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Global Fashion Lawyer September 2020 Issue 2020-09-24T15:47:17-08:00

Who is Watching the Watchmen?

The fashion world awoke to the realities of a pandemic that would massively impact the purchasing public. Some companies adapted to the constant state of fear that accompanied Covid-19 by providing useful data tracking related to the virus. But the confluence of various technologies now promoting features related to the Covid virus carry a potential risk for privacy issues. Many wearables already have an integrated GPS, Bluetooth, or biometric surveillance in their programs for exercise or sleep patterns, etc.  One form of technological adaptation is contact tracing via wearable accessories and apps that alert a person if they had recent contact with an infected person. Some monitoring can also alert data users that they are not practicing social distancing. Additionally, monitoring capabilities offer alerts detailing slight changes in health, such as an elevated temperature, heart rate, or respirations that could indicate symptoms of the disease before it would otherwise be detected.

There are two extremely different viewpoints to this brave new world of constant, intrusive monitoring. One point of view sees this as a wonderful advancement of technology and science, whereby people–by just wearing their preferred accessories–could be notified that they were in contact with an individual who tested positive. This technology could measure the proximity to the infected person and relay information such as duration of your exposure to that individual, which could also provide scientific findings about disease transmission. Additionally, early detection that a user is actively infected could improve response. Learning you have been exposed to the virus or that you may be showing signs of the sickness could allow for faster remediation. If you had someone in your household who is at risk due to a compromised immune system, etc., you could effectively then adjust your behavior knowing you have been exposed. For example, you could opt to get tested and even isolate yourself, and thereby reduce the risk of exposing others to the disease. One such device already on the market is the tiny Oura ring, adopted by the NBA, to be worn on player’s fingers to detect the onset of symptoms while the players are in ‘the bubble’ of isolation during the shortened season in Orlando.

The other side of the coin is the degree of privacy lost by the individual user who submits to the constant monitoring of their personal location and health data. For example, let’s say you sign up and opt-in with one company’s wearable privacy policy. Then at some later point, another company acquires the original (think Fitbit being bought by Google).  What becomes of your health data acquired by the new company?  Is it repurposed for the new company’s goals, some of which might vary from the original company’s agenda?  How secure is the data now?  If you decide not to opt-in to the new company’s privacy policy, is there a risk your device could suddenly become a brick because you will not agree to the new terms and conditions?

What if the data is collected for one particular narrow Covid purpose, then later is used for a different purpose, one that may or may not be Covid related? In a rush to feel safer during the Covid panic, users may have clicked “yes” on accepting privacy policies that they failed to properly understand or were written in a confusing manner rendering consent impossible.  Companies should be cautious in wording their privacy terms and conditions since data users need to understand exactly how their sensitive information will be used, shared, stored, and what happens after the data is no longer needed.

One particular area of concern is when companies share and aggregate data. If a company de-identifies individual users to protect their privacy for one purpose, what if it then pools the anonymized data with another company for a different purpose, but by aggregating the data it results in the original user being identified? Then the user’s privacy has been compromised and the company has potentially violated its own terms and conditions.

Who exactly is watching the watchmen? The watchmen here are the companies creating the wearable technology that watches over a user’s personal health data for a potentially stigmatizing disease. Private companies do not fall under the auspice of the Health Insurance Portability and Accountability Act (HIPPA), which deals with medically sensitive patient information. The FTC could step in to hold companies accountable for misleading data subjects into believing their data was secure if it is shared without notice or consent. Additionally, individual state privacy laws may potentially hold a company liable. Many states have established their own privacy laws in what seems to be a race to see which one can claim the strictest in consumer data protection.

What started the states becoming more active in the area of data privacy is when the European Union passed the General Data Protection Regulation (GDPR), effective in May 25, 2018. GDPR is one of the toughest, enforced privacy laws in the world, known for levying huge financial penalties on companies for violations of data subjects’ information.

Under GDPR, data subjects have the right to: transparent information, be provided information to ensure fair processing when personal data is collected, access their data, rectification, erasure (right to be forgotten), restriction of processing, data portability, and object. Further, there are six privacy principles relating to the processing of data, which are lawfulness, purpose limitation, data minimization, accuracy, storage limitations, and integrity. An example of violator consequences is from 2019 when Google was hit with a $57 million penalty for violating “lack of transparency” in exactly what and how data was to be used, and for improper consent from the data subjects (you cannot give informed consent if you are unaware as a data subject of how your data will be used).

California was one of the first states to follow the European Union’s example by implementing a privacy law, the California Consumer Privacy Act (CCPA), that has been called ‘GDPR-lite.’ The law is enforceable beginning this summer, and like GDPR, carries significant fines for violations.  The law mandates that privacy notices must disclose to consumers what personal information it collects and how it is to be used.  Straying from the purpose could lead to statutory damages of $100-$750 per consumer injured, with private right of action that could lead to class action litigation.

For a company pitching wearable technology that can provide Covid contact tracing and/or symptom monitoring, it should tread lightly in regards to privacy, because what may start out as a profitable design could become a liability if the user’s data is not handled properly.

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Driven by Sustainability: Lamborghini’s Commitment to the Global Environment. Interview with Katia Bassi, Marketing Director at Lamborghini

Katia, could you please briefly describe your role in Lamborghini? 

I am the Chief Marketing and Communication Officer – in charge of marketing, communication & PR, Brand Extension, sponsorship for the Racing activity and the MUDETEC museum

What are the main points of strength for the Lamborghini brand?

We are innovators and future shapers. Another of our strengths is that we are lucky to have a very young fan & customer base.

How is Lamborghini legally protecting worldwide its brand and design?

Lamborghini has implemented several activities on a worldwide level in order to protect and enhance its intellectual property rights, which are obviously a strategic asset:

  1. International registration of its trademarks, as well as of car design, with the relevant authorities. Following the development of licensing activities, we are also progressively increasing the number of protected categories for all kind of licensed products;
  2. Worldwide surveillance and alerts against any request of registration which may conflict with Lamborghini trademarks and registered design in order to block them;
  3. Brand protection activities by means of (i) internet monitoring (which includes social networks) and (ii) controls physically made at customs level; in case of finding of counterfeit products, destruction of them and taking legal actions against the relevant party responsible;
  4. Proactive activities against any unauthorized and counterfeit product by means of cease and desist letters and litigation;
  5. Security stickers affixed on official products as guarantee of its origin.

Can you please describe in few words the marketing efforts of the Lamborghini at a global level? How important is the role of social media in pursuing such efforts?

