Influencing the Law: The Implications of Influencer Fraud for Consumers, Influencers, and Developers
A relatively new development in the influencer industry has been the proliferation of influencer fraud in various forms. Influencers have capitalized on the wide array of technologies available, which allow them to simulate user engagement and secure more lucrative endorsement contracts.
When choosing their influencers, brands judge the value of prospective influencers based on their base, i.e., the number of followers they have, and their engagement, or the amount of likes or comments their posts garner. Engagement carries greater weight because brands need to know that an influencer’s word, or—as is the case in the social media world—post, actually stirs his/her followers to action. It is, therefore, easy to see why mobile apps that generate fake followers and create artificial engagement with users are so valuable to influencers. It allows them the opportunity to secure well-paying endorsement contracts by having the right qualifications on paper despite taking a shortcut to obtain them.
Apps of this sort have quickly evolved and come in various forms. See Teagan West, Tackling Pods, Bots and Glots: Our Position on Influencer Fraud, Scrunch, https://www.scrunch.com/blog/pods-bots-glots (last visited Sept. 12, 2019).
Akin to pods of whales or dolphins, pods in the influencer industry refers to two or more influencers who agree to reciprocate their engagement of each other’s posts. When one endorser in the pod makes a post, the others like or comment on it to raise the engagement level of that endorser. This symbiotic relationship guarantees all pod members receive at least a minimal level of engagement per post.
Glots are algorithms which act on behalf of an existing social media account. Again, the greatest value to a brand—and, by extension, an influencer—is engagement. Thus, glots are programmed to assume the account holder’s identity and like, comment, and follow content on their behalf in accordance with the algorithm they are given. The appeal of glots lies in the incredible speed and efficiency with which they act. It simulates human action without the human drawbacks.
As algorithms, bots act in the same way as glots and achieve the same results—high user engagement. The pitfall of bots, however, is that they do not step into the shoes of an existing account. Instead, a bot is an entirely fake user that “boost[s] vanity metrics and give[s] the illusion of increased traffic and engagement.” Id.
What, then, are the implications for influencers who find themselves in a pod or who happen to use glots or bots?
Notably, use of these technologies has been decried by federal agencies like the Federal Trade Commission (“FTC”). “If ‘likes’ are from non-existent people or people who have no experience using the product or service, they are clearly deceptive, and both the purchaser and the seller of the fake ‘likes’ could face enforcement action.” The FTC’s Endorsement Guides: What People Are Asking, FTC, https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking#SocialNetworkingSites (last updated Sept. 2017). Likes from “non-existent people” undoubtedly encompasses the use of bots since a bot, by definition, represents a fake user or social media account. In fact, it may even be argued that this phrase also encompasses glots because they are programmed algorithms as opposed to real people. The use of glots would nevertheless be prohibited because glots generate likes on behalf of people who have no experience using the product or service; therein lies the appeal—and downfall—of the glot. In truth, these semantics are of little import given that the FTC’s mission of preventing deceptive and misleading practices would encompass all three of these technologies. Even pods—which are usually met with greater approval and acceptance in the influencer industry—could be considered unfair, deceptive, or misleading because the professional arrangement between the pod members is seldom disclosed to consumers. The nature and extent of pod members’ engagement would probably be the determining factor in this type of analysis. One like on a post is arguably a lot less misleading than a glowing review of a product that the pod member never bought or used.
Brands have denounced influencer fraud in a similar fashion, with many brands publicly declaring their commitment to no longer work with influencers who use bots or similar technologies used to perpetrate influencer fraud. David Shadpour, Battling The Bots: How Brands Can Combat Influencer Fraud, Forbes (Aug. 22, 2018, 08:00 AM), https://www.forbes.com/sites/forbesagencycouncil/2018/08/22/battling-the-bots-how-brands-can-combat-influencer-fraud/#41f947442c53. In reality, this comes as no surprise given the financial and legal stake that brands have in the actions of their influencers. For one, influencer fraud is projected to cost brands in excess of $1.3 billion this year alone. Megan Graham, Fake followers in influencer marketing will cost brands $1.3 billion this year, report says, CNBC (July 24, 2019, 01:31 PM), https://www.cnbc.com/2019/07/24/fake-followers-in-influencer-marketing-will-cost-1point3-billion-in-2019.html. In addition, the FTC has made clear that brands are responsible for the unfair or deceptive trade practices of their influencers and endorsers.
