Though event organizer, Billy McFarland, remains behind bars serving out his six-year prison sentence for fraud, the controversy surrounding his disastrous Fyre Festival remains ongoing. One of the most talked-about aspects of Fyre Festival was its influencer-driven marketing campaign, whereby festival producers paid well-known social media influencers, including some of the top models in the industry, to promote the event.
Unfortunately for these influencers and the agencies representing some of the musicians who signed on to perform at Fyre Festival, recent lawsuits indicate that they may be held accountable for their roles in promoting the fraudulent festival. Over the past two weeks, Gregory Messer, Fyre’s Chapter 7 Bankruptcy Trustee, filed a series of lawsuits seeking the return of payments made to these individuals.
Specifically, Messer named Kendall Jenner and Emily Ratajkowski, two of the most well-known models in the industry, in individual lawsuits in which he seeks the return of payments made to them for their social media posts regarding Fyre Festival. Messer seeks the return of $275,000 from Jenner and $300,000 from Ratajkowski. Additionally, Messer named talent agencies CAA, UTA, and ICM as defendants. These agencies represent many of the musical artists paid to perform at the festival, all of whom (understandably) never even made it to soundcheck. For instance, Messer seeks the return of a $500,000 payment to Blink-182 through its agency, CAA.
Generally with new festivals, promoters such as McFarland pay the fee related to the artists booked upfront and in full. Most artist agreements for these festivals, especially with more well-known acts, contain provisions that establish that payment will not be returned in the event of cancellation. In the present situation, Messer argues that the money McFarland paid to the agencies representing the artists booked was fraudulently obtained and, thus, the “unfair expense of Fyre Festival’s defrauded investors, creditors and ticket holders.” As such, Messer contends that this money should be returned. It appears that many of these agencies intend to handle the suit head-on, while Paradigm, the agency that represents Major Lazer, is taking a different approach by engaging in settlement discussions with Messer.
The bigger issue that these recent lawsuits bring up, however, is the lack of accountability for social media influencers who promote products without the proper (and legally-required) disclosures. The multi-billion dollar influencer marketing industry is relatively new and largely unregulated. The Federal Trade Commission, through the Federal Trade Commission Act, holds the authority to regulate social media influencers. Influencers must comport with the FTC’s endorsement guidelines, which require that a person paid by a company to promote a product on social media must clearly disclose this financial relationship, referred to as a “material connection,” in the post itself. Lack of disclosure of this material connection violates Section 5 of the Federal Trade Commission Act as a “deceptive practice.” Influencers’ posts about products or companies are almost always accompanied with disclosures such as #ad or #sponsored in order to comport with the FTC’s requirements.
The FTC generally only holds the companies that hired the influencers accountable for these Section 5 violations in the form of civil fines, despite the fact that it is the influencer who actually uploads the paid-for posts. Although the vast majority of influencers hired to post on social media for Fyre Festival never disclosed their material connection to the festival (significantly, Jenner herself), none of them have been fined or held accountable for these Section 5 violations. Instead, the FTC issued warning letters to influencers and companies in violation of the disclosure requirement.
The FTC’s lack of enforcement sends the wrong message to social media influencers. As brands’ marketing and advertising strategies now inevitably incorporate the use of social media, it is of vital importance that consumers are aware that influencers are being paid to promote these brands and their products.
Though the legal merits of Messer’s claims against influencers Jenner and Ratajkowski remain to be seen, it is time that the FTC enforces its own rules about sponsored content. The enforcement of the FTC’s requirements regarding clear disclosure of sponsored content is especially important in relation to macro-influencers such as Jenner. Celebrities with this type of clout have followers who take their recommendations at face value. Additionally, with such a large following, the number of consumers that these macro-influencers reach is astounding. Consumers need to know about material connections between brands and influencers in order to be better informed about the legitimacy of the products endorsed. Without such disclosure, it is easy for companies to take advantage of consumers.
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