The relation with our customers is important – we always try to establish a one-on-one conversation with them. Obviously, in times of Covid, the role of social media has grown a lot. We needed to take all of our events and launches to a virtual level, thus amplifying the relation with those who love and appreciate our brand. We also have a dedicated channel for our customers, our Unica App, where they can find exclusive content and previews of products.

What is your vision of sustainability within the automotive and luxury industries? How can a company like Lamborghini contribute to that vision and to the delicate balance between business and Human Rights (as recognized by the UN)?

Sustainability is currently one of the key topics in the automotive and luxury industries.

We consider ourselves to be a sustainable company, reaching CO2 neutrality in 2015, when this feature was not officially requested yet.

Automobili Lamborghini’s commitment to the environment has grown exponentially in recent years. All projects the Company started in this field have always been taken on with the goal of being a benchmark for the sector and beyond.

As part of this, a focused and rapid drive towards an ever-greater environmental commitment, maximizing reductions in CO2 emissions and energy consumption has become one of our key goals. For this reason, we have in recent years implemented various projects to meet these goals, such as photovoltaic installations, sun-shade systems for south-facing buildings, and LED lighting and thermal insulation for older buildings. In 2015, we completed the two most important projects, which allowed us to obtain Carbon Neutrality certification: a trigeneration plant and a district heating system, powered by a biogas cogeneration plant.

The major industrialization works undertaken in 2017 were in harmony with the appearance of the rest of the building and in line with the environmental commitment we took in 2015, keeping our plant CO2 neutral, and constructing, for the first time in Italy, an industrial building that received LEED (Leadership in Energy and Environmental Design) certification.

We are very committed in creating a sustainable environment, as this topic was our main attention point during the planning, design and realization of the Paint-Shop, inaugurated in July 2019:

  • 95% of the paint colors are water based
  • The building itself is a class A-Building with perfect insulation, using the latest generation of LED lamps
  • The E-CUBES are our Latest generation filtering technology which reduces the water consumption of 100% during the whole process
  • The solvent emissions are very low thanks to a huge post burner, which you will not see as it is placed on a higher floor.
  • The heat coming from the post burner is recovered and used for heating the ovens of the painting line, leading to a reduction of 25% less energy consumption.

In spring 2011, Lamborghini, in collaboration with the Universities of Bologna and Bolzano, and with the supervision of the University of Munich, created a Biopark where almost 10,000 Oak trees (Quercus robur) were planted over an area of around 7 hectares (70,000 m2) in the town of Sant’Agata Bolognese (near Bologna), following a layout replicated in various European countries (Germany, Poland, Belgium, Hungary).

By monitoring this plantation over the years and decades to come, it will be possible to better understand the relationship between forest productivity, density, and the capacity to absorb CO2 and maintain biodiversity based on climate.

Furthermore, we are studying the next step towards hybrid vehicles. The super capacitors of our Sian are just one example.

How has Covid-19 impacted your business, and what have been Lamborghini’s efforts in the fight against the virus in Italy?

As you are probably aware, Italy was seriously hit by Covid-19. Our company took the very difficult decision to close for several weeks, to safeguard the health of our workers, employees and their families, before the Italian State decided to issue lockdown orders. Automobili Lamborghini then converted some departments of its super sports car production plant in Sant’Agata Bolognese in order to produce surgical masks and protective plexiglass shields. The masks were donated to the Sant’Orsola-Malpighi Hospital in Bologna to be used in the fight against the COVID-19 pandemic. Work on this solidarity initiative was carried out by personnel of the saddlery that produce the interiors and specialty customization for Lamborghini cars, producing 1,000 masks a day. The medical shields will be realized in 200 units a day, using 3D printers within the carbon fibre production plant and the Research and Development department.

The activity has been approved and supported by the Emilia-Romagna Region, and is taking place in collaboration with the University of Bologna. The Department of Medical and Surgical Sciences will oversee validation testing of the medical devices made by Lamborghini, prior to their delivery to the hospital.

Furthermore, Automobili Lamborghini is providing resources and equipment from its Research and Development Department for the co-engineering and production of breathing simulators, supporting Siare Engineering International Group, Italy’s top manufacturer of ventilators, during the health emergency caused by the spread of COVID-19.

The breathing simulator enables the tester to carry out an initial evaluation of the ventilator’s performance before reaching the final checking stage, when the ventilator undergoes a comprehensive test using certified equipment.

For the time being we consider ourselves very lucky that the impact on sales was not as bad as it could have been.

Fashion Tools for Negotiation: Persuade People with Colors

When preparing for a high stakes negotiation, you may be considering your research, your arguments, your leverage, your strategies and your tactics.  While all of those are critical to be pondering, there is another, perhaps less obvious but no less persuasive piece for which you should be planning with equal care.  In fact, there is quite an impressive body of research that proves that what you wear has a marked impact on your psyche, your poise and your presentation, as well as your impact on the other party.

The New York Times did a study on the nexus between the clothes we wear and their impact on our psyche.   They found that if a person wore a white coat they believed belonged to a doctor, then their attention increased sharply, but if they wore a white coat (same coat) they believed belonged to a painter, then there was no improvement.  Scientists have come up with a fancy schmancy name to go with this phenomenon – it’s called “enclothed cognition” – meaning that what you wear has an impact on how you think.

These findings are part of a larger area of psychology called embodied cognition, which stands for the proposition that we not only think with our brains, but our bodies participate in that process as well.   Our physical experiences, including the clothes we wear, influence our thoughts.

The flip side of how you feel in the clothes is how others will perceive you.   Studies have shown that women who dressed in more masculine attire had increased chances of being hired.  Furthermore, people who dressed more professionally were perceived as smarter than those who did not.

Color Me Powerful

Millions of dollars have been spent in industries across the board, from healthcare to fashion, and from financial planning to ecology, on what effect colors have on us humans.  The impact is psychological, conscious, subconscious, emotional and physiological.   In negotiations, colors make just as much of a difference.    Here are some common colors, what they mean and what impact they have on negotiations:

Red:   Red is often associated with intense emotions such as love, anger, passion, power and desire.   It also signals danger and can be associated with violence.  Fire engines and ambulances are red.  So is blood.  Even expressions using the word “red” are emotionally intense.  “In the red” means you are spending more money than you have. There are “red flags”, “red hot”, “beet red” and “blood red.”        Considering all of that, it may be fairly obvious that in negotiations, red is not a color to wear if your plan is to actually get to a resolution.   This is not a color of trust or safety.   It can definitely be a power color so if your only goal is to intimidate then red might be the color for you.  If your goal is to get the other person to resolve the issues, then it is not the optimum color.