It bears noting that the FTC’s statement explicitly makes the mobile apps that sell these fake engagements legally liable, as well. In other words, the developers and owners who sell bots, glots, and other such products that make influencer fraud possible may be subject to FTC enforcement actions. Despite providing only the means by which influencer fraud is perpetrated, such entities are equally as guilty in the eyes of the FTC. This may explain why many mobile apps that sell fake likes and followers have recently shut down. Josh Constine, Instagram kills off fake followers, threatens accounts that keep using apps to get them, techcrunch (Nov. 19, 2018, 01:00 PM), https://techcrunch.com/2018/11/19/instagram-fake-followers/.
By far, however, the most surprising development put into motion by influencer fraud is the vocal stance that social media platforms have taken against both influencers and developers of such apps. Taking regulation into their own hands, social media giants like Facebook and Instagram have amended their policies and business practices to reflect their commitment to eliminating influencer fraud. “We have a strong incentive to aggressively go after the bad actors behind fake likes because businesses and people who use our platform want real connections and results.” Why Facebook cares about fake likes, Facebook: Business, https://www.facebook.com/business/a/page/fake-likes (last visited Sept. 17, 2019); see also Reducing Inauthentic Activity on Instagram, Instagram (Nov. 19, 2018), https://instagram-press.com/blog/2018/11/19/reducing-inauthentic-activity-on-instagram/.
Aside from shutting down fake accounts and removing inauthentic likes, follows, and comments, Facebook and Instagram have even taken legal action against mobile apps that generate inauthentic engagement on their social media platforms. In April, Facebook and Instagram filed suit against a New Zealand-based company that generated fake engagement through the use of bots and glots. See Facebook, Inc. v. Nollen, No. 3:19-cv-02262 (N.D. Cali. Apr. 25, 2019) (available at https://www.scribd.com/document/407713729/Facebook-vs-AREND-NOLLEN-LEON-HEDGES-DAVID-PASANEN-and-SOCIAL-MEDIA-SERIES-LIMITED#from_embed). The complaint asserted claims for breach of contract (specifically, violating Instagram’s Terms of Use and Community Guidelines) and unjust enrichment, as well as violations of California state law and the federal Computer Fraud and Abuse Act. Id. On September 11th, however, the parties filed a notice of settlement. Id. (notice of settlement) (available at https://www.courtlistener.com/recap/gov.uscourts.cand.341343/gov.uscourts.cand.341343.38.0.pdf). Although the matter won’t proceed to trial, the lawsuit stands as a firm reminder of the legal repercussions that could arise not just for influencers, but for mobile app developers, as well.
The Pandora’s Box of legal liability that influencer fraud opens up affects nearly every party in the chain of distribution. Developers of mobile apps that market and sell these services could face FTC enforcement actions, as well as lawsuits by the social media platforms their apps are used on. In turn, influencers who purchase and use these apps may be subject to FTC enforcement actions, regulatory actions by social media platforms, and suits for fraud or breach of contract by the brands that hire them. Consumers, induced or influenced into purchasing products by false or inaccurate representations, may file suit against influencers, themselves, and assert claims of fraud and negligent or intentional misrepresentation. See Jung v. McFarland, No. 2:17-cv-03245 (C.D. Cali. Apr. 30, 2017) (available at https://www.documentcloud.org/documents/3688226-Fyre-Fest-Lawsuit.html.
Perhaps more problematic to app developers and influencers is their potential liability for false advertising and unfair competition under section § 1125(a) of the Lanham Act. 15 U.S.C. § 1125(a). In the Eleventh Circuit, false statements may be actionable for false advertising if (1) they were false or misleading; (2) the statements deceived, or had the capacity to deceive, consumers; (3) the deception had a material effect on the consumers' purchasing decision; (4) the misrepresented service affects interstate commerce, e.g., offered over the Internet; and (5) the prospective plaintiff has been, or likely will be, injured as a result of the false or misleading statement. Duty Free Americas, Inc. v. Estee Lauder Cos., Inc., 797 F.3d 1248, 1277 (11th Cir. 2015). Interestingly, the statement does not have to be literally false to be actionable; rather, a literally true or ambiguous statement can still be actionable if it implicitly conveys a false impression, is misleading in context, or is likely to deceive consumers. For those influencers who may claim First Amendment protection, they should know that said defense will also likely be inapplicable if their statement is made for the purpose of influencing consumers to buy defendant's goods or services. These violations can come with a harsh penalty that may include payment of the harmed party’s damages, treble or enhanced damages, and payment of the harmed party’s attorneys’ fees and costs.
As such, it is highly recommended that all parties involved retain legal counsel or, at the very least, consult an attorney to minimize their legal exposure. For more information on the above or to secure representation, feel free to contact Johnson | Dalal at (954) 507-4500 and ask to speak to one of our qualified attorneys at no charge. We look forward to answering any questions you may have.
