By Elizabeth Lee
I. Introduction
Ever since advertising first began, companies have utilized celebrities’ fame and power to market their products. In doing so, companies can reach larger audiences and tap into extensive networks of loyal fans. With the rise of social media and platforms like Instagram and TikTok, companies have taken a greater interest in campaigning for product placement marketing on celebrities’ platforms, which they do by sending celebrities products in exchange for posts or video reviews. However, recently there has been a greater trend for celebrities to enter partnerships with companies to advance their own line or brand. A few prominent artists exemplify this marketing development. Rap star Kanye West partnered with Adidas to create the Yeezy clothing line, Snoop Dogg partnered with an Australian winery called 19 Crimes to launch his own red wine brand, Snoop Cali Red, American soul singer Lizzo released Yitty, her new shapewear clothing line with Fabletics, an athletic leisure store, and Rihanna collaborated with the French luxury group LVMH to create her own makeup and clothing line, Savage X Fenty.
When celebrities engage in partnership and endorsement agreements, they often become susceptible to signing their rights away to companies without fully understanding the legal ramifications. This article will examine various cases in which celebrity partnerships and endorsements went awry. This review will help equip celebrities and influencers with the basic legal knowledge necessary for marketing deals to stay informed and protect themselves from potential lawsuits.
II. Celebrity Endorsement Agreements
In 2010, an application called Instagram launched and effectively transformed the entire marketing game.[1] Instagram is an application designed to allow individual users to upload stories, pictures, and videos to their accounts for their followers to see.[2] As a result, celebrities and non-celebrities alike now can influence large numbers of individuals as they post on their social media accounts, depending on the size and purpose of their platform.[3] Consequently, Instagram popularized a whole new category of “celebrities” that we now collectively understand to be “influencers.”[4]
In general, an influencer is one who exerts influence, a person who inspires or guides the actions of others, or/and a person who can generate interest in something (such as a consumer product) by posting about it on social media.[5] Today, Instagram influencers are paid largely dependent on the number of followers they have on their accounts and the type of brands that they attract. For example, Portuguese football player Cristiano Ronaldo is the current highest-earning celebrity on Instagram in 2023, making roughly $2,397,000 per Instagram post.[6] However, to be more cost efficient, companies will also target “nano” or “micro” influencers who have less than 100,000 followers to market their products.[7] Smaller companies might also just send influencers a product free of charge, with the expectation that the influencer will post, and freely market the product in exchange.[8]
This new kind of “influencer marketing” has proven to be extremely effective because potential customers tend to trust humans more than mere advertisements.[9] It is extremely persuading for individuals to review an item and talk about how the product is incorporated into their everyday life, rather than simply look at an advertisement discussing the potential benefits of buying a product.[10] Additionally, because influencers can also be non-celebrities or unfamiliar individuals, potential customers usually feel more connected to and relate better to influencers than a traditional advertisement. According to a survey conducted in 2018, influencer marketing received a 520% return on investment, showing just how much power influencers now have in the marketing industry.[11]
2. The Basics of Celebrity Endorsement Agreements
The advertising and marketing industry categorizes and pays influencers based on their popularity, which is largely calculated by their number of followers. There are four main tiers of influencers: 1) the mega influencer or the celebrity has greater than 1 million followers; 2) the macro influencer has between 100,000 to 1 million followers; 3) the micro-influencer has between 10,000 and 100,000 followers; and 4) the nano influencer has less than 1,000 to 10,000 followers.[12] Most of the legal issues surrounding celebrity endorsements fall into the categories of false advertising, right of publicity, and intellectual property.