Black:   Like red, black is a color of intensity.  While it can mean power, strength, authority and formality, it also connotes death, evil, and negativity.    Darth Vader wore all black.  Certain psychologists have said that wearing all black day after day can even affect your own mood and even can cause depression and mood swings.   While black can also mean sophistication and elegance, it is also associated with mourning, and can be even more sinister; gangs are often seen wearing all black.   There is also a gender difference with black.   So for negotiations, a man wearing all black might be perceived as sending a message of caution or to stay back, whereas with women, the message transmitted may be one of composure and poise.   It is still not the ideal color for negotiations however, for either (or any) gender.

Orange:   While orange is similar in hue to red, it is its own animal.   Orange has aspects of yellow, which is warmer and more inviting.  There is an energy to orange that causes a feeling a lightness, happiness and fun.   The sun is orange, and orange juice is considered a morning pick me up. People who wear orange are viewed as more sociable, more friendly and more approachable.  Orange is a safe color to wear in negotiations and does make a positive statement.

Green:   Green is one of the natural colors that appears on the planet and so is viewed positively.  It is often associated with healthy food, environmentally friendly products, conservation, as well as life, renewal, nature and energy.   Green is also the color of money, which often is a positive connotation for people, so they think of green as meaning abundance, growth, luck and even balance.  When people see others wearing the color of green, they feel a sense of calm, relaxation and soothing.     Green can also bring a sense of hope, health, compassion and harmony.    Thus, green is a good color for negotiation.   A couple of caveats however, olive green is associated with the army or illness, so that shade is not as desirable, and further, some psychologists say that too much green can even cause lethargy and placidity.  Overall, however, green is a positive color for negotiations, especially jade or emerald greens.

White:   In contrast to red or black, white means purity, innocence, light, cleanliness and goodness.   It is the color we often see God or angels wearing and the color of a lot of soaps.   We see doctors wearing white coats, as do brides, laboratory scientists and good guys.   It’s the color of snow and the color of the surrender flag.   White can also mean new beginnings, wholeness, cleansing and renewal.   Because of all of these meanings, when people are wearing white, the effect on the mind and body can be one of a feeling a clarity, and the encouragement of exorcising old negative thoughts and emotions, which will allow for positivity to flow.  Therefore, white is a positive color to wear during a negotiation.

Purple:   Purple is often associated with royalty, power, nobility, passion, fulfillment and luxury.   Maybe that’s why Prince liked purple so much.  Purple often occurs naturally as well, as some of the most beautiful flowers are purple; lilacs, lavender, orchids and violets.    These are some of the most beloved flowers and are considered to be precious, desirable and delicate.   Purple is also associated with spirituality and is used with depicting astrology, third eyes and auras.  Purple is a color of trust and therefore makes a great color for a negotiation.

Yellow:   Yellow is bright, airy and light.  Much like orange, but even without that intense red mixed in, yellow is friendship, love and safety.  It also means freshness, optimism, clarity and happiness. Remember the old round smiley face. What color was that again? Oh right. YELLOW!   It was also the color of ribbon used when people had loved ones at war, and they were praying and hoping for their safe return.  While all this sounds lovely, yellow is also the color that signifies being a coward, fearful or “yellow.”   It can be perceived as weak and so it’s a wonderful color for a Buddhist monk but not necessarily an optimum color for negotiating.

Blue:   You often see blue in ads for financial advisors and lawyers.  Doctors’ scrubs are also blue.  Think that’s an accident?  Yeah, NO!  Blue is a color of trust, hope and optimism.   It’s the most prevalent color on the planet and is the color of water, the element that makes up 60% of us.   Blue also connotes peace, trust, loyalty, stability, faith, the sky, confidence, heaven and intelligence. The color blue has positive effects on the mind and the body.  We often see news anchors wearing blue, and it is also the color that is most often worn in job interviews.   To be clear, when we are referencing blue here, it is usually a navy blue or a royal blue, not a neon or electric blue.  Those colors cause more agitation and can do more harm than good in a negotiation.   While blue can also mean depressed or sad, it mostly brings a positive response and thus, blue is the winner of the color war when choosing something to wear for your big day.

To summarize the above, the best color choices to wear for a successful negotiation would be blue, green or purple, followed by orange and white.   Probably best to avoid red, black or yellow in this instance.   Save those colors for when they will serve you best.   Figure how you feel and choose to wear a color that’s going to make you want to slay the day.

Classicism in New Contexts:
Larusmiani’s Adaptability in the Face of Covid-19

Ciao Guglielmo, thank you for taking the time to chat with me. I know you’re very busy so let’s jump right in. Tell me about the idea behind Larusmiani’s new campaign in California and what you’ve been doing on the west coast during the last few months.

The idea behind shooting in California, particularly in Palm Springs, revolves around how inspired we have been by the desert, its colors, and the beauty of the design and architecture in this area. Apart from shooting the Spring/Summer 2020 collection in Palm Springs this year, we have shot two other campaigns related to “Gentlemen Essentials”, which is a line of unique objects Larusmiani has been crafting by hand for several years. These products have been enriched in the last few years by the exceptional know-how of Aldo Lorenzi and the artisans at the former G. Lorenzi, who joined the Larusmiani team. Mr. Lorenzi, who did not have children to whom he could pass on his brand, passed it onto me and to Larusmiani, sharing his 60 years of experience and working with us to create products such as blades, gaming, smoking accessories, “art de la table”, grooming kits, and beauty and travel accessories.

I was also in California to attend “Fuori Concorso” on the road, which is a format around automotive culture. This year, we created a unique rally, which for the first time was color-coded with all white cars.

How has growing up as the third generation of the Larusmiani label shaped your personal style and vision for the brand?

I have been very fortunate to be surrounded by men that have had an incredible passion and an extraordinary amount of skill and knowledge of certain arts and crafts. The aesthetics that I have been brought up with through my parents have really provided for me the opportunity to enjoy continuing my grandfather’s legacy and to take it one step further by integrating other uniquely crafted gentlemen essentials. What is important with Larusmiani is that we maintain and exalt the traditions and the know-how of generations past, but we combine it with a very modern approach in terms of the aesthetics of our clothing collections. We want to create something that is fresh but at the same time reinforces the typical bespoke and traditional codes of elegance that makes a collection timeless. Larusmiani is not a fashion brand.

Which cities in North America do you think are ready to shop Larusmiani, either physically or online? And if you’ve looked into leasing any spaces in America are you now somewhat discouraged given the recent shift to a more “stay-home economy”? 

We are currently negotiating a location in Los Angeles. And sometime in the near future I think other cities such as New York and Miami could be potentially successful openings for us as well. The reason I am confident Larusmiani will thrive in the U.S. market is because we have been extremely successful in our sales at our St. Bart’s location in the boutique at Le Sereno resort. Given that 70 percent of the clients there are coming from the United States, I think this provides for us the drive to concentrate on expansion in the U.S. in the near future.

