Legal Ramifications of Celebrity Endorsements
First let's clarify one thing that is important to understand, unless you think you look good in stripes. This industry is quiet, especially product placement, and there are numerous examples where we think the public is being mislead as to the relationship between the celebrity and the company paying them to endorse their products.
It is very difficult to police and the FTC is stretched thin as it is, but as we know in this great country of ours, ignorance of the law is not an excuse.
This page from the FTC has some great basic information about the legal framework we are working with but the real nitty gritty is contained here, and we highly suggest you read it an make sure your attorney does as well.
In this PDF from the FTC website there are numerous examples of how to do it right, and how to NOT do it right, and end up in jail.
This section is definitely NOT LEGAL ADVICE as we are not attorneys.
Regardless, we highly recommend that you read what the FTC has to say about this. The above links are written in plain english and contain numerous examples as to how it works and what the government is expecting from YOU in terms of how you present the relationship, the celebrity, and the product. Lets go over a few key points with regards to these above documents that are important:
The key points are:
1) "Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser. Furthermore, an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser"
In other words, if you wouldn't say it, you can't have the celebrity say it for you.
2) "An advertiser may use an endorsement of an expert or celebrity only so long as it has good reason to believe that the endorser continues to subscribe to the views presented"
There are ways to satisfy this requirement, but its important to understand that while you may "have a deal" it does not mean that you own that celebrity's likeness to use as you see fit until the end of time. Likewise, if things change in your company or you fail to represent your product or service ethically and truthfully, you can get both yourself AND the celebrity in hot water. 90% of these deals work out just fine, but like any legal contract, there are obligations for both parties, and either party not doing their part not only makes the endorsement ineffective for marketing purposes, but can also backfire on both the celebrity and the company.
3) "When the advertisement represents that the endorser uses the endorsed product, the endorser must have been a bona fide user of it at the time the endorsement was given. Additionally, the advertiser may continue to run the advertisement only so long as it has good reason to believe that the endorser remains a bona fide user of the product."
In other words, If your celebrity says they are a user of the product, they have to actually BE a user of your product. Note that it doesn't say the celebrity has to pay for it, they just have to actually be a user of the product or service.
4) "Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable for statements made in the course of their endorsements"
This last one is a big one. This means that the celebrity is not "off the hook" if you make untrue claims about your product or service. They are lending their name and their credibility to you, but the way things are presented are important as it is not just the celebrity's reputation that is on the line, but possible legal ramifications for you as well. As you can see, there are risks for both parties here.
These quotes from the FTC website are not here to scare you unduly, but it is important to realize that if you intend to enter into an agreement with a celebrity, they may be risking more than you realize because in this social media light-speed world we live in now, bad news travels extremely fast, and reputations can and have been ruined overnight. Celebrities losing their endorsements are front page news.
In spite of the risks, why do so many of these deals happen, and why is the industry booming? Many of these deals work out just fine for both the celebrity and the brand, and many relationships are decades long. Why? because if all parties do their jobs, the credibility and authority of the celebrity rubs off on your company, which makes it much easier to sell, your claims much more believable, and in general everything goes better. To find out more about which celebrity may be right for your company, please fill out the form below.
What types of things should be put into a celebrity endorsement contract?
We would love to provide a template here of all the clauses you should have, but since we aren't attorneys it wouldn't be a smart idea for us, seeing as we don't look good in stripes.
This is not legal advice, but here are some general guidelines:
The contract should specify the brand, the products, and the term (length of time) that the endorsement is to take place.
The contract should have the things that the celebrity is allowing you to do, i.e. use their name and likeness in promotions, press releases, commercials, website, ads, infomercials, wherever you intend to use it. Do not take liberties with your written agreement!
The contract should also include any disclaimers that may have to accompany any promotions, press releases or ads, to protect both you and the celebrity.
The contract should state what duties the celebrity is expected to perform as well as what duties the company or individual is expected to perform.
Any costs and fees borne by either party.
The contract should spell out any expenses to be paid as a result of an appearance, photo shoot, video shoot, narration, in terms of time, hours worked, and travel expenses.
Exclusivity for your niche. At least this should be thought about, since you don't want the celebrity endorsing both you and your competitor.
Ability for the celebrity to review any advertising creatives or press releases and whether you have to get prior approval or not.
Right to terminate the agreement based upon certain conditions such as bad behavior by the celebrity, or the company, or breach of agreement, or if your company goes bankrupt. Your attorney can hopefully provide a good list of potential "outs" that usually arise from circumstances beyond your control.
Licensing names, trademarks, symbols, logos, emblems, service marks and whether or not that is part of the deal.
Representations and Warranties
Indemnity clause of who is liable if something goes wrong.
Insurance coverage, and the amount required. ( usually paid by the company hiring the celebrity )
Relationship of parties- Very important to specify that the celebrity is not a partner in the business if they are not, and exactly what the relationship is, whether it is contractor, partner, equity partner, etc.
Assignment of contract- Can you, or the celebrity assign the duties or sell the contract to others?
Place or jurisdiction that the contract is valid in
There are a number of other factors that are part of almost any other business contract, and the rules are different depending on which country, state, district, etc. you are in, which is why a good local attorney is valuable. Some of these contract terms are not limited to authority to contract, severability, waiver or no waiver, merger modifications, choice of law, interpretation, representations, attorneys fees, beneficiaries, recitals, witnesses. This is not an exhaustive list, which is why you do need a good attorney for this.