Social media platforms such as YouTube, Facebook, Instagram and Snapchat shape retail nowadays. Ben Sullins[1] arranges for many Tesla’s to be sold[2]. Fashion influencers such as Negin Mirsalehi have contracts with big brands[3]. The high street shopping declines all around Europe and traditional media advertising loses its values. Affiliate marketing and influencers have taken over.
This article[4] deals with some of the legal aspects of affiliate marketing and arrangements with influencers. Can the law keep up with these new developments?
Contents
- What is affiliate marketing?
- How does affiliate marketing by influencers work?
- The affiliate-network
- What is the legal qualification of the relationships involving influencers under Dutch law?
- Intermediary contract
- (Commercial) Agent contract
- Distribution contract
- What contract should be used between influencers and brands?
What is affiliate marketing?
Affiliate marketing is a type of internet-marketing in which a brand rewards affiliates for each view, click, lead or sale realized by the affiliate’s efforts. It is a type of performance-based marketing. As leads, sales and clicks can be monitored, the brand has clear data effectivity and costs.
How does affiliate marketing by influencers work?
Influencers are called influencers because they have the ability to influence the behavior or opinion of their target audience. They use their status on social media platforms to influence the purchasing decisions of their followers. In affiliate marketing the influencer acts as the middle (wo)man for the seller. Basically, the job of the influencer is to link the seller and consumer to each other by promoting a product.
‘Click on the link in the description box below’ had become a very popular tagline YouTubers use in their YouTube videos. A brand and influencer conclude an agreement in which the influencer takes on the obligation to promote the brand or a certain product. A way of promoting the product could be that the influencer posts a picture wearing or showing the product on Instagram. The influencer tags the brand in the picture and/or promotes the product in the text under the post. Another way of promoting the product could be that the influencer mentions it in its YouTube-video.
By clicking the link in the description box, the follower goes to the website where the product can be bought from the selling brand. The seller pays the influencer a commission for each view, click, lead or sale, subject to the contract. Consumers do not conclude a purchase agreement with the influencer directly but enter into an agreement with the brand. The selling brand imposes its terms and conditions on the consumer. The seller must comply with the regulations on general conditions for the sale of goods such as consumer rights and conformity demands.
Selling brands can give instructions to a certain degree to influencers. Their power is limited, otherwise the agreement could potentially be classified as an employment-contract. In that case all kinds of mandatory rules and regulations become applicable which these parties want to avoid.
The affiliate-network
Processing the data which the influencer has generated can be quite a hassle for the seller. That is where an affiliate network, such as Amazon Associates, comes in. An affiliate network is a platform that helps to connect the seller and the affiliate and also helps them with administrative duties, like providing the influencer with affiliate links. An advertiser can offer its product on the platform, to which the influencer can sign up for. The affiliate network then monitors the clicks, leads and sales generated by a certain affiliate. Based on these data the affiliate-network takes care of payment of the affiliate’s and the advertiser’s share of the purchase price as well as the remuneration.
What is the legal qualification of the relationships involving influencers under Dutch law?
There are – as far as we know – no court rulings on the legal status of influencers and affiliate marketeers under Dutch law yet qualifying the affiliate marketing agreement to a certain type of agreement. So what could it be?
The Dutch law is not adjusted to new phenomena such as affiliate marketing and influencers. We hope to trigger that lawyers from other jurisdictions such as our member firms from Pangea Net share their local laws on this topic, should these exist. We see the following main options under Dutch law:
– Intermediary contract
– (Commercial) Agent contract
– Distribution contract
Intermediary contract
The intermediary contract is an assignment agreement where the contractor and the client conclude an agreement in which the contractor works as an intermediary/middle (wo)man for the purpose of concluding one or more agreements between the client and third parties. An assignment where the intermediary solely has to bring his client in contact with a potential contract party, without concluding the agreement himself, must also be qualified as an intermediary-agreement. The intermediary has to perform all kinds of factual acts that contribute to the goal of bringing his client and a third party together. The advertiser chooses the intermediary because of his special knowledge, position and reputation to establish contacts that the client could not make on his own or could only realize at high costs.[/vc_column_text][/vc_column_inner][/vc_row_inner]
(Commercial) Agent contract
Agent contracts are a particular type of intermediary contract. The agents are the intermediaries. The difference between these two is that the intermediary contract is concluded for the purpose of intermediating in one or more agreements, while the agent contract is concluded to intermediate for a certain period of time or uncertain period of time. The agent contract requires a lasting relationship between the agent and client, but the agent is not subordinate to the client and the agent can conclude agent-contracts with other clients.
Another difference is that the agent contract has more mandatory rules compared to other assignment contracts, because it serves to protect the agent. Other assignment contracts serve to protect the client.
Distribution contract
The distribution contract cannot be qualified as one of the agreements from book 7 of the Dutch Civil Code. It is a systematic performance contract where the supplier undertakes to deliver certain products or services to its distributor. The distributor undertakes to take care of the sales and distribution by purchasing the products from the supplier and reselling them at his own expense and risk and in his own name.
The distribution contract is generally not considered to be a certain type of assignment agreement, because the distributor acts in his own name and for his own expense. The distributor does not act as a representative of the supplier, but concludes agreements for himself.
What contract should be used between influencers and brands?
What kind of contract should be used between influencers and the brands is hard to tell. The way parties shape their relationship determines the qualification thereof. It is less important what they name the contract. The intentions at the moment the seller and the influencer enter into the agreement (preferably laid down in a contract) are very important. Should there be any discussion in the future on what parties actually have agreed, the court will go back to these intentions.
The influencer will be a distributor if he buys products from the manufacturer and sells them on to customers. This traditional way of a sale process is less likely to take place in case of affiliate marketing or when an influencer is involved. If and influencer arranges for good from the seller to be sold, this could lead to an intermediary contract. And if those sales are part of a more or less systematic process, and agency contract seems likely.
Influencers are likely to prefer the agency contract as European law dictates the minimum protection for agents and they are very well protected. Agency law throughout the EU contains the possibility of goodwill claims to be awarded for instance. Keep in mind that this harmonized laws have been drafted way before even the internet existed.
It seems though that the law does provide for rules on contracts for affiliate marketing and retail by influencers. We are pretty sure that we will see more of these contractual relationships develop and discussed in court in the near future.
The International Franchise & Retail team of Valegis Advocaten can help you with any questions you might have on the new way retail is taking shape. We refer you to our website www.valegis.com, https://www.facebook.com/ValegisAdvocaten/ and LinkedIn page https://www.linkedin.com/company/1467686/admin/.
[1] YouTube channel: https://www.youtube.com/channel/UCbEbf0-PoSuHD0TgMbxomDg
[2] https://www.cnbc.com/2018/08/22/youtube-star-referred-over-12-million-in-tesla-sales-and-got-2-free-cars.html
[3] Instagram: https://www.instagram.com/negin_mirsalehi/ | Blog: http://neginmirsalehi.com/fashion
[4] I owe many thanks to Anjalie Jagessar https://www.linkedin.com/in/anjalie-jagessar-966556172/ as she was very much involved in setting up this article.