Moreover, the laws and bureaucracy in America seem to be less complicated than in Italy, which simplifies starting new retail ventures. I remember when I opened Larusmiani USA for our textile division, it was an easy process with respect to opening and operating it. Also, taxation in Italy is among the highest in the world so it can be a more favorable environment in other markets.

What do you think is the role of influencers and social media talent in brand promotion today, especially in the face of Covid-19’s effect on the fashion industry? Have you used them as a tool in the past, and if so, what has been your experience?

We believe social influencers are definitely platforms of communication that can be effective, but they are for sure much more effective on the low to medium level products. We do have influencers that without any financial exchange post about our brand at times, and we really appreciate that, but we do not invest in them as part of our strategy. However, we do like to work closely and maintain relationships with some of our clients, ranging from actors to designers and architects, and we love the natural connections we make with them and are happy to have these people promoting our brand naturally at times on their social media platforms. For example, Simon Kidston, the leading international dealer of the highest quality collector cars and speaker each year at the Concorso Eleganza at Villa d’Este, has been a natural ambassador of Larusmiani. These are the kind of long-term relationships we like to maintain.

Do you think the recent events concerning Coronavirus makes you want to halt global expansion of your brand and focus more on the Italian market, or does it encourage you to utilize marketing techniques to promote e-commerce abroad?

Although in the beginning stages of the virus, online business for non-essential goods was not booming at all, as people were focused on buying what is necessary, currently luxury e-commerce has picked up again and is doing quite well. I think people have a new appreciation for purchasing quality items that last. We are, of course, making our own assumptions with respect to every country, so that we can deploy our development strategy in each of the countries we have identified to be potentially interesting for us.

Lastly, I know you enjoy a nice getaway and love California for its easy vibe and peaceful nature. What has been your favorite social-distancing activity?

My favorite social-distancing activity would definitely be spending time at my friend’s ranch near Montecito, California. Nature and friendship are the two most important aspects of my days here.

COVID-19 and the Victoria’s Secret Buyout

Following the declaration of COVID-19 as a pandemic, governments around the globe have implemented travel, movement, and large-gathering bans, as well as restrictive interventions such as the closure of non-essential businesses.

The pandemic, both by virtue of the disease and of the unprecedented measures taken to contain its spread, has extraordinarily affected global business activity. The public health crisis has in parallel become an economic crisis. One of the prominent implications is companies’ inability to fulfill contractual obligations. Force Majeure and Material Adverse Change (MAC) clauses have now taken center stage and proven fundamental in protecting players from the consequences of contractual breaches resulting from the COVID-19 pandemic.

The Victoria’s Secret Case

Early in 2020 SP VS Buyer LP, a Delaware limited partnership (“Buyer”) and L Brands, Inc., a Delaware corporation (“L Brands”), entered into a purchase agreement (the “Transaction Agreement”) for the acquisition of a majority interest in Victoria’s Secret, a retail business owned by L Brands, for $525 million. The acquisition was expected to close in the second quarter of the year.

On April 22, 2020, Buyer filed a complaint in the Delaware Chancery Court seeking to terminate the Transaction Agreement. Buyer’s grounds for termination were L Brands’ alleged breach of its covenants under the Transaction Agreement, which caused its representations and warranties to become false.

What could have possibly gone so wrong? Starting in March 2020, L Brands closed virtually all of its stores globally, terminated most of its employees, reduced new merchandise receipts, and stopped paying rent for its United States stores during April 2020, all due to COVID-19 and related government measures. In the course of a month, L Brands shares went from over $23 to less than $10 a share. This was a dire scenario compared to the stock market all-time highs registered during the month in which L Brands and Buyer entered into the Transaction Agreement.

Buyer alleged that the measures taken by L Brands in response to COVID-19 violated the conditions precedent to closing contemplated in the Transaction Agreement.

The Transaction Agreement included a material adverse effect closing condition, defined as anything that would “prevent, materially delay or materially impede” L Brands’ performance of its obligations, as well as an ordinary course of business closing condition. However, the Transaction Agreement carved out pandemic-related material adverse effects on the financial condition of the Victoria’s Secret business, assets or results of operations. The relevant clause stated: “any state of facts, circumstance, condition, event, change, development, occurrence, result or effect to the extent directly or indirectly resulting from … pandemics.”

Despite the fact that the dispute was settled only a few weeks after the filing of the initial complaint, without payment of a termination fee by either party, the underlying controversy presents us with a dilemma worthy of further scrutiny.

Material Adverse Change Clause

Contract drafting is being reshaped by the ongoing pandemic. Particularly, parties to M&A transactions are now faced with the challenge of rethinking MAC clauses, representations and warranties, and closing covenants, in light of the uncertainty that surrounds COVID-19. One lesson to learn from SP VS Buyer LP v. L Brands, Inc., is which exclusions should be included in a MAC clause. Buyers will generally advocate for broadly-drafted MAC clauses, comprising not only changes to the business and the financial condition of the seller, but also circumstances that prevent seller’s performance under the agreement, notwithstanding their unforeseeability. Conversely, sellers will attempt to exclude diseases, epidemics, pandemics or similar terms, in addition to associated government action, from the scope of MAC.

MAC provisions are typically interpreted narrowly, and there is no “one size fits all” type of interpretation. That said, it is common that a MAC clause excludes circumstances of general applicability, such as an economic downturn that is not specific to the target. Therefore, one must conduct a fact-specific analysis when drafting the relevant language, and even more when considering to invoke a MAC clause. By the same token, the long term effect of COVID-19 on financial and operational aspects is not immediately apparent. Thus, depending on the specific facts and circumstances, a company may be more vulnerable to the effects of the pandemic than others in its industry.

Force Majeure Clause; Common Law Principles and Civil Law Lens

Force Majeure clauses are primarily risk-allocation provisions that address impediments to perform. They seek to excuse a party’s non-performance as long as the breach results from unforeseeable circumstances beyond the party’s control.

Although Civil law and common law jurisdictions share general principles of contract interpretation, such as good faith and respect for the parties’ intent, the supremacy of these principles vary throughout different jurisdictions.

Examples of available legal tools in the United States are the common law doctrines of frustration of purpose, impossibility, or impracticability, which may find their counterparts in the doctrines of caducité, res sic stantibus, force majeure or hardship in civil law jurisdictions. Notwithstanding notable differences among the foregoing, the unforeseeable change in circumstances is the salient prerequisite.

