Federal Court of Justice: Landmark rulings on influencer marketing

For some years now, there has been a debate as to whether Instagram posts should be labelled as advertising and if so, how. There are numerous, sometimes very divergent, court decisions on this issue. The Federal Ministry of Justice has also responded by incorporating into its amendment of the Act against Unfair Competition (Gesetzes gegen den unlauteren Wettbewerb) certain regulations intended to clarify the legal situation. However, the new Act will not come into force until May 2022.

Now, for the first time, Germany’s Federal Court of Justice (Bundesgerichtshof) has commented on influencer marketing and handed down three judgments of fundamental importance to whether posts on Instagram have to be labelled as advertising.

In all proceedings, the action was brought by the Association of Socially Responsible Competition (Verband Sozialer Wettbewerb). In each case, the defendants are female influencers with a large number of followers on Instagram who regularly post photos to their accounts. Two of the three cases considered Instagram posts for which the influencers had not received any consideration from the relevant suppliers of the products shown. In the third case the influencer had been paid for her post. In all three sets of proceedings, the claimant accused the defendants of surreptitious advertising and filed claims for injunctive relief and reimbursement of costs.

(Paid) advertising with “tap tags” subject to labelling requirements

Proceedings no. I ZR 90/20 against the fitness influencer Luisa-Maxime Huss concerned the publication of a post about a new raspberry jam. In addition to statements about when and where the jam would be available, the influencer used a tap tag. Tap tags appear on Instagram when the image is tapped and the company or brand of the manufacturer/provider of the tagged product is shown. If a user taps the tag, they are redirected to the Instagram profile of the producer/provider. The influencer was paid for the cooperation, but the post was not labelled as advertising.

The Federal Court of Justice has now decided that this post should have been labelled as advertising. According to the Court, the post breaches section 5a(6) of the Act against Unfair Competition because the commercial purpose of the post to promote sales of that manufacturer’s products is not sufficiently highlighted and is not apparent from the circumstances. The Court stated that it is irrelevant whether the consumer recognises that the defendant is acting on behalf of her own company by publishing posts on her Instagram profile. Consumers must be aware of the actual purpose of a post to promote an external company. Failure to make clear the commercial purpose of such a post with tap tags and links is generally liable, the Court said, to induce the consumer to make a commercial decision, i.e. click on the link leading to the manufacturer’s Instagram profile, which they would not otherwise have done.

Posts without consideration promoting another company do not require labelling

However, in the other two sets of proceedings (case nos. I ZR 125/20 and I ZR 126/20) against the influencers Cathy Hummels and Leonie Hanne, the Federal Court of Justice ruled in favour of the two influencers. The Court found that due to lack of consideration by a third party, the contested posts did not contain any commercial content or advertising within the meaning of the provisions of the German Telemedia Act and that there was therefore no labelling obligation under that Act. According to the Court, however, the provisions of the Act are special area-specific provisions which limit the scope of the general provision laid down in section 5a(6) of the Act against Unfair Competition.

The Federal Court of Justice goes on to state in its press release that influencers who sell goods, offer services or market their own image via social media such as Instagram, are running a business. The publication of those influencers’ posts on social media is likely to boost their visibility and advertising value and thus promote their own business. In addition, however, a commercial act for the benefit of another company could also be considered. Publishing a post is such an act, except when an influencer receives consideration for it – but only if the overall impression of the post is that of overt advertising, for example because it simply praises the company’s product features without any objectivity in such a way that the description goes beyond factually relevant information. The mere fact that product photos have tap tags is not sufficient to assume that such advertising content is present. On the other hand, if there is a link to a website of the manufacturer of the product depicted, that is normally deemed to be advertising content.

Conclusion

The decisions by the Federal Court of Justice are landmark decisions and are likely to still apply under the amended Act against Unfair Competition which will enter into force in the coming year.

A decisive factor for the Federal Court of Justice is whether influencers receive consideration for their posts or not. If they do not, and therefore the labelling obligations of the Telemedia Act do not apply, any conflicting assessment under the Act against Unfair Competition is no longer relevant. The Federal Court of Justice considers that the provisions of the Telemedia Act, which demand consideration, are conclusive special provisions. As far as a possible contradiction in the assessment compared to the Act against Unfair Competition still seems to exist at this point, this contradiction will be resolved when the amendment comes into force, because the new provision will also be based on the issue of consideration.

Another interesting point which cannot yet be answered definitively, at least not until the grounds for the judgment are published, remains the tap tags. The Federal Court of Justice apparently differentiates between placing a tap tag (in which case no advertising purpose exists) and adding a link (in which case advertising generally exists). This differentiation is confusing at first glance, because tap tags on Instagram necessarily include a link to an Instagram profile. It is not possible to include non-clickable names or brands by placing tap tags on Instagram. It therefore remains to be seen what the Federal Court of Justice means by linking – maybe it means adding a direct link (which is not possible via tap tags) to the website of a manufacturer/provider. But such a link cannot be embedded in the text accompanying a post, either. If at all, it could be done in the influencer’s bio, i.e. the brief introduction to a profile, which is essentially their Instagram business card. However, linking to a third-party company there is neither appropriate nor common practice. Thus, until the reasons for the decision are published, it remains unclear whether the rulings by the Federal Court of Justice actually suggest that tap tags do not lead to a labelling obligation, as is currently often stated by (legal) commentaries.