Traditional advertising tactics often included the “marriage” of big brands and household names, as famous faces were commonly leveraged to support brand growth via traditional advertising mediums like TV commercials or newspaper print ads. Today, companies continue to seek and leverage influential celebrities and athletes across a much broader set of media platforms and often in more organic ways. If your company wants to establish an endorsement relationship with a famous athlete, celebrity or social media influencer to elevate your product or brand, then a key step in that process is putting an endorsement agreement in place that protects and benefits your organization.
What is an endorsement agreement?
An endorsement agreement is a contract governing the relationship between an endorser – celebrity, athlete, influencer or other famous person – and an endorsee – company or brand – permitting the endorsee to utilize the endorser’s name, likeness, reputation, voice, images, video and/or social media content to promote a product, brand, or service.
As a starting point, it is important to know that the FTC has established Guides Concerning the Use of Endorsements and Testimonials in Advertising to help ensure that endorsement content is accurate and that consumers are not being misled. If your company is pursuing an endorsement agreement, here are a few key takeaways from these guidelines, updated in 2023, that may impact an agreement with a celebrity, influencer or athlete:
- Ensure that the endorsement relationship between the parties is “clear and conspicuous,” perhaps beyond your typical disclosures (e.g., paid social media posts often disclose the endorsement relationship by including the hashtags #ad or #sponsored). These disclosures are important to ensure that consumers understand that a paid endorsement relationship exists between the parties so that they may properly evaluate how much weight they give to the endorsement. For example, suppose you are researching computer brands for a potential new purchase and come across a glowing review of a particular brand from a well-known celebrity technology influencer. In that case, you might evaluate the review differently if you knew that the celebrity was a paid endorser of the particular brand.
- Recognize the potential liability that advertisers, endorsers, and intermediaries like advertising agencies face for misleading consumers and/or violating applicable.
- Any claims the endorser makes about your products or brand should be factually accurate and verifiable.
- Exercise special concerns with child-directed advertising for minor celebrities or youth athletes.
Due diligence before engaging in an endorsement agreement
Before engaging in an endorsement agreement, it’s wise for a company to conduct due diligence and help ensure your endorser is a good “fit” for your brand.
Be sure to:
- Weed out the competition – dig into your endorser’s past and help ensure they are not affiliated with a significant competing company or brand in your market; also, understand any other endorsements out of market that may appear conflicting.
- Look for skeletons – do a thorough background check, preferably with the endorser’s permission (signed consent); review all public content like personal website, social accounts, etc.; remember, this person is representing your brand and if there are indiscretions to be found, either you find them first or expect the internet to offer this up in a potentially damaging manner later.
- Manage intellectual property – determine if the celebrity, influencer, or athlete owns any IP RIGHTS, including but not limited to the trademark of stage name, catchphrase, symbol, or artistic works, that you want to leverage in your agreement, as well as any of your company’s IP that might need to be accessed by the endorser; lastly, consider if your endorsement agreement will create new IP (e.g., videos, posts or other content) and how ownership will be attributed.
If your due diligence is satisfactory, then you have the green light to move forward with an agreement! If not, it may be wise to consider another endorser or marketing approach altogether. As the adage goes, “An ounce of prevention is worth a pound of cure.” It’s best to carefully consider what an endorsement can do for your brand and be cautious about the risks now and down the road in case of a dispute or endorser misstep.
Things to include in an endorsement agreement with a celebrity or athlete
Even if your company has engaged in endorsements previously, it’s essential to approach each celebrity or athlete uniquely, considering your goals and expectations with what the endorser is willing to provide.
Consider the following:
- Deliverables – are you looking for your endorser to shoot a commercial, attend an annual shareholders’ meeting or exclusive promotional event, or perhaps make several posts, videos and/or mentions on SOCIAL MEDIA? In addition to clearly defining deliverables and timeline terms (when deliverable must be completed and for how long you have access to utilize them) in your agreement, ensure you have access to metrics that can be used to track and measure the endorsement’s impact.
- Compensation – once you determine the deliverables, you need to determine how the endorser is compensated; this could be a flat fee, per ”post,” equity stake, royalties or a combination of these things; additionally, you can build in “guaranteed minimums” and incentivize performance with bonuses for results above or beyond a certain threshold.
- Clauses – Other things to consider: what happens if the celebrity gets arrested, the athlete gets injured and/or the endorser otherwise engages in conduct that might negatively impact your brand or product’s reputation (morality clause)? If circumstances change and the endorsement is less valuable, you want to ensure your company has some level of recourse (such as an indemnification clause) and/or the ability to terminate the agreement; additionally, confidentiality clauses protect your company’s IP and market research.
As you construct your agreement, be cognizant of other regulating bodies, such as state laws, child labor laws when working with minors, or any industry jurisdictions, such as the NCAA rules about name, image, and likeness (NIL) for athletes.
Legal support for your endorsement agreement
Working with an experienced contract or corporate attorney to build a custom endorsement agreement, especially in niche industries like food and beverage (which face a high number of frivolous lawsuits as it is), will help ensure your company is further poised for success with your endorsement.
Despite all the best market research in the world, it may be wise to consider investing in some level of brand protection insurance to further insulate your company in the case a celebrity or athlete causes damage to your reputation, resulting in financial loss.
Let our Corporate, Business & Banking team provide counsel on the risks and rewards of endorsement agreements and support your next endeavor.