Despite the foregoing, the difficulty and uncertainty attached to proving the existence of a special circumstance that warrants judicial intervention in a contract, justifies that parties consider to include specific language with regard to their economic expectations and allocation of the associated risk.

Redefining Luxury Materials: Key Approaches to Salvatore Ferragamo’s International Success

Interview with Mrs. Stefania Ricci, Director of The Salvatore Ferragamo Museum in Florence, Italy by Grazyna Kolondra

Thank you for taking the time to share with us some of Mr. Ferragamo’s career aspirations and successes. I think it’s safe to say he is one of the world’s leading craftsmen of shoes. Was there a time Mr. Ferragamo needed to prove people wrong or to hone his own skills to reach his goals in producing luxury goods? 

Salvatore Ferragamo’s story is studded with episodes in which passion, commitment and dedication have beaten adversity and detractors. And not only in the sense strictly related to work, but also in personal life. I think we can say that his desire was not to be satisfied, but to always find a greater challenge to face. It was the key to his international success.

When working as an apprentice in his hometown, he decided to move to Naples, a city that could offer him more. When his shoe workshop in Bonito (his hometown) was well under way, he emigrated to the United States, attracted by new prospects of knowledge. Then when his activity in Santa Barbara, California was solid, he followed the film industry to Hollywood, against the opinion of his brothers, in search of new and richer possibilities. Finally, when he moved his business from America to Italy, he had a moment of crisis that ended up with bankruptcy, but in a few years he was able to rebuild his business on even more solid ground.

Salvatore Ferragamo had never been a man who let himself be overcome by adversity. Moments such as the ones mentioned above were a source of inspiration and a reason of improvement for him, and he always believed in his skills and intuitions. He had the same open mind when proposing innovative styles and models of footwear, which have made the history of international fashion: the wedge, the Invisible sandal, the Rainbow sandal, etc.

His inclination to experimentation led him to propose the traditional craft techniques, typical of Italy and Tuscany, in a new context. This is how some of his most interesting models were born, such as Tavarnelle lace shoes or crocheted and woven raffia uppers. He demonstrated how technique, creativity and perfect workmanship could create a unique and luxury product.

Salvatore’s attitude is the symbol of how curiosity and continuous interest in improving and experimenting are the basis for success.

I think it is amazing how Mr. Ferragamo was able to experiment with so many different methods of production and become an innovator and pioneer in the luxury world while maintaining his own unique style. Why do you think it is so important to create pieces of superior quality…ones that can withstand the test of time and be appreciated years later as artifacts?

Achieving the highest quality has always been Salvatore Ferragamo’s goal in his work. Since the time he was an apprentice, he always wanted to learn as much as possible from his teachers. He even decided to move to the USA because he had such a thirst for knowledge.

His experience in a factory was certainly a decisive moment for his training because he learned useful information, and he also experienced the negative sides of massive production.  Furthermore, he understood that he didn’t want to give his name to badly made shoes. The search for the highest quality product goes hand in hand with the study of the fit and anatomical shapes to ensure the comfort of the shoe. Aesthetic is important for sure, but comfort is essential. A quality shoe must respect the anatomy of the human foot. It must cure problems, not create them. The materials must also be of the highest quality, and Salvatore Ferragamo has shown us that this does not necessarily mean that they must be precious or expensive. Some of his most extraordinary inventions are related to this concept. Just think about the wedge. A model really loved in the history of footwear fashion was created in years of autarchy, in which quality materials became unavailable in Italy. Salvatore Ferragamo decided not to create his cambrione (shank) – the internal support to the arch of the foot, present in all heeled shoes – with a lower quality steel, because the shoes would have broken and the customers would have been disappointed. This was unacceptable for Mr. Ferragamo, so he found a solution to offer the best product with the best available materials, transforming the shape of the heel into a wedge and replacing the steel with the Sardinian cork.

I know Salvatore Ferragamo continued to improve his handcrafting techniques when taking courses in human anatomy at USC here in Los Angeles. It makes me wonder whether these courses influenced his designs and whether inspiration to designers comes in the most unconventional ways. Is innovation a necessity for luxury brands?

I believe that innovation is essential for the evolution of luxury brands. I also agree with the philosophy of the Salvatore Ferragamo Company, which is that innovation must exist in synergy with tradition, respecting and, indeed, enhancing the past. In this, Ferragamo finds a truly unique support in the heritage preserved in the Historical Archive, the heart of the company still today and a pulsing starting point for any future evolution. The study of balance and foot measurement was a fundamental aspect in Salvatore Ferragamo’s work, later supported by his passionate nephew Dr. Jerry Ferragamo.

The attention to the measurement of the foot led Salvatore Ferragamo to manufacture his revolutionary wooden lasts, which, by supporting the plantar arch, allow the foot to move like a reverse pendulum. This was just the starting point, leading him to conceive one of his most important patents – the shank – and to influence worldwide footwear production forever.

If I’m not mistaken, 350 of Salvatore Ferragamo’s innovative footwear designs are protected by several Intellectual Property (IP) rights. Could you mention a few of his designs that have IP protection?

The Salvatore Ferragamo Company owns the highest number of ornament and invention patents in the footwear sector. Some of the most famous patents, besides the previously mentioned shank and the wedge shoe, concern revolutionary shapes of heels, soles and uppers.

A very important example is the Invisible Sandal – the model which was presented on the occasion of the Neiman Marcus Award, won by Salvatore Ferragamo in 1947. It even carries a double invention: a nylon wire upper and a wedge heel shaped as the F of Ferragamo.

One of the most extraordinary inventions is the metal sole, which Ferragamo patented in 1956, when he had to respond to an incredible request: the creation of an 18-karat gold sandal, for an American customer. The sandal was made by Salvatore Ferragamo in collaboration with the Florentine goldsmiths of Ponte Vecchio, who took charge of creating the upper chains, the gold lining of the sole and the heel.

That same year, Ferragamo patented a new heel, the so-called “cage heel”, consisting in a metal structure, generally in brass. The threadlike cage could be empty inside, or filled with other material.

The Salvatore Ferragamo Museum offers virtual tour and, currently, it runs exhibition “Sustainable Thinking” at https://www.ferragamo.com/museo/en/usa/

Safety Gears in Olympic Skateboard: A New Billboard For Brands

For over 50 years skateboarding has been kept as an underground activity, an environment in which skateboarders love, influence and thrive. However, following the Olympic Games of Rio in 2016, skateboarding was selected as a new sport to debut in the Tokyo 2020 Olympic Games, later postponed to 2021 due to the COVID-19 pandemic. Amongst many modalities and practices, the rule of gender equality allowed the skate to join the biggest sports event in the world in only two modalities: street and park.

