More and more companies advertise their products through so called influencer marketing, using the accounts of social media stars to reach their followers. The Higher Regional Court of Celle decided recently that a company using an influencer to post advertising on Instagram may be liable for failing to clearly indicate the underlying commercial purpose even though the post contained the hashtag “#ad” (Higher Regional Court of Celle, ref. no. 13 U 53/17).
An association for consumer protection applied for a preliminary injunction against a consumer goods company that had paid an influencer to advertise its products on Instagram. The influencer had posted an image showing female arms holding different cosmetics and jewelry with a text saying that the company offers a 40% discount on eye make-up in all its stores the following day. The text itself also contained a link to the company’s Instagram account and was followed by six hashtags, again including the company name as well as “#ad #eyes #shopping #discount #40percent”. The District Court had refused to grant a preliminary injunction in the first instance.
Findings of the Court
The Higher Regional Court reversed the decision of the District Court and held that the Defendant is obliged to cease and desist from having third parties posting advertisements under the appearance of private posts as in the cosmetics advertising described above. It held that the Defendant itself is liable for having violated German unfair competition law, notwithstanding that the advertising appeared as a statement of an individual on Instagram. In reasoning so, the Court mainly relied on the fact that the influencer had obtained a remuneration for the post. The Court further came to the conclusion that the hashtag “#ad” used by the influencer as one of six hashtags at the end of the post does not suffice to clearly mark the underlying commercial intent of the post, particularly underlining that such commercial intent needs to be identifiable at first sight. While the Court did not decide expressly whether the hashtag “#ad” is suited to identify advertising, it pointed out that consumers tend to not read the hashtags and will therefore in any event not take notice of the “#ad” hashtag. The Court further pointed out that average consumers will not infer the commercial intent of the post from the other elements of the advertisement, such as the company name being mentioned. Moreover, the Court held that the professional quality of the photo is not an indicator for the commercial intent either, as many influencers would also post professional quality photos illustrating their private life.
The decision significantly raises the bar for influencer marketing posts to not violate unfair competition law, while regrettably not clarifying the criteria to be met. With the question of whether the hashtag “#ad” itself satisfactorily identifies advertising remaining unresolved, it is still unclear what companies can do to avoid falling foul of German unfair competition law. Until the issue is finally decided by the Federal Court of Justice, it is advisable for companies to have their influencers contractually obligated to indicate the commercial intent as clearly as possible, e.g. by naming the advertising purpose at the beginning of the comment text itself and by including identifiers such as “#ad” and “#sponsored” as the first hashtags within a group of hashtags.