The Federal Trade Commission (FTC) is the main body of government regulating advertisements and promotions on social media sites such as Instagram, Facebook, and TikTok.[13] Most of the legal issues related to celebrity endorsements comes from Section 5(a) of the FTC Act that prohibits “unfair or deceptive acts or practices in affecting commerce” to protect consumers and businesses alike.[14] As social media marketing became popularized, the FTC created a pamphlet reference specifically for social media influencers to warn them of the various legal issues surrounding endorsements.[15] In the article, the FTC stressed that whenever the influencer has a “material connection” with the brand, “including a personal, family, or employment relationship or a financial relationship, that this must be clearly disclosed.[16] Thus, the FTC requires that influencers disclose whether a product or advertisement is endorsed because telling followers about that business relationship allows followers to consider how much weight they want to put on the advertisement and allows influencers to make honest and truthful reviews.[17]
The pamphlet specifies different guidelines for various forms of media including picture, video, and live stream endorsements.[18] Photo endorsements, for example, require the disclosure to be seen and noticed by viewers.[19] On the other hand, video endorsements require that the disclosure be included in the description, as well as in the video and audio to ensure that viewers who watch the video without sound can see the notice.[20] Lastly, live stream endorsements require that influencers repeat the disclosure periodically so that viewers who join in and out of the stream have a better chance of seeing the disclosure.[21]
Lastly, the FDC emphasized that influencers need to state their true opinions about products, so that they are not falsely advertising any products or services.[22] Thus, influencers must do their due diligence in researching the company and trying the products or services to ensure that it is safe for their followers to buy.[23] Lastly, influencers should take care to not spread misinformation or make up any facts about the product so that their reviews are accurate to the products or services represented. [24]
When promoting products or services, influencers and celebrities alike must also abide by all applicable trademark and copyright rules to ensure that their promotions run smoothly.[25] Copyright law essentially protects original works such as photographs, videos, written text, art, and sound recordings.[26] Thus, influencers must receive permission from the original author of the copyright who has the right to distribute their work when using it in their endorsements.[27] Trademark law, on the other hand, focuses more on protecting consumers and businesses by making marks that identify the source of goods and services of different companies.[28] Thus, it is imperative to get permission to advertise with company logos and other distinctive marks to avoid future legal issues.[29]
2. Fyre Festival x Kendall Jenner
In 2017, serial entrepreneur and fraudster, Billy McFarland, became CEO of Fyre Media and launched the Fyre Festival, which was supposed to be a luxurious and exclusive music festival for elite music lovers.[30] The festival was marketed to include luxury villas, delicious food, yacht trips, and parties with celebrities on an island in the Bahamas that was supposedly once owned by Pablo Escobar.[31] In reality, festival attendees arrived at a highly underprepared island and had to sleep in tents with wild pigs running around them, while the government tried to figure out how to get people safely off of the island.[32] In addition, there was a lack of basic supplies like food and water.[33] The Fyre Festival may in fact go down in history as one of the largest music festival flops of all times.
As part of the promotional activities for the festival, the Fyre Festival organizers collaborated with celebrity influencers like Kendall Jenner, Bella Hadid, and Hailey Baldwin to shoot promotional videos and post on their respective social media platforms.[34] These influencers utilized the hashtag #FyreFest and posted an orange tile on their Instagram pages to gain more traction for the event.[35] However, many of these influencers faced legal troubles when the festival turned out to be a flop, as they had failed to disclose that they were getting paid to promote the event, in direct violation of the Federal Trade Commission’s (FTC) rules.[36] The FTC requires influencers to clearly state when they are being sponsored to provide clarity for their audiences.[37] For the purposes of this article, I have chosen to focus on the legal implications resulting from false advertising campaigns for the Fyre Festival, through Kendal Jenner’s lawsuit, which is representative of many other celebrities’ cases.