The skateboarders slept as pure “pièce de résistance” of the urban counterculture of our regular society and woke up as a new sport in the most important event in the world. Under new rules and a new environment for sports, brands centered on skateboard culture have a new opportunity to participate in the mainstream.

The underground lifestyle has always maintained a popular saying among skateboarders who enforced the idea of “keeping skate underground and keeping skate as a crime”. But sport status and, even more, Olympic status, took skateboarding to a new level, imposing on athletes rules and limits which ultimately divided the skateboard community. The question of whether skateboarding is a sport or a lifestyle will always confront the skaters’ ideas. However, the constant quest to jeer the rules have had some heavy consequences, as skateboarders are constantly evolving their spectacular tricks and increasing the difficulty and the likelihood of getting severely injured.

Recently the skateboard bodies of representation collectively noticed a significant increase of concussions and accidents during the official competitions. It would be dangerous and a significant risk for a newcomer debuting a sport for the first time in the Tokyo Olympic Games to begin with a huge accident, likely with a concussion, during an Olympic competition that is streamed to almost a hundred countries around the world. This was a high risk that organizers were not willing to accept. Furthermore, it would also leave a detrimental first impression for both the traditional audience and new watchers tuning in to see the “new sport”.

Consequently, this situation brought the necessity of an old special safety gear and enemy of those pure lifestyle skateboarders, the much questioned and debated gear: the helmet.

Using a helmet, the skateboarders can keep the same radical maneuvers and simultaneously show that safety gears would not leave a negative impact on the audience or deter the sport amongst children. After all the statistics and studies, the use of a helmet will be mandatory to all the competitors in the park competitions and to all the minors on both modalities (street and park).

Due to the decision requiring safety gears, the skater must also understand and abide by Rule 50 of the Olympic Charter. Rule 50 of the Olympic Charter provides rules for advertising, demonstrations, and propaganda on the “to practice” gears in the Olympic Games.

Team USA stated the purpose of Rule 50 is to “define rules for manufacturers’ identifications and other identifying features on sports uniforms and equipment” and to prevent unauthorized commercialization and conflicts with Official Sponsors.

With skateboarding as a new sport in the Tokyo Olympic Games, helmets, for example, are a new venture that sports brands can seek to pursue. Under the Authorized Identifications Games of the XXXII Olympiad Tokyo 2020 (the “Guidelines”), brands now have more flexibility while still not conflicting with Official Sponsors or being considered conspicuous. They can successfully release new professional headgear into the retail consumer market and have their equipment qualify as Authorized Identification, thus allowing athletes to supply their preferred equipment.

As a result of the delay in the Tokyo Olympic Games because of the COVID-19 pandemic, sports brands still have the opportunity to release new models of headgear (e.g. helmets) into the market and successfully meet the requirements for Rule 50 in time for the Tokyo Olympic Games. The rule expansion effectively can create a new brand of helmets for sporting goods companies. However, only sports brands can place their identifying features on the helmet.

The Guidelines define a sports brand as being in the business of manufacturing, providing, distributing, and selling sporting goods which are not used for non-sport products or confusingly similar to another line of business that is not related to sporting goods.

To qualify, sports brands need to release a pro model into the retail consumer market at least six (6) months in advance of the Tokyo Olympic Games. Previously under the Guidelines, only one “Identification of the Manufacturer” (i.e. display of name, designation, trademark, or logo) was allowed per equipment. The Identification over 6cm² for headgear was considered conspicuous. Now for the Tokyo Olympic Games, a sports brand can either place the Identification (i) once on one side of the helmet, with a maximum size of 10cm², or (ii) twice on both sides of the helmet, above the ears, with a maximum size of 5cm² each.

The Guidelines also state how to mathematically calculate the surface area depending on the shape of the feature. Additionally, sports brands can also consider the skateboards itself and its relevant components such as the deck, trucks, and wheels as new opportunities for professional athletes. However, it is also important to note that the helmet will be marked as conspicuous if the identification is not concerning the sport or is only featured for “conspicuous” exposure during the Tokyo Olympic Games. These regulations may affect some athletes that are endorsed by companies, not in the business of exclusive sports goods, who traditionally have the logo covering all surfaces of an athlete’s helmet.

The use of safety gears, importantly the helmet, allows skateboarders a new place to show endorsements and a new opportunity to renegotiate old contracts that never previewed the Olympic rules over the professional performances of them. Sports goods brands have a brand new “billboard” where they can be noticed and a chance to develop new products that will be in constant display by television cameras during the streaming of the Olympic Games. Traditional helmet companies will be joined by many new brands, who will likely become famous in the skateboarding industry for displaying their products on the best skaters in the world.

The companies that have continuously invested in skateboarders’ safety equipment will certainly be the new favorites of other sports and audience members, since the style of the equipment is more bold, modern, and urban, being an integral part of the skateboarders’ lifestyle for decades.

The skateboard has arrived in the Olympic environment bringing a new meaning to the motto “Citius, Altius, Fortius”, and the audience will have the opportunity to watch a sports competition with the best skaters in the world, wearing helmets.

Place your bets! This new billboard will be an amazing place to see the sport goods companies logos and a new market to be exploited in the sports endorsements and merchandising area.

Handbags with History. The Paradox of Time as an Indicator of True Luxury. Interview with Micaela Calabresi Marconi

Ciao Micky! Thank you for taking the time to chat with us today. It is admirable to see someone take over a heritage brand like Saddlers Union and re-launch and transform it into a modern, practical, and desirable label. Can you share with us how you were able to build on so many years of history while maintaining your unique image and story?

I grew up with Saddlers Union. My family used to be clients of the brand, and I grew up having in my mind the smell of calf in their unique shop on Via Condotti. It was a bit like the Madeleine for Proust in La Recherche du Temps Perdu. I felt like I had a responsibility to keep the DNA of the brand, its elegance. But I was conscious that although Saddlers is more of a lifestyle brand, not part of the fashion system, I had to consider entering the fashion world in a unique way to create something desirable to a modern version of the Saddlers customer. I had to wink to fashion without losing track of what Saddlers meant to me and to so many. I have tried to design items to be everlasting. You have to feel the tradition, the smell of calf, and appreciate the small imperfections that are part of luxury craftsmanship.

Our bags are produced to last a lifetime, not a season. Our logo is hidden; we don’t want to be loud. Levi’s blue jeans, a white tee shirt, a Burberry raincoat, Car Shoe loafers…these are the classic pieces my customer wears! This is my iconic target of elegance. I don’t want to lose my clear code.

It is often mistaken that those who attend law school lack artistic talents, but as someone who studied law, would you say your legal education perhaps facilitated your creative pursuits? What made you decide to change your plans to practice law?

