Background

The plaintiff in all three cases is an association whose aim is to prevent unfair competition. The defendants are three female influencers, who have well over four million followers in total on Instagram. They regularly mark their posts there with so-called "tap tags". These are markings within a posted picture that, when clicked, redirect users to the Instagram profiles of the retailers/manufacturers of the products featured in the picture. According to the association, posts with tap tags must be labelled as advertising. Otherwise, there would be unlawful surreptitious advertising, which is why the association took legal actions against the influencers.

In one of the three cases (Case No. I ZR 90/20 – Influencer I), the association prevailed with this argumentation. The Higher Regional Court of Braunschweig upheld the action in the lower instance, as the commercial character of the posts in question was not sufficiently clear from the mere context (Higher Regional Court Braunschweig, decision of 13 May 2020 - 2 U 78/19). In the other two cases, however, the courts ruled in favor of the influencers – albeit with different reasons.

In case I ZR 125/20 (Influencer II), the Hanseatic Higher Regional Court Hamburg decided that it was obvious to consumers from the circumstances of the posts that they contained advertisements. An anti-competitive act pursuant to Section 5a (6) of the German Act against Unfair Competition (UWG) was therefore not present (Hanseatic Higher Regional Court Hamburg, decision of 2 July 2020 - 15 U 142/19; see our earlier publication (German language) regarding that decision

In case I ZR 126/20 (Influencer III), the Higher Regional Court Munich even denied the existence of a commercial practice with regard to the Instagram-posts in question. In the opinion of the Munich court, the mere intention to acquire "paid partnerships", i.e. advertising contracts, through the unpaid posts did not lead to the existence of a commercial practice within the meaning of Section 2 (1) no. 1 of the Act against Unfair Competition. The general intention to attract advertising contracts through publications was not sufficient to assume an objective connection between the posts and the promotion of sales, as required by Sec. 2 (1) no. 1. Rather, the information about the products conveyed by tap tags, links and the like belonged to the "editorial part” of the defendant's posts. Additionally and irrespective of this, the Higher Regional Court Munich likewise stated that the commercial character of the posts had been sufficiently clear in itself anyway.

Decision of the German Federal Court of Justice

The German Federal Court of Justice rejected the appeal in all three cases. Thus, the influencer in the first case also lost before the FCJ, whereas the influencers were able to prevail again in the other two cases.

In its Influencer I decision, the FCJ first explicitly stated that influencers who market their own image also operated a business. However, a business act in favor of another company ("third-party advertising") was only present - apart from the case of the receipt of a consideration - if a contribution has an “advertising surplus” according to its overall impression, i.e. if it is excessively promotional. According to the FCJ, this is regularly the case with direct links to the manufacturer's website, for example; the fact that "tap tags" were used, on the other hand, was not sufficient on its own for an advertising surplus.

In the Influencer II and Influencer III cases, in which no consideration was paid in either case, the FCJ ruled that the publication of posts was suitable for increasing one's own awareness and advertising value and thus for promoting one's own business. The FCJ thus contradicted the opinion of the OLG Munich, which had denied the existence of a business act in this respect in the lower instance of the Influencer III case. However, the First Civil Senate of the FCJ did not consider there to be a violation of Section 5a (6) UWG due to the missing reference to "self-promotion". Rather, in both cases in which it had to deal with the labeling of "self-promotion", the FCJ took the view that the commercial purpose was already evident from the circumstances (the defendants had over 400,000 and over 1.7 million followers, respectively, and Instagram accounts verified by the "blue checkmark").

Regarding the "third-party advertising", the FCJ stated in both cases that a violation of Section 5a (6) UWG could not be considered, as this conduct of the defendants complied with the provisions of Section 6 (1) No. 1 TMG (Telemedia Act), Section 58 (1) Sentence 1 RStV (Interstate Broadcasting Treaty)  and Section 22 (1) Sentence 1 MStV (Media State Treaty). In the absence of consideration, there is neither commercial communication (TMG) nor advertising (RStV/MStV). According to the FCJ, these regulations were sector-specific special provisions which limit the scope of application of the general provision under unfair competition law of Section 5a (6) UWG. A violation of No. 11 of the Annex to Section 3 (3) UWG also did not exist due to the lack of financing of the contributions by third parties.

Conclusion

The field of influencer-marketing has developed into one of the core areas of the modern advertising industry. In recent years, however, influencers have increasingly had to fear being held liable for an alleged violation of their obligation to label posts as advertising. In this context, it is increasingly essential to balance consumer and competition protection interests on the one hand, and the right to freedom of expression, on the other.

The Federal Court of Justice has now resolved this tension by assuming - depending on the terminology of the respective norm - a commercial communication, advertisement or “commercial practice for the benefit of a third party`s business" if an actual consideration was provided for the post.  According to the FCJ, for the "commercial practices for the benefit of a third party`s business" within the meaning of Section 2 (1) No. 1 UWG, it can also be sufficient if the publication has an "advertising surplus" based on its overall impression which must be comprehensively assessed by the court of fact.

With regard to "self-advertising", the FCJ stated in the cases at hand that it was already apparent to consumers from the respective circumstances that the influencers intended to promote their own business by publishing the posts. Hence, no further labelling as “advertising” was required. However, this argument creates uncertainty for the future regarding the parameters that render the commercial character of a post “apparent from the circumstances”. For instance, the question comes up whether a certain minimum number of followers is required.

Nevertheless, the FCJ decision finally brings legal certainty for influencers and companies that use influencer marketing. However, the legislature has also taken action. The Act to Strengthen Consumer Protection in Competition and Trade Law, which will come into force in May 2022, provides for Section 5a (then) Paragraph 4 UWG that a commercial purpose does not exist in the case of an action in favor of another company if the person acting does not receive any consideration or allows himself to be promised any consideration.

It is thus encouraging that the FCJ’s statements are in principle consistent with the regulations in the Act to Strengthen Consumer Protection in Competition and Trade Law regarding influencer marketing and that more legal certainty has now actually been gained.

Authored by Yvonne Draheim and Sabrina Mittelstädt