A couple of months before the festival was to occur, Fyre Media reached out to Kendall Jenner to ask her to post Fyre Festival’s iconic orange tile on her Instagram feed and announce that G.O.O.D. Music Inc.’s artists would be headliners at the festival.[38] G.O.O.D. Music Inc. is none other than Kanye West’s (Kendall Jenner’s then-brother-in-law) record label.[39] Unlike other celebrities who had shot a promotional video for the Fyre Festival, Kendall had simply posted the orange tile and captioned it with “So hyped to announce my G.O.O.D. Music Family as the first headliners for @fyrefestival” to share the exciting news with her fans.[40]
Since the incident, Kendall Jenner deleted the post promoting Fyre Festival from her Instagram and was initially sued for $275,000, the amount that she was allegedly paid for posting the singular promotion on Instagram.[41] While her post had hinted that Kanye West would be performing at the festival, it was later discovered that he had never been booked. [42] Thus, the lawsuit stated that this demonstrated a lack of good faith effort on Kendall’s part to fact check companies that she promoted prior to doing promotional activity.[43] Apparently, the FTC also reached out to Kendall and warned her to stop “unfair, deceptive, and fraudulent business practices” because she did not reveal to her followers that her post was sponsored by Fyre Festival.[44] Ultimately, the Keeping up with the Kardashians star settled the lawsuit for $90,000 and continues to actively promote on social media today.[45]
III. Celebrity Partnerships
Recently, celebrities in the entertainment industry have initiated brand partnerships with companies in order to have an economic stake in the companies that they partner with. According to Sarah Scott, a Managing Partner at boutique music law firm LaPolt Law, this new trend has largely been prompted by a desire for celebrities to share profits, rather than rely on royalties to be paid for deals.[46] As she states, “profit-sharing deals make the artist far more happy, successful, and involved in their business, rather than being antagonistic with the record label or publisher.”[47] In essence, artists are partnering with companies because they want more control over their businesses to boost their capitalization and provide more input into projects.[48] Many of these partnership contracts provide a 75 to 25 split respectively between the company and the artist [49] However, artists should read the contract agreement carefully to check for hidden fees and other price adjustments to ensure that they receive a fair monetary amount from the partnership.[50]
All celebrity endorsements and partnerships allow companies to tap into huge networks to stay competitive in the market.[51] Nonetheless, these agreements with influencers and celebrities also present them with new challenges and liabilities. When deciding who to contract with, companies must be careful to select celebrities who have a good rapport with the general public and can serve as a good representative for the company.[52] Because celebrities are constantly in the limelight, any mistake that they make, both past and present, is magnified by the public eye, which adds an additional unreliable variable for how the company will perform in the future.[53] Companies should do their due diligence and perform a thorough background check on potential celebrities that they would like to work with.[54] In addition, celebrities often require additional fees due to their fame and require security measures in order to acquire their service in the first place.[55] Thus, companies must take extensive precautionary measures to ensure that obtaining a celebrity to advertise their product or service is a practical business decision.[56]
Kanye West x Yeezy
In 2016, Adidas, the athletic brand, and Kanye West, the artist, partnered to create one of the most successful celebrity partnerships to date. Together, they created the lifestyle brand featuring footwear, clothing apparel, and accessories designed to be a cross between street wear and sport wear. The most hyped product that they created was a shoe model called the YEEZY BOOST 750. The success of the first edition then led to a line of other sneakers called YEEZY BOOST 350 and BOOST.
However, turmoil embroiled between the company and artist when Adidas released the Adilette 22 sandals.[57] Kanye West, took to the Internet to blatantly complain that Adidas had created a model that looked similar in design to YEEZY’s slides and that they had used his ideas to gain profits of their own.[58] Kanye West also accused Adidas of purposefully leaving him out of YEEZY-related marketing and planning, such that his ideas were simply being used without any of his control.[59] He also stated that he had not even given any approval to the new lines of YEEZY that were being released.[60] In his public Instagram outcry, Kanye West also talked about a higher purpose to defend himself against Adidas, to encourage other celebrities in similar situations to do the same without fear, despite the risk that their contracts may be rescinded.[61]
The final straw for Adidas, however, was in October 2022 when Kanye West took to the internet to share his antisemitic opinions with the world. In his original Twitter post, Kanye West specifically stated “I’m going death con 3 ON JEWISH PEOPLE.”[62] To no one’s surprise, the public was outraged by this statement and Kanye West immediately began receiving considerable backlash. Accordingly, Adidas immediately terminated its partnership with Kanye West and released a public statement that the company does not tolerate antisemitism or hate speech, so the contract has been terminated due to Kanye West’s violation of the company’s “values of diversity and inclusion, mutual respect and fairness.”[63] As a result, the company also instated a full stop on all YEEZY production and any related business.[64] The company also stated, however, that Adidas was the “sole owner of all design rights to existing products as well as previous and new colorways under the partnership,” essentially reassuring customers that the line can in fact continue in the future.[65] In essence, Kanye West did not have ownership rights over any of the designs for his YEEZY line so the company would be allowed to create new designs in the future.