I have studied law because it was a tradition in my family, and when I went to college I thought that I had only one choice. Then, obviously, I ended up following my passion, my instinct and my creativity. My legal education was and is a strength because it gives me the instruments to be a concrete and creative woman. It is definitely a plus!

I consider a legal education a strength because it gives you the knowledge to ask what you want. I grew up among lawyers. I lost my father when I was 11 years old, and my mother would take my younger brother and me to attend business meetings with her. I realized that contracts are everywhere in our lives: if you take a taxi, if you rent a car, etc. If you have a legal education you can have lawyers to help you to find instruments to go where you want. It is easier to understand. It is like speaking another language.

As an artist and businesswoman with many talents, from overseeing corporate governance to creative direction and marketing, do you think this kind of efficiency is necessary today as luxury fashion brands downsize their teams and go back to the roots at the heart of their company’s DNA?

In my opinion efficiency is fundamental. A good, creative idea has a great chance of being successful if it is considered from a perspective that accounts for production costs, customers’ demand, trends and all the technical business and marketing details. These aspects need to be prioritized just as much as a creative idea, maybe more.

I think that if a company has historic roots and DNA, it is necessary to take advantage of that and start creating new things from there, both in terms of business and marketing and the actual products. We have some examples of huge success in the last years like Bulgari, Gucci, Hermès and so on, where the settings of the collections, of the image have been based on the archives, on the old collections inspiring the new ones. It doesn’t have to be considered a lack of ideas. A good designer can adapt from the archives and interpret what customers need and desire.

You set to re-launch Saddlers Union in 2009, in the middle of the economic recession. You were able to build a strong presence and allure during a difficult time, partly because of the timeless nature of the brand’s pieces and its long but unforgotten history. Do you think the current economy presents the same opportunities for brands trying to expand today?

I believe that every crisis gives opportunity especially in countries like the USA where everything is faster in nature and where people are used to restarting. I believe that after Covid and from now on, fashion will change, just because people’s habits and priorities are changing. I think that fashion is obliged to become more intelligent and up- to-date to what we are going through. We will for sure have lots of opportunities. It is going to be exciting to reinvent new lifestyles.

Do you think the future of brand expansion in the United States, both for your brand and other luxury European labels, will include backing out of deals with department stores and selling products in other ways like individual pop-ups and online stores?

I have always believed the USA is and will be the stable market for European brands. For sure e-commerce will become stronger and stronger, but department stores will remain the windows to “experience” the items (touching them, trying them on). In a way, in these places people can keep the ritual for shopping, spending some of their time there, eating in the restaurants, going to hairdressers (for ex: Bergdorf’s). They will have to remain the cathedrals for certain rituals.

During a time when so many fashion and lifestyle influencers are trying to build on their popularity and recognition to create their own brands, what advice would you give them to optimize these efforts as someone who is both a well-connected socialite and a businesswoman?

Well I do not think there is a real rule. I believe 1) in good luck, 2) in a good star, and  3) in good taste. The third one, which is my obsession, is subjective and unfortunately impossible to teach. Success, as you can see, not always presupposes good taste.

Do you think influencers and other digital talent can run successful businesses simply because they have a large number of followers, or does it take more than that?

I believe that sometimes, having lots of followers is like being rich at Monopoly. It might be easier to launch a product or idea, but to make a business you cannot count only on the followers. It is an important piece of a complicated puzzle, but it takes far more than that.

What is it about handbags that you are passionate about and that drives you to innovate and inspire with the pieces you create for your clients?

I believe in elegance, in iconic and elegant women who give life to what they wear. They don’t need a brand to find their identity…the pieces simply complement their natural style and grace. I like to imagine my bags worn by them: Jackie Kennedy, Lauren Hutton, Silvana Mangano, Ines de la Fressange. By the way, Jackie Kennedy had a bucket bag and another bag in calf and canvas from Saddlers Union. My goal is to expand Saddlers’ presence more in the USA. 80% of our clients are from the States.

Will you be joining Valentino and Giancarlo on their boat in Greece this year, or are you putting off your travels until 2021?

I really hope to join them on the “TM Blue One” before the end of summer, hopefully in Capri. It has been a tradition for many years, and this year more than ever we Italians need to help our tourism in our beautiful islands!

Influencers: Are You Complying with The Federal Trade Commission Guidelines for Endorsements And Testimonials?

Apparently, during the Covid-19 pandemic, social media has become the only “social” type of gathering allowed lately and the only place where people can see and be seen. People who never thought they would promote services and products on social media are now active through partnerships with brands or promoting their own brands. Those people are known as “influencers”.

However, what the majority of those who consider themselves influencers do not realize is that what they are doing is advertising on social media. In the United States, the Government body who controls this type of advertising is The Federal Trade Commission (FTC). The FTC has Guidelines that should be followed by the influencers. Furthermore, the Guidelines should be complied with not only by Americans but also by foreign influencers if the products and services that they are sponsoring are sold and seen by US consumers.

Considering that, this paper will discuss about who are the influencers, the applicable federal laws and guidelines to them, the required disclosures that they should make when endorsing a brand or giving testimonials and what is next for them.

Who are influencers? It is not about how many followers one has on social media but rather the material connection one has with a brand

An Influencer is not someone who has many followers or has the verified checkmark on Instagram, Twitter or any other social media platform.  According to the Guidelines an influencer is someone who has a “material connection” with the brand[1]. This material connection can be (1) financial (e.g. the brand pays the influencer or gives him/her products or services for free or with a discount), (2) personal (e.g. the influencer is the designer of the brand, or has a financial interest in the company), (3) family (e.g. someone in the influencer’s family is the founder of the company, president, CEO etc.) or (4) employment (e.g. influencer works for the brand). Thus, if an influencer has any of those types of connections with the brand and is endorsing or giving a testimonial about the brand they should comply with the FTC Guidelines and make effective disclosures on social media about their relationship with the brand.

Applicable Federal Laws to Influencers

The FTC Guidelines for influencers are not a law but as its name indicates only Guidelines meaning conducts and procedures that should be followed.

However, the FTC has the power to conduct investigations and bring cases involving endorsements made on behalf of advertisers according to Section 5 of the FTC Act, which prohibits deceptive advertising. The law is mainly directed to the advertisers who are the ones to suffer the major financial consequences of an investigation and also who are sued. The influencer normally will receive a letter from FTC requiring that he or she make the appropriate disclosures according to the FTC Guidelines. If the influencer does not comply with the FTC requirements during an investigation the FTC could bring a lawsuit against the influencer for deceptive advertising.  Thus, even though the Guidelines themselves don’t have the force of law, any conduct inconsistent with it may result in law enforcement actions alleging violations of the FTC Rules. Considering that, it is important for the influencer to be aware of the FTC Guidelines and make the required effective disclosures. An investigation letter from the FTC is a legal procedure and also could damage the personal brand of the influencer. No influencer would like to associate his or her image with a deceptive advertising practice because this would hurt also his/her personal brand.

