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In a recent case, the Higher District Court of Hamburg sided with a German influencer in a decision dealing with the obligation to label commercial posts on Instagram as advertisement (file reference 15 U 142/19).
The court set out criteria leading to the commercial intent of the post being apparent from context and thus obvious to the audience, which means that the post did not have to be specifically labelled as advertisement.
A German lifestyle influencer with an audience of around 1.7 million followers had published three photographs of herself with short captions. In each post, she made use of several so-called "tap tags". "Tap tags" are links to other (mostly commercial) Instagram profiles that appear if a follower taps on a post. If the follower then clicks on the specific tap tag, one is directed to the Instagram profile linked in the tag. By use of such tap tags, the influencer inter alia labelled the brands of certain garments she was wearing in the respective photographs. If her followers then clicked on the tap tag, they were forwarded to the brands’ Instagram pages.
Although the influencer uses her social media platform for commercial purposes by way of advertisement and sponsorships for certain content, she did not receive any compensation for the three posts in question. Furthermore, she did not specifically disclose the three posts, which gained between 45,000 and 64,000 likes each, as advertisements or sponsored content.
Subsequently, an association for the prevention of unfair competition took legal action against the influencer for the violation of German unfair competition law. At the centre of the complaint was the claim that the influencer was pursuing commercial purposes with her posts by using the tap tags to direct her followers to commercial Instagram pages of certain brands. As the published photos showed her in private situations, such as vacations, her followers were – in the association's opinion – not able to distinguish between advertisements and her personal views and preferences. The association also argued that by linking the Instagram profiles of other brands, the influencer not only fostered their businesses, but also attracted the brands’ attention to her own profile, thus potentially soliciting new sponsors for herself.
Whereas the District Court of Hamburg as the court of first instance had still decided in favour of the association, the Higher District Court of Hamburg as the appellate court sided with the influencer. In its decision, the bench asserted that the non-disclosure of the posts did not violate the German Unfair Competition Act (UWG).
According to section 5a (6) of the German Unfair Competition Act, unfairness shall have occurred where the commercial intent of a commercial practice is not identified, unless this is directly apparent from the context, and where such failure to identify the commercial intent is suited to causing the consumer to take a transactional decision which he would not have taken otherwise.
The court’s decision therefore rests on three main aspects: (1) whether the published posts constitute a commercial practice, (2) if the commercial intent was directly apparent from the context, and (3) whether the posts caused consumers to take a transactional decision which they would not have taken otherwise.
(1) The first aspect the court had to decide upon was whether the published posts constituted a commercial practice. This was disputed by the influencer.
As defined in section 2 (1) No. 1 of the German Unfair Competition Act, a commercial practice means “any conduct by a person for the benefit of that person’s or a third party’s business […] [which is], objectively connected with promoting the sale or procurement of goods or services […]”. As established by the German Federal Court, this applies where there is a direct and functional connection between a specific conduct and the sale of a product.
In the present case, the court affirmed the presence of a commercial practice. It explained that the main focus of the influencer occupation was to "influence" people, to stimulate the audiences’ interest in certain brands and to create a desire for particular products. By using tap tags, the influencer made the products attractive and special for her followers and enabled them to explore the brands through the links. This fact was pivotal for the court’s opinion: The influencer could have merely listed the brands in the posts' captions. Instead, she linked the brands, creating a direct pathway to their Instagram profiles. Thus, the court found that the influencer acted with the intent to promote the sale of the brands and therefore with commercial intent.
Further, no other view could be formed because of the fact that the influencer did not receive any compensation. Since the influencer also relied on sponsored links and affiliate content on her profile, the audience could, according to the court, not distinguish between sponsored and non-sponsored content.
(2) Secondly, the court asserted that the influencer did not have to label her posts as advertisements, since the commercial intent was directly apparent from the context. Thus, no unfairness was given under section 5a (6) of the German Unfair Competition Act.
According to the court, the decision whether or not the commercial intent was directly apparent had to be based on a holistic evaluation of the circumstances and the medium in which the post had been published. The commercial nature of the post needs to be obvious to the average consumer upon first glance.
The influencer in the present case used a verified Instagram account, which is visible for the platform users through the blue check mark next to her profile’s name. Furthermore, her significant follower count of 1,7 million, as well as the number of likes given on each post (around 50,000 each) indicated that the influencer was pursuing not private, but commercial purposes. Also, the influencer did not post mere snapshots, but carefully arranged pictures of high quality. Lastly, the court took into consideration that platform users are nowadays generally informed about the commercial intent of influencers on Instagram. The court backed its reasoning with the fact that a total Instagram marketing budget of around EUR 560 million had been invested by brands in 2017 alone, implying that influencer endorsement had evolved into a well-known and widespread marketing trend. Furthermore, as the cases regarding influencer marketing had attracted broad media attention (especially a case involving the wife of a famous German soccer player), the court assumed that the average consumer would now recognize the commercial nature of the posts.
Based on these facts, the court came to the conclusion that the commercial intent of the posts was obvious for the average consumer which meant that labelling as advertisement was not required.
(3) Lastly, the court found that – in the specific case – consumers were not caused to take a transactional decision which they would not have taken otherwise.
It should be noted here that, in Germany, it is assumed in settled case law that advertising in print media disguised as an editorial contribution without appropriate labelling would induce the reader to pay attention to the contribution and then attach more importance to it as an editorial contribution. This could then lead to the reader being induced to purchase the product. Based on this, other courts had – in other influencer cases – ruled that the consumers were caused to take a transactional decision which they would not have taken otherwise.
Taking into account the overall circumstances, the Higher District Court of Hamburg comes to a different conclusion in this specific case.
In the court's opinion, the followers of an Instagram account knew and expected that an advertisement was posted. It held that the followers called up the account to find out about new products on the fashion market or to receive suggestions for travel, lifestyle, etc. For them, it was crucial that the products shown had just been selected by the influencer herself; so her actual selection of the products was decisive for the followers, according to the court's view. The reasons for which the product was presented were only of minor importance.
The court came to the conclusion that in this respect the situation underlying the present case, in which not only new media or new technical and media possibilities, but also a new purchasing and decision-making behaviour of consumers had to be taken as a basis, differed significantly from the cases previously decided by the case law on hidden advertisement in printed matters, thus justifying a different decision.
Although the decision may be welcomed by many German influencers, they may still need to wait for a final decision from the German Federal Court. The court allowed the appeal and German case law is very diverse with many of the other courts siding with the association which has been the plaintiff in many of the cases in Germany. Nevertheless, the decision represents a more differentiated approach to influencer marketing and may provide some more clarity in a topic that is still highly debated.
Authored by Yvonne Draheim and Sabrina Mittelstaedt