ADventures in Law

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Most of us know that the Federal Trade Commission (FTC) <a href="https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-publishes-final-guides-governing-endorsements-testimonials/091005revisedendorsementguides.pdf">Guides Concerning the Use of Endorsement and Testimonials in Advertising</a> (the Guides) were updated in June 2023. While the Guides aren’t law, you ignore them at your peril. The Guides are a snapshot of what influencer marketing activities the FTC could flag as unfair or deceptive in violation of Section 5 of the FTC Act. And the FTC has definitely not been hiding off grid; it knows that advances in AI can increase risk in the endorsement and testimonial space. To help address the rise of AI-generated influencers, the updated definition of “endorser” includes those who “<em>appear[s] to be&nbsp;</em>an individual, group, or institution.” When we last wrote about the rise of hyper-realistic virtual influencers in <a href="https://www.bakerlaw.com/insights/updated-ftc-endorsement-guides-hold-virtual-influencers-to-actual-standards/">August 2023</a>, we cautioned brands to “approach the trend with clear eyes and a plan to both mitigate legal risk and protect brand integrity.”

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Am I allowed to quote my own article? I’ll take the liberty this once. After several months, we now have some brand integrity lessons learned to share with the advertising law community.

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To kick off the new year, Formula E racing Team Mahindra introduced “Ava” to the world via Instagram at @avabeyondreality, described as “Sustainable Tech Queen &amp; Racing Rebel Robot.” Ava’s bio declared Mahindra’s goal to be “fueling inclusion through AI innovation.” I give points to the Indian-owned company for being up front about the nonhuman status of its new ambassador. Fans and new viewers understood that Ava was the product of GenAI. While the Guides don’t address specifically how to disclose that a virtual endorser is not human, being up front is the way to go to avoid consumer confusion. We advertising lawyers know that confused consumers are angry consumers.

Here, despite race fans knowing Ava was a virtual ambassador, they were confused as to <em>why</em>. Fan <a href="https://www.deccanherald.com/business/mahindraroasted-in-social-media-after-launching-ai-generated-female-influencer-2843113">reaction</a> was overwhelmingly negative. For context, <a href="https://www.fiaformulae.com/en">Formula E</a> has very few women drivers and none in the starting grid. There are of course plenty of women in the sport – on and off the track – who would be open to an ambassador relationship. Fans expressed confusion about why Mahindra didn’t hire an actual female racing pro to serve in this important role.

Ava was also positioned as a “Sustainable Tech Queen.” Keen fans and even a journalist spotted this, noting that GenAI is a huge energy drain. Therefore, a GenAI ambassador touting sustainability <a href="https://us.motorsport.com/formula-e/news/mahindra-kills-off-ai-influencer-after-social-media-backlash/10564693/">felt off</a>. While Ava’s introduction appears to have been carefully vetted from a strict legal perspective, the brand faced significant blowback. Ava’s account was disabled days after launch. RIP.

Ava is not the only virtual influencer under scrutiny in 2024. Barcelona ad agency The Clueless created a popular, pink-haired influencer named Aitana Lopez – a “Virtual Soul.” This popular AI model is a “gamer at heart and a fitness lover” with 274K followers and 75 posts so far at @fit_aitana. Brands have reportedly paid $1K per post. There’s been <a href="https://arstechnica.com/ai/2023/12/ai-created-virtual-influencers-are-stealing-business-from-humans/">backlash</a> over the idea that brands engaging virtual influencers like Ava and Aitana are taking work away from authentic humans.

Despite brand risks, virtual influencers are here to stay. They will only grow in popularity due to their versatility, reach and relative low cost as an advertising tactic. As part of their remit to find the right influencer mix for brands within budget, agencies will present options across the human and virtual spectrums. To reduce both reputational and legal risk, brands and agencies should partner closely and plan as a team – vetting contenders based on recent lessons. As a reminder, agencies and brands really are in this together. The 2023 version of the Guides reiterated that all entities in the marketing supply chain – advertisers, intermediaries (like agencies), and endorsers – are liable for unfair or deceptive statements and for failing to disclose a material connection between the endorser and the advertiser. Everyone has skin (pun intended) in the virtual and real influencer game.

Practice Tips for Engaging Virtual Influencers

Brands and their agencies can pre-plan and pre-approve all content in advance, taking comfort in the fact that the virtual influencer account will likely deploy required disclosures in the agreed format because there’s no human “wild card” element. So, the lesson learned from these recent Ava and Aitana headlines is not to avoid virtual influencers. It’s to engage and launch promotions thoughtfully in terms of both legal compliance and brand integrity to avoid misfires and backlash.

Here are some ad law practice tips to protect your brand when considering a virtual endorser relationship:

Do a chemistry test: Is a virtual endorser right for your brand in this moment?

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Do a background check: Check to see if the public has reacted negatively to similar campaigns in your product field or with this influencer specifically.

Consider a beta: Just as with any new endeavor, it may be wise to start with a smaller campaign and see how it’s received with your target audience.

Avoid certain product claims: Remember that a virtual endorser making claims about product experiences that are uniquely human (e.g., the benefits of a skin cream or vitamins) will draw scrutiny. The FTC still expects honesty and accuracy, even in the virtual world.

Check for compliance: In addition to clear requirements in your contract, check to see how the influencer account has approached disclosures of the material connection to past advertisers – just as you would with a human influencer account.

Monitor: Even though you’ve pre-agreed on content and disclosures, monitor posts, disclosures, and the comments carefully. Have an escalation plan and procedures in place if you need to change course.

Require prompt takedown plans: Things go viral quickly, good and bad. Ensure the humans at the keyboard who control the virtual endorser account are accessible and contractually required to follow immediate takedown requests in case you need to pull the plug.

Virtual Influencers 2.0: Real Lessons Learned in 2024