The Guidelines focus on avoiding unfair or deceptive advertising practices to mislead “a significant minority” of consumers. This is why the Guidelines require that the influencer make effective disclosures of his or her relationship with the brand and express an honest opinion because he or she is advertising in social media and influencing a consumer to purchase a product or a service.

Imagine, for example, that a fashion influencer is posting a picture wearing clothes gifted by Brand X and “tags” the brand but does not disclose that she is an ambassador or received the clothes for free. This will be considered a violation of the Guidelines because the consumer would be mistaken about the fact that the influencer has a specific taste for this merchandise when in reality this is not true because the influencer received clothes for free in order to endorse Brand X. Regarding this topic, the explanation on the FTC website makes clear that this kind of relationship must be disclosed.

For educational purposes we will change the FTC example to fashion as follows: “I have a YouTube channel that focuses on fashion, beauty, and lifestyle. Sometimes I do product reviews. Beauty brands know how much I love skin care products, so they send me such products as free gifts, hoping that I will review them. I am not under any obligation to talk about any product… and getting these products as gifts really doesn’t affect my judgment. Do I need to disclose when I’m talking about a product I got for free?”

Even if you don’t think it affects your evaluation of the product, what matters is whether knowing that you got the skin care product for free might affect how your audience views what you say about the product. It doesn’t matter that you aren’t required to review every skin care product you receive. Your viewers may assess your review differently if they knew you got the product for free, so we advise disclosing that fact.[2]

Required disclosures for influencers when endorsing a brand or giving testimonials

The Guidelines contain details about the type of disclosures that an influencer shall make when endorsing or giving a testimonial about a brand but the main disclosure that must be made is about the relationship between the influencer and the brand (financial, personal, family or employment). On the other hand, of course if someone is just telling people on social media about a product or service that he/she purchased and liked but has no relation with the brand no disclosure should be necessary.

Another important observation is that if the Influencer is posting from a foreign country he/she shall comply with the Guidelines if it is reasonably foreseeable that the post will affect U.S. consumers.

How to disclose

The disclosures must be made in a place that people can see right away and clearly understand the connection between influencer and the brand. It also should be in proximity with the relevant claim made by the Influencer. Here are some examples:

  • The disclosure must be made in the endorsement message itself and the consumer should not need to click “more” to be able to read it.
  • If the endorsement is in a picture superimpose the disclosure over the picture and make sure the viewers have enough time to notice and read it.
  • If the influencer endorsement is in a video the disclosure should be in the video and not in the video description.
  • If the disclosure is made on a live stream the disclosure should be repeated periodically in order for viewers who see only part of the stream will get the disclosure.

The disclosure should also be clear and conspicuous:

  • Using simple explanations like “Thank you, Brand X, for the free product”, “advertising”, “sponsored”, ad, #sponsored, paid promotion, Brand X paid for my trip, thanks Brand X for the trip.
  • For posts made abroad or in another language the disclosure should be made in the same language as the post.
  • When using a hyperlink make the link obvious to your target audience.
  • Only “tagging” a brand is not an enough disclosure, you must tell consumers about your relationship with the brand, such as Brand Ambassador, #BrandXambassador (the brand being Brand X).

What is next for influencers?

In 2017 the FTC sent over 90 letters to influencers and marketers advising them to clearly and conspicuously disclose their relationship with the brands when promoting or endorsing a product through social media. The letters were sent in response to a sample of Instagram posts analyzed by FTC which contained endorsements or referencing brands, and the consumer could not see if in fact the ads were sponsored. The letters informed the Influencers that when multiple tags, hashtags, or links are used, readers may just skip over them, especially when they appear at the end of a long post.  Some of the letters also addressed that some particular disclosures used by Influencers were not sufficiently clear because they were not pointing out that many consumers will not understand a disclosure such as the following: “#sp,” “Thanks [Brand X],” or “#partner” in an Instagram post to mean that the post is sponsored.

This year, in February 2020, the Commissioner Rohit Chopra from the FTC issued a statement about the need for a review of the endorsement guides and to establish new requirements for social media platforms and advertisements regarding civil penalties liabilities. The Commissioner also said that FTC’s main concern is the advertisers and not small influencers: When individual influencers are able to post about their interests to earn extra money on the side, this is not a cause for major concern. But when companies launder advertising by paying someone for a seemingly authentic endorsement or review, this is illegal payola. If these companies are also pressuring influencers to post in ways that disguise that their review or endorsement is paid advertising, those advertisers especially need to be held accountable. I am concerned that companies paying for undisclosed influencer endorsements and reviews are not held fully accountable for this illegal activity. I agree with my colleague, Commissioner Noah Joshua Phillips, who noted that “posting deceptive or inaccurate information online, or engaging in other deceptive conduct like selling fake followers, distorts the online marketplace, preventing consumers from making informed purchasing decisions and creating an uneven playing field for those that follow the rules.” When we do not hold lawbreaking companies accountable, this harms every honest business looking to compete fairly.  The Commissioner also concluded that the next steps for the endorsement guides were developing technology for the social media platforms to facilitate and either directly or indirectly profit from influencer marketing, codify the existing endorsements guide for advertisers into formal rules in which violators can be liable for civil penalties and establish requirements which specifies contractual arrangements that companies shall adopt when hiring influencers.

Conclusion

Whether you are an established influencer or you are planning on becoming one, it is important that you comply with the FTC Guidelines. Even though the Guidelines are not  binding themselves, they contain some principles of ethical advertising practices that anyone in social media should be following, especially about clear and conspicuous communication. This is an important strategy in social media communication because your personal brand is the most important and valuable asset you have. If you associate your personal brand with an advertiser who is being investigated or sued by the FTC for misleading advertising practices your personal brand will be damaged as well, and consumers will associate you with the unethical brand causing you to lose your credibility in social media.

Despite that, the Commissioner’s review proposal for endorsements guides was issued before Covid-19. After Covid-19, we saw a tremendous explosion of social media interaction and this only tends to grow since our interactions become mostly online. Considering that, there is a huge chance the FTC will increase its investigations among advertisers and influencers. If you are an influencer, you should take note and make sure you follow the guides strictly, even if your advertiser does not.

[1] https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-publishes-final-guides-governing-endorsements-testimonials/091005revisedendorsementguides.pdf

[2] https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking#ftcactapply

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