However, both parties were strongly affected by the immediate termination of Kanye West’s contract. According to Forbes, the YEEZY brand added an additional $1.5 billion to Kanye West’s net worth and brought in nearly $2 billion a year for Adidas, which is the equivalent of roughly 10% of the company’s sale revenues.[66] The YEEZY brand had been vital to Adidas in its competition with rival Nike for similar product lines.[67] Thus, the company also released in its statement that expected a “short-term negative impact of up to $246 million on the company’s net worth.”[68]
As of February 2023, the artist and athletic apparel company finally reached an agreement to sell the remaining $500 million YEEZY sneaker inventory after terminating their partnership.[69] The two parties remodeled their original agreement to largely focus on selling the remains of the YEEZY shoe inventory.[70] However, the clothing line will not be sold and new designs will not be created.[71] Unfortunately, Adidas reported that it expected to take a $1.3 billion dollar hit to its net worth because of the contract termination.[72] Reportedly, Kanye West has also looked for a new company to restart his line, but has not been successful thus far in acquiring another partnership.[73]
IV. Conclusion
Both companies and celebrities can profit enormously from celebrity partnerships and agreements if due diligence is done by both parties. Research is essential in determining whether a partnership will be mutually beneficial or detrimental to each participant. However, while companies often have legal teams that will advise them on how to best strategize their business decisions, influencers and other smaller celebrities are less likely to have the resources or legal knowledge to protect themselves. Thus, it is important for influencers and celebrities to stay knowledgeable on the rules of advertising and keep up with the FTC’s regulations to ensure that they are monetizing legally when entering into agreements with companies.
[1] EduBirdie, How Instagram has Changed Marketing and Advertising Industries, EduBirdie, (Sept. 29, 2021), https://edubirdie.com/examples/how-instagram-has-changed-marketing-and-advertising-industries/#citation-block
[2] Id.
[3] Id.
[4] Id.
[5] Influencer, Merriam-Webster, https://www.merriam-webster.com/dictionary/influencer
[6] Werner Geyser, 20 of Instagram’s Highest Paid Stars in 2023, Influencer Marketing Hub, (Feb. 1, 2023), https://influencermarketinghub.com/instagram-highest-paid/
[7] Bradley, Sydney, How much money Instagram influencers make, INSIDER, (Dec. 23, 2022), https://www.businessinsider.com/how-much-money-instagram-influencers-earn-examples-2021-6
[8] Id.
[9] EduBirdie, How Instagram has Changed Marketing and Advertising Industries, EduBirdie, (Sept. 29, 2021), https://edubirdie.com/examples/how-instagram-has-changed-marketing-and-advertising-industries/#citation-block
[10] Id.
[11] Id.
[12] Counsel for Creators, Top Social Media Influencer Legal Issues, Counsel for Creators LLP, (Nov., 21, 2022), https://counselforcreators.com/log/top-legal-issues-for-influencers/#:~:text=Influencer%20Legal%20Issues%20with%20Trademark%20Laws&text=Influencers%20should%20obtain%20permission%20from,source%20of%20goods%20or%20services
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id.
[18] Fed. Trade Comm’n, Disclosures 101 for Social Media Influencers, Fed. Trade Comm’n, (Nov. 2019), https://www.ftc.gov/business-guidance/resources/disclosures-101-social-media-influencers
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id.
[25] Counsel for Creators, Top Social Media Influencer Legal Issues, Counsel for Creators LLP, (Nov., 21, 2022), https://counselforcreators.com/log/top-legal-issues-for-influencers/#:~:text=Influencer%20Legal%20Issues%20with%20Trademark%20Laws&text=Influencers%20should%20obtain%20permission%20from,source%20of%20goods%20or%20services
[26] Id.
[27] Id.
[28] Id.
[29] Id.
