endorsements and warned the industry that it would get aggressive in taking legal action against those who don't comply after settling its first complaint against two influencers who failed to disclose connections to a sponsor.

Though both influencers and the brands that sponsor them face shared liability, Adams insisted it's ultimately the brands that get burned worse. Preventing a legal headache begins with the contract. Brands must contractually require creators to comply with the FTC's disclosure requirements and make sure any agencies involved are also a part of the process. After that point, it comes down to training and constant monitoring of influencers' work.

"Influencers, at least the more sophisticated ones with agents, are now aware of the issue and are willing to work with the brands [to adhere to FTC guidelines]," Adams said. For many, this is a full-time job, so they don't want to be blacklisted from future partnerships for past disclosure blunders, he added.

So, what does a proper disclosure look like?

Clearly, disclosing paid endorsement deals is critical to avoiding lawsuits and maintaining good relationships, but more importantly, transparency prevents consumers from feeling duped about a brand or product. Exactly how to sufficiently disclose these partnerships is a challenge thanks to length constraints on social platforms and changing influencer trends on channels like Twitter and Instagram.

Some influencers have turned to hashtags like #sponsored, #sp or #partner, which Adams and the FTC said are not clear enough, while others may bury disclosure links or tags at the end of a post. The problem with the latter approach is that channels like Instagram clip longer content with a "read more" button, so just the first three lines of a post appear, making those buried disclosures virtually invisible to the quick-scrolling user. In a recent crackdown, the FTC explicitly addressed this issue and now requires influencers to include these hashtag disclosures above the "more" button.

Some social platforms have even taken matters into their own hands. In June 2017, popular influencer platform Instagram added a "paid partnership" tag that appears directly next to the influencer's name above the post, making the brand sponsorship obvious to any user who's quickly scanning a screen.

Who really owns the content?

It's not absurd for marketers to think they ultimately own the rights to sponsored content created by influencers as they typically conceptualize, commission and fund the campaign. However, the situation, in reality, is not so clear-cut. Many brands elect to work with influencer agencies to navigate legal complexities like licensing content back to brands, removal rights and addressing usage agreements for once the contract ends.

According to Adams, ownership is often a gray area in influencer relationships.

"These influencers, they want to own [sponsored content] too. It's all they have," he said. "They have their channel and their content. Sometimes this stuff is fairly ephemeral, so when we don't really have to own it, I don't want to make that a major negotiating point if it's not that critical." 

Managing provocative personalities and content

As any savvy marketer knows, working with influencers for any amount of time comes with challenges and potential issues outside of tricky ownership legalese and superficial endorsements. There's also the real risk that a partnership will sour due to an influencer's behavior, such as inaccurate brand messaging, rogue behavior or a seemingly slight slip-up that leads to major damage to a brand's reputation.

Adams suggested brands issue a "continuity of persona" clause in a contract to clearly communicate their expectations of influencers' behavior, appearance, stance or tone, and make influencers accountable for any sudden changes not previously agreed upon.

Sports influencers, for example, may agree to not significantly change their weight, hairstyle or stance on controversial social topics in such a clause. It might sound overly restrictive, but the underlying idea is to maintain a consistent character and tone throughout an influencer campaign, Adams said. This clause typically includes specific topics that influencers must avoid, such as animal or domestic abuse, race relations, reproductive issues, politics or anything that could cast a negative spotlight on the influencer or brand.

Looking ahead

Despite legal risks and challenges that appear to be par for the course in influencer marketing, the sponsorship strategy doesn't appear to be dwindling, as nearly half of national advertisers say they plan to increase their influencer budgets in the next 12 months, per the ANA's estimates. But as the space evolves from a scrappy social media tactic to a digital marketing must, legal counselors like P&G's Adams highlight the importance of keeping in mind the ever-changing legal nitty-gritty before adding social influencers to the marketing arsenal.