The Credibility of influencer marketing and mandatory labelling.The legal situation in Germany and its influence on acceptance and consumer behaviour

Table of Contents

Titelpage

Acknowledgements

Abstract

Table of Contents

List of Tables

List of Figures

List of Abbreviations

List of Appendices

1 Introduction and Research Purpose
1.1 Problem Statement
1.2 Aims and Objectives
1.3 Research Questions
1.4 Chapter Outline
1.5 Limitations

2 Review of Current Thinking
2.1 Insights into the Review of Current Thinking
2.2 Literature Review Methodology
2.3 Thematic Classification within Marketing
2.3.1 Definition of Influencer
2.3.2 Definition of Influencer Marketing
2.3.3 Influencer Marketing and Companies
2.3.4 The Theory of Influencer Marketing
2.3.5 Classification and Delineation of Influencer Marketing
2.3.6 The Psychology of Following
2.3.7 Critiques and Consequences of Influencer Marketing
2.4 (Media-) legal framework
2.4.1 General Classification
2.4.2 Principle of Separation
2.4.3 Law Against the Unfair Competition (UWG)
2.4.4 Infringing Acts/Individual Standards
2.4.5 Legal Consequences
2.4.6 European Directives
2.5 Summary of Literature Findings

3 Research Design and Methodology
3.1 Research Methodology Theory
3.1.1 Research Philosophy
3.1.2 Research Approach
3.1.3 Research Strategy
3.1.4 Research Choices
3.1.5 Time Horizon
3.1.6 Summary
3.2 Data Collection and Analysis
3.2.1 Data Collection Techniques and Procedure
3.2.2 Evaluation of Current Jurisdictions
3.2.3 Development of Interview Guideline
3.2.4 Development of Survey/Questionnaire
3.3 Ethical Considerations

4 Results
4.1 Archival Research Results
4.1.1 Key arguments of Current Court Decisions
4.1.2 Evaluation of Current Jurisdictions
4.2 Interviews
4.3 Survey

5 Discussion and Evaluation
5.1 Archival Research
5.2 Interviews
5.3 Survey
5.4 Answers to Research Questions
5.5 (Tentative) Hypotheses
5.6 Reliability/Validity/Generalization

6 Conclusion, Limitations and Suggestions
6.1 Conclusion
6.2 Limitations of the Research
6.3 Suggestions for Future Research Projects

7 Bibliography

8 Appendices

Acknowledgements

'It always seems impossible until it's done' (Nelson Mandela)

The dissertation would not have been possible without the involvement and support of many individuals:

First and foremost, my supervisor Dr. Dieter Thumm - thank you very much for supporting me in the last months; you were incredibly patient, sympathetic and committed and I am grateful for that. I am sure that I would not have come to the end of this work without you.

My family and friends, especially, Mum and Dad, thank you for your support, understanding and continuous words of encouragement during the last years and to help pull me through.

My supervisor at work, Dr. Ulrich Reese, for always believing in me and allowing to pursue my studies in parallel to my professional duties. Thank you very much for your understanding and kindness.

Finally, I would also like to thank the ' Akademie für Unternehmensmanagement' and Buckinghamshire New University for all their academic support and anyone else taking part in this thesis and was not named above.

Abstract

Following the wave of warning letters and court proceedings regarding surreptitious advertising, the increasing popularity of influencer marketing also reveals the legal dimension of this topic. The lack of legal certainty in this area results from trade association activities, such as the Association for Social Competition ('VSW') which systematically sue many influencers and collaborating companies for disguising the promotional nature of paid contributions on social platforms such as Instagram.

Against this background, this dissertation examines in further detail the controversial scope of labelling and disclosure obligations for influencers in social media such as Instagram and considers the associated issue of 'credibility of influencer-marketing' and potential effects on consumer-behaviour. This assessment is further supported by empirical data collected which is carried out with qualitative and quantitative research methods in order to establish (tentative) hypotheses based on research phenomena and consumer-behaviour pattern.

The archival research includes a description and evaluation of current court decisions, followed by a case study with expert interviews. In addition to that, the results of a survey will be reported and discussed in order to reflect the situation from the influencers and customers point of view. To assess the question whether there is an interplay between the legal aspects (labelling and disclosure requirements) on the one hand and the effects of influencer-marketing on consumer-behaviour on the other hand, an inductive approach was chosen. The archival research has shown that the courts so far tend to interpret the obligation of influencers to label and disclose a potential promotional character of the content and presentations rather broadly. In most cases, limited guidance has been provided in a negative way, i.e. how presentations of influencer post may not be marked or labelled. In the absence of a clear leading decision by the Federal Supreme Court (BGH), the legal situation remains somewhat unclear. However, as a general rule, it is broadly accepted that if commercial and promotional interests are pursued, influencers must clearly label their content and presentations as advertising. To this end, the use of the notion 'advertisement/anzeige' is deemed sufficient as a distinguishing mark. Any disclosure information must be clearly clear and unambiguous, so it can be easily understood by an average user of the respective platform. Against this background, advertising notices should always be placed immediately at the beginning of a post but not within a simple 'hashtag cloud', so that it is perceived before reading the post. However, such labelling or disclosure may not be required if influencers did not receive a compensation for the respective presentation and if the respective product was not provided for free but self-purchased by the influencers themselves.

