Celebrity endorsement deals offer brand owners lots of upside — and potential downside
Because of the staggering levels of fascination we place on celebrity culture, brand positioning that results from being associated with a public figure can be massive. From social media influencing to advertisements to use of names and likenesses, brand owners understand the value of an endorsement to its current and potential customers. And getting into the same room as a public figure can provide a brand with a deserved sense of credibility, as well.
Accordingly, it can be easy for a brand to let the enthusiasm and fear of missing out distract from the very real protections that might be needed should some element of the relationship go awry.
As a lawyer to consumer brands, I have worked on my share of celebrity and athlete endorsement deals, and have witnessed all kinds of unexpected issues arise, including celebrities not showing up for agreed and scheduled events, athletes getting traded in the middle of a deal, athletes getting injured in the course of a season, celebrities utterly refusing to participate in any kind of social media promotion, public figures engaging in questionable conduct that put the brand in an awkward position going forward with the association and brand owners making unauthorized uses of the name and image of a public figure.
This means that strong endorsement agreements are important, for all sides, but as brand owners often have the most to lose and can be the more vulnerable of the parties involved, this statement holds truer for them. A well-drafted endorsement agreement should address some of the following terms:
Duration of the agreement – an endorsement cannot go on indefinitely, but a brand owner wants to ensure it gets some minimum bang for its very pricey buck
Payment terms – of course, compensation will be agreed to, but the terms of payment are equally important. Does the celebrity get paid in full on signing, or are payments staggered over time to ensure ongoing compliance by the celebrity with his or her contractual obligations?
Responsibilities of the celebrity – must the celebrity appear at a minimum number of events? How much active promotion by the celebrity in interviews or on social media channels is expected? Or does the agreement contemplate a licence to the celebrity’s name and likeness only?
Exceptions to the celebrity’s responsibilities – under what conditions can the celebrity be excused from performing his or her contractual obligations, for example if a scheduled event coincides with a playoff game or filming schedule that could not have been previously anticipated?
Events that trigger a termination of the endorsement – can the brand owner terminate the agreement and cease paying if an athlete is injured or traded? What if the athlete tests positive for taking a banned substance? What if a celebrity engages in conduct that reflects unfavourably on the brand?
I was reminded of that last item while reading a recent decision by Ontario’s Court of Appeal that determined a professional hockey player signed to an endorsement agreement had not breached that agreement when nude photos of him taken by an ex-girlfriend were published online. The brand invoked what is referred to as a morals clause to terminate the endorsement deal on the basis that this constituted an act that shocked, insulted or offended the community, or had the effect of ridiculing public morals and decency.
The Court of Appeal found that the brand owner had wrongfully terminated the agreement and that no morals clause had been breached by the athlete since the online posting was not committed by him, the transmission of pictures to the ex-girlfriend took place before the endorsement agreement was signed and, importantly, the publication of nude photographs (while of general interest to the public) did not amount to the level of shock, insult or offence the morals clause contemplated.
The takeaway for brand owners is that the excitement of a potential celebrity endorsement should be tempered with clear thought about each of the parties’ respective obligations, and what specific kind of conduct for a specific kind of audience would be appropriate to end that relationship.
Chad Finkelstein is a franchise lawyer and registered trademark agent at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto.
Twitter.com/@ChadFinkelstein