The traditional advertising industry is changing. For quite some time now, companies have increasingly been using so-called influencers to promote their products instead of the traditional media. On their wide-ranging social media channels, influencers rate, test, present or mention brands, products, and services of various companies by means of tagging or links in social media posts. Many of such posts do not immediately "out" themselves as classic advertising and for consumers, it is not always clear if a post is an influencer's personal and independent opinion or if the post is sponsored by the company, who’s product is mentioned in the post. Therefore, consumers are not able to tell whether such a post constitutes an objective statement by an independent third party, which consumers are regularly more likely to consider in their decision-making process, or if it is a sponsored marketing activity, which is regularly less reliable. For a long time there was considerable legal uncertainty whether such posts by influencers must be clearly labelled as advertisements under German unfair competition law. Now, for the first time, the German Federal Court of Justice (Bundesgerichtshof, BGH) has issued a "decision hat trick" (case I ZR 90/20; case I ZR 125/20; case I/ZR 126/20) regarding influencer marketing - especially in connection with the use of so-called tap tags. In particular, the decisions dealt with the question of whether influencers had violated the requirement to label their social media posts as advertisements.

Influencer posts in favour of a third-party company for consideration

According to the BGH, influencers offering goods and services (e.g. fitness courses, online shops, advertising for other companies for a fee) and advertising them via their posts on social media regularly perform commercial practices for the benefit of their own company with their published posts, irrespective of whether they receive any consideration in return. To the extent that the respective influencer receives a consideration from a third-party company for its promotional posts, this publication (also) constitutes a commercial practice for the benefit of the advertised company. Even though a precise definition of the term “consideration” was unfortunately not provided by the BGH, a relevant “consideration” is likely to exist in the case of a monetary payment, or, for example, in cases where the influencer receives the advertised product free of charge.

Influencer posts in favour of a third-party company with excessive promotional surplus

In addition, a commercial practice in favour of another company may also take place if the influencer does not receive any consideration, but the overall impression of the contribution is that it is excessively promotional, i.e. it contains a promotional surplus. In this context, it must be considered whether the post emphasises the advantages of the product or service alone without any critical distance, in a way that gives the public the impression that the product or service is recommended by the influencer, or whether the products or services of third parties are mentioned and praised by name and the presentation thus exceeds the scope of factual information.

In this regard, the BGH ruled that the use of “tap tags” per se does not constitute a promotional surplus. Tap tags are clickable links within images posted on social media, for example, that lead directly to other profiles of influencers or companies and retailers that offer the respective products.

However, if the corresponding “tap tag” does not contain a discernible reference to the related post/picture from the perspective of the relevant average customer, but merely mentions/links to a product in an incoherent manner, this indicates an advertising surplus. Such a link to a website of the manufacturer of the product depicted regularly indicates a promotional surplus. This is because the user accesses the advertising influence of the respective manufacturing company. According to the BGH, posts with such a promotional surplus must generally be clearly labelled as advertisements.

Influencer posts in favour of the influencer’s business only

According to the BGH, the commercial intent of so-called influencer marketing regarding practices in favour of their own business should be easily identifiable to the average consumer, not least because the users of social media are be aware of the specifics of the medium since influencer marketing has recently become a respectable form of marketing.

Yet, if the activity is also in favour of a third-party company, the commercial intent is not always clearly identifiable since the posts of influencers often seek to precisely convey the impression of privacy and objectivity.

However, such posts are only subject to labelling if the respective influencer receives remuneration or other benefits for the corresponding post due to the specific provisions of Section 6 (1) German Telemedia Act (TMG), Section 58 (1) German State Broadcasting Treaty (RStV) regarding online media. This is due to the fact that a commercial communication within the meaning of the aforementioned provisions for the benefit of other companies is only at hand if a consideration is provided.

Form of labelling as advertisement

If labelling is required, the necessary reference to the commercial intent of a commercial practice and its point of reference must be sufficiently clear, so that it is apparent at first glance and beyond doubt from the point of view of the average consumer being addressed. In this case, products or services being promoted by influencers should clearly be labelled as advertisements.

Even though the BGH did not explicitly comment on the specific form of labelling, the notice should not merely be displayed below a social media post in “show more” buttons, other links or in a “hashtag cloud”. When using “tap tags”, the notice should also not appear in a continuous text next to the image. The notice must be displayed at the latest immediately when the visible “tap tag” appears, i.e. after clicking on the image for the first time. If the advertising action is (also) directed at the German-speaking consumer, only a labelling with the unambiguous German terms “Anzeige” or “Werbung” shall be sufficient; foreign-language terms such as “advertisement”, “collaboration”, “sponsored by”, “paid content” etc. are still considered too imprecise.

In the context of influencer marketing, a lack of labelling is also likely to be regularly suitable for causing the consumer to take a transactional decision. When using tap tags, the second click (i.e. on the “tap tag”), which leads to the linked company profile, is considered a transactional decision as the consumer then engages with the respective company or its products.

Practical relevance and outlook

In summary, whenever a post is made for the benefit of third-party companies and the influencer receives remuneration for it, the post must always be marked as advertising in such a way that it is clear for consumers at first glance and without any doubt. Here, a simple rule applies: the more visible, the better!

Furthermore, due to possible liability risks for the conduct of the influencers commissioned, companies should always (1) sign a contractual agreement with the social media influencers, (2) specify in this agreement the terms of the labelling of posts and the observance of all (unfair competition) law provisions and, if necessary, sanction them, and (3) in order to avoid risks, adequately and regularly train the social media influencers and monitor their posts and, if necessary, request the respective influencers to rectify them immediately.

Even if the decision hat trick resolves many legal uncertainties, certain questions still remain, in particular regarding the definition of consideration. However, two further decisions are already pending before the BGH, so that there may soon be further clarification in this regard. So stay tuned for our next update on the use of social media influencers!