The empirical data collected by the case study suggest that there is a consensus amongst interviewees and participants that general labelling and disclosure obligations make sense from a legal perspective. There seem to be no clear indication that consumers would react negatively to such labelling or disclosure. More importantly, the level of credibility seems to be driven by choices of influencers regarding the company, brand or the products influencers present or advertise. In this respect, even though the samples collected may not be completely representative in a statistical sense, they show nevertheless a good and consistent pattern of responses. Overall, the collected data allow to formulate two (tentative) hypotheses.

Hypothesis 1: The lack of clear legal guidance by the legislator on labelling and disclosure requirements for influencers and companies have created an area of considerable legal uncertainty. This has in practice caused influencers to use labelling/disclosure marks in a rather inflationary way in order to prevent warning letter and legal proceedings from the outset.

Hypothesis 2: There seems to be no clear and robust evidence that mandatory labelling/disclosure of promotional character of posts would have a significant negative influence on the credibility of influencers and behaviour or acceptance by consumers.

In summary, mandatory labelling and disclosure requirements do not seem to 'ruin' the credibility of influencer-marketing and do not take a major influence on consumer acceptance and -behaviour. Acceptance and market behaviour rather seem to be driven by other factors, including the character of the products and the company involved and the personal fit with the profile of the respective influencers.

The research-project is limited to the consideration of influencer-marketing and compliance with legal obligations in Germany.

Keywords: Blogger; Costumer; Credibility; Influencer; Influencer-Marketing; Marketing-Mix; Instagram; Labelling Requirements; Legal Grey Zones; Marketing; Opinion Leader; Surreptitious Advertising; Unfair Competition Law

List of Tables

Table 1 Overview of the interview experts (own presentation)

Table 2 Age and gender of the participants

Table 3 Frequency of usage of social media networks (b)

Table 4 Characteristics of influencers

Table 5 Credibility of influencers

Table 6 Exploration of new brands through influencers

Table 7 Statements regarding advertising brands and influencers (a)

Table 8 Statements regarding advertising brands and influencers (b)

Table 9 Impact of credibility

List of Figures

Figure 1 Structure of the thesis (own presentation)

Figure 2 Literature review methodology process (own presentation)

Figure 3 Marketing mix (own presentation)

Figure 4 The two-step flow of communication (own presentation)

Figure 5 Differentiation and demarcation of influencer marketing (own presentation)

Figure 6 Cathy Hummels' Post 7th July 2018

Figure 7 Research onion by Saunders et al.

Figure 8 Research process (own presentation)

Figure 9 Comparison of four research philosophies (own presentation)

Figure 10 Inductive and deductive research approach

Figure 11 Research methods (own presentation)

Figure 12 Research methodology process overview (own presentation)

Figure 13 Lena Gercke for intimissimi

Figure 14 Blogpost by Lieblingsstil

Figure 15 Questions/answers of the interviews (a)

Figure 16 Questions/answers of the interviews (b)

Figure 17 Usage of social media networks

Figure 18 Frequency of usage of social media networks (a)

Figure 19 Topics of interest for participants

Figure 20 Credibility of influencers

Figure 21 Statements regarding advertising brands and influencers

Figure 22 Buying behaviour of consumers regarding recommendations of influencers

Figure 23 Important characteristics of collaborations between influencers and companies

Figure 24 Opinions regarding collaborations

Figure 25 Identification of labelling contributions

Figure 26 Impact of credibility

Figure 27 Labelling of collaborations

Figure 28 Relation between age and gender (b)

Figure 29 Frequency social media networks gendered

Figure 30 Identification of labelling gendered

Figure 31 Opinion regarding clearly labelled posts gendered

Figure 32 Influence of labelling gender related

Figure 33 Influence of labelling age related

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Appendices

Appendix 1: Update Case Cathy Hummels

Appendix 2: Interview Questions (GER)

Appendix 3: Interview Questions (ENG)

Appendix 4: Consent of Respondents

Appendix 5: Coding Table (Interviews)

Appendix 6: Questionnaire Questions (GER)

Appendix 7: Questionnaire Questions (ENG)

Appendix 8: Research Ethic Checklist

Appendix 9: Evaluation of Questionnaire

1 Introduction and Research Purpose

The first part of this master's thesis is considered to give a short introduction into the business context and the respective research gap followed by the aims, objectives and the research questions.

1.1 Problem Statement

Smartphones have evolved over the last years from simple communication devices into a digital all-rounder. According to a ‘Global Mobile Consumer survey’ by Deloitte (2018), German consumers between the ages of 18 and 24 use their smartphone 56 