Influencer Marketing

In this digital age, a new kind of advertising that feeds on social influence via social media has emerged. Marketers now use bloggers and other social media “celebrities,” effectively called influencers, to advocate and advertise their products. Coined as influencer marketing, companies are using these influencers to increase market awareness amongst target markets.

But are these hired influencers FTC Compliant? At the heart of the Federal Trade Commission’s Endorsement Guides lies their truth-in-advertising principle. Truth in advertising is important in all media whether old or new. It is law that influencers must disclose their relationship with the companies or brands they are endorsing clearly and conspicuously. This means that the disclosure should appear at the beginning of the post or, with visual content, sometimes directly on the picture itself. Honesty and transparency by influencers is key, as today’s consumers are savvy and will easily spot deception. They will gladly consume content, even sponsored content, as long as it is useful and truthful.

As long as the influencer is acting on behalf of an advertiser, what they say is usually going to be considered commercial speech, and commercial speech violates the FTC Act if it is deceptive. The FTC does conduct investigations and will bring cases involving deceptive advertising under Section 5 of the FTC Act. 15 U.S.C. §45. While the FTC is not generally monitoring bloggers, concerns may be brought to the attention of the FTC, who will then evaluate them case by case. Their focus will usually be on the advertisers or their ad agencies and public relations firms, though influencers are not exempt from any legal action.

This is not to say that the FTC holds online endorsers to a higher standard than paper-and-ink publications. The issue is that the audience must understand the relationship between the reviewer and the company. On paper, where a reader will generally know it is your job to provide personal opinion on behalf of the brand, personal blogs or social media pages may not provide such a clear understanding of that relationship. This is when a disclosure is necessary and particularly important. To be clear, a blogger only needs a disclosure if they are paid or otherwise reimbursed for their endorsement.

Marketers must be especially careful if they choose to utilize this developing field of influencer marketing. The first and most important question to ask is, “how can I ensure my influencers will be FTC compliant?”

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Implied Warranty of Habitability

A condominium association claims that various parties involved in the design, construction, and sale of a condominium complex breached the implied warranty of habitability by incorporating latent defects into the units via the design, material, and construction.

The theory of implied warranty of habitability initially arose because the application of the common law principles of caveat emptor and merger meant that a new home buyer had little or no recourse against a builder that constructed a defective residence. Caveat emptor prevented a new home buyer from suing the builder if he failed to discover any defects before taking possession. However, the doctrine of caveat emptor is based on the expectation that the buyer and seller possess comparable skill and experience and could use their own judgments to come to a conclusion. The implication of a warranty of habitability came as a judicial response to the fact that in the twentieth century, new home buyers and sellers were no longer in an equal bargaining position. As the ordinary home buyer no longer had the skill or training to make a meaningful inspection and discover latent defects, caveat emptor fell out of favor.

In this case, the record demonstrates that each Condominium Purchase Agreement disclaimed implied warranties on behalf of the developer-seller and its agents. Though the condominium association argues that the language in the purchase agreement was not called to the buyers’ attention or worded properly, a seller is not required to specifically point out a disclaimer in a written contract or use a particular method to bring it to the buyer’s attention. A disclaimer is deemed legally effective if it (1) is a conspicuous part of the agreement, (2) refers to the warranty by name, and (3) discloses the consequences of its inclusion. The court rules that the included provision meets the criteria of an effective disclaimer.

Generally speaking, only builders or builder-sellers warrant the habitability of their construction work. Engineers and design professionals – such as the defendant architectural firm in this case – provide a service and do not warrant the accuracy of their plans and specifications. Breach of implied warranty of habitability claims against design professionals have consistently been rejected in Illinois and most other jurisdictions. This court holds that the designer’s role did not subject it to a claim for breach of the warranty of habitability of the builder’s work. The developer-seller is also dismissed from these proceedings due to the effective waiver.

The court then must consider whether the wording of the Agreement encompasses the other defendants. The contract defines the seller, but does not define officers, agents, or other representatives. An agent is commonly understood to be a person “who is authorized to act for or in the place of another.” The allegations that the contractors provided development services and held themselves out as knowledgeable developers and contractors do not allege that the contractors were authorized to act on behalf of the developer-seller. Therefore, they do not fall under the scope of “agents” and were improperly dismissed at the trial level. The case is affirmed in part, reversed in part, and remanded for further proceedings.
Board of Managers of Park Point at Wheeling Condominium Association. v. Park Point at Wheeling, LLC, 2015 IL App (1st) 123452 (December 31, 2015).