Date: Thursday, August 1st, 2024 by Michaela Hickson.
A French law aimed at combatting abuses by influencers on social media and regulating their commercial nfl uence creates liability insurance obligation.
French law n°2023-451 of June 9, 2023, the “Influencer Act”, was adopted to regulate commercial influence and combat misconduct by influencers on social networks, aiming to protect French consumers faced with an increase in unfair commercial practices and scams.
The act applies where the targeted audience is located within French territory, regardless of the domicile of the influencer.
The key points of the act include the definition of an “influencer”, which can be translated as: “Natural or legal persons who use their reputation (notoriété) among their audience to communicate content to the public by electronic means with a view to promoting, directly or indirectly, goods, services or any cause whatsoever [and] carries out the activity of commercial influence by electronic means”.
This is a broad definition and introduces some ambiguity as to the meaning of the French term “notoriété” (translated here as “reputation”), which was reportedly accepted after much lively discussion by the legislators and was left intentionally vague.
Prohibited activities
The main purpose of the act is to prohibit a number of advertising communications involving health-related products and services, including medicines, cosmetic surgery, health claims for food, alcoholic drinks and tobacco and vaping products as well as other nicotine-based products. The act also prohibits the advertisingof certain financial services, such as those related to digital assets, subject to certain specified conditions, as well as sports advice/predictions and gambling (unless the platform can technically exclude underage users).
The act also provides influencers are held responsible for their drop-shipping practices for products sold to consumers, even if a supplier is in charge of delivery. In particular, they must ensure the availability and compliance of the product with French and EU rules and provide the supplier’s identity and other information on them.
The act introduces a principle of joint and several liability between the influencer, their agent and the advertiser. Under this provision, all such parties may be held jointly liable in the event of damage caused to third parties in the performance of the commercial influence contract binding them. The victim may therefore claim full damages from any of the responsible parties.
The act requires a written contract between the influencer and their agent or the advertiser. This contract must include the designation of the applicable law, the nature of the diligences, the remuneration and modalities of the payment and the respective rights and obligations of the parties, particularly in terms of intellectual property rights. When the target audience is established in France, the contract concluded between an influencer and their agent or advertiser must be subject to French law. However, this requirement will not apply to influencers whose remuneration or in-kind benefits for their activities fall under a specific threshold, to be determined by a subsequent decree which has not yet been published (Article 8 II).
Liability insurance requirement
The act also creates a new insurance obligation for influencers whose activity is targeted, even incidentally, towards the public situated in France, to take out a policy with an EU-based insurer to cover the financial consequences of the influencer’s professional civil liability. This obligation applies exclusively to influencers established outside the European Economic Area (EEA) or Switzerland.
According to the legislation history, this measure is intended to ensure influencers, even located outside the EEA, have adequate coverage for any damage they could cause to French consumers. Although it is difficult to estimate the number of commercial influencers based abroad, many of them reside outside the EU, notably in the United Arab Emirates, often for tax purposes. The obligation to take out insurance with an EU-based insurer will therefore facilitate enforcement of court decisions through a direct action against the insurer, where such direct actions are allowed, such as in France.
To maximise consumer protection, this insurance obligation accompanies the introduction of a requirement for influencers established outside of the EEA or Switzerland to appoint a legal representative within the EU, who will be responsible for guaranteeing compliance of their commercial influence contracts with French law and who will also be the contact point for any requests from the competent administrative or judicial authorities. Such an appointment does not constitute an establishment in the EU.
However, the act does not provide for specific sanctions for the failure to take out such insurance.
The question remains whether the obligation to take out insurance applies to any influencer regardless of the number of followers they may have. The terms of this obligation are to be specified by a decree issued by the Conseil d’État, which has not yet been published.
Among the other key requirements, influencers must explicitly disclose the commercial or advertising nature of their content or posts using terms like “advertising” or “commercial partnership”. This disclosure must be prominently displayed by a clear, legible and identifiable statement and remain visible throughout the duration of the promotion. Likewise, any post that was edited to modify the general appearance of a person must include a “edited image” mention; or if it was generated through artificial intelligence, it must include a “virtual image” disclaimer. Failure to comply with these requirements are subject to sanctions of fines and, ultimately, prison sentences.
Compatibility questions
There are ongoing discussions on the compatibility of the Influencer Act with EU single market rules.
The European Commission sent a letter to the French government in August 2023, pointing out certain provisions of the Influencer Act contravene EU single market rules, including the Digital Services Act. For this reason, the commission asked the French government to amend the Influencer Act or to request an exemption, which should be justified and notified to the other member states.
At the time of writing, discussions are still under way between the French authorities and the commission regarding the compatibility issue, although some commentators have opined France will ultimately beseeking an exemption.
The French authorities will ensure the effective implementation of this act and must, within two years of the promulgation of the act, submit an evaluation report containing, in particular, information on the application of the act.
With this Influencer Act, France is the first EU country to implement a thorough framework regulating commercial influence. However, its effectiveness will depend on its next rewrite, its rigorous implementation and ongoing adaptation to developments in the digital marketing sector and European regulations.
Robert Byrd is a partner and Valérie Kubwimana is an associate at Byrd & Associates, a member of Global Insurance LawConnect.
This article first appeared in Insurance Day, published on 31 July 2024.
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