[30] Huddleston Jr., Tom, Fyre Festival: How a 25-year-old Scammed Investors Out of $26 Million, CNBC, (Aug. 18, 2019), https://www.cnbc.com/2019/08/18/how-fyre-festivals-organizer-scammed-investors-out-of-26-million.html
[31] Vargas, Alani, Keep Track Of The Fyre Fest Disaster With This Detailed Timeline, Refinery29, (Jan. 18, 2019), https://www.refinery29.com/en-us/2019/01/221816/fyre-festival-timeline-what-happened-netflix-documentary
[32] Abrams, Margaret, What is Fyre Festival? Guests Who Got Scammed by Billy McFarland Tell Their Horrifying Stories, Evening Standard, (Apr. 9, 2019), https://www.standard.co.uk/insider/celebrity/fyre-festival-what-happened-a4039896.html
[33] Id.
[34] Id.
[35] Kaur, Tarandip, The Power of Influencer Marketing: Fyre Festival Case Study, Meltwater, (Mar. 17, 2019), https://www.meltwater.com/en/blog/the-power-of-influencer-marketing-fyre-festival-case-study
[36] Gelbart, Bryn, Celebs Broke Advertising Rules to Promote Fyre Festival, Observer, (May 2, 2017), https://observer.com/2017/05/celebs-broke-advertising-rules-promoting-fyre-festival/
[37] Id.
[38] Gonzales, Erica, Kendall Jenner Responds to Her Fyre Festival Involvement for the First Time, Harper’s BAZAAR, (Apr. 3, 2019), https://www.harpersbazaar.com/celebrity/latest/a27028770/kendall-jenner-fyre-festival-responds/
[39] Aviles, Gwen, Kendall Jenner to Pay $90,000 Settlement for Promoting Fyre Festival, NBC news, (May 21, 2020), https://www.nbcnews.com/pop-culture/pop-culture-news/kendall-jenner-pay-90-000-settlement-promoting-fyre-festival-n1212011
[40] Id.
[41] Shenton, Zoe, Kendall Jenner Settles Fyre Festival Instagram Post Lawsuit for $90,000, Cosmopolitan, (May 21, 2020), https://www.cosmopolitan.com/uk/entertainment/a32624953/kendall-jenner-fyre-festival-lawsuit-settlement/
[42] Id.
[43] Id.
[44] Id.
[45] Id.
[46] Jones, Rhian, ‘Partnership Deals are the Future of the Music Business,’ Music Business Worldwide, (July 14, 2021), https://www.musicbusinessworldwide.com/partnership-deals-are-the-future-of-the-music-business/
[47] Id.
[48] Id.
[49] Id.
[50] Id.
[51] Goodwin, Tara, The Pros and Cons of Celebrity Partnerships, LinkedIn, (May 6, 2021), https://www.linkedin.com/pulse/pros-cons-celebrity-partnerships-tara-goodwin/
[52] Id.
[53] Id.
[54] Id.
[55] Id.
[56] Id.
[57] Phillips, Hedy, Everything to Know About Kanye West’s Feud with Adidas, People, (Jan. 18, 2023), https://people.com/style/kanye-west-feud-with-adidas-everything-to-know/
[58] Id.
[59] Id.
[60] Id.
[61] Id.
[62] Center on Extremism, Unpacking Kanye West’s Antisemitic Remarks, Anti-Defamation League, (Oct. 14, 2022), https://www.adl.org/resources/blog/unpacking-kanye-wests-antisemitic-remarks?gclid=Cj0KCQiAo-yfBhD_ARIsANr56g6I4N4GgxBryhjGqs0yS4bndHpNKAZumNsYW1INajbfzzYOGKl1C2UaAvxzEALw_wcB
[63] Reid, Jenni; Golden, Jessica, Adidas Terminates Ye Partnership, Gap Removes Yeezy Items Over Rapper’s Antisemitic Remarks, CNBC, (Oct, 25, 2022), https://www.cnbc.com/2022/10/25/adidas-terminates-partnership-with-ye-following-rappers-antisemitic-remarks.html
[64] Id.
[65] Id.
[66] Id.
[67] Id.
[68] Id.
[69] Coleman II, C. Vernon, Kanye West and Adidas Reach Agreement to Sell $500 Million Worth of remaining Yeezy sneakers – Report, XXL Mag, (Feb. 25, 2023), https://www.xxlmag.com/kanye-west-adidas-agreement-sell-remaining-yeezy-sneakers/
[70] Id.
[71] Id.
[72] Id.
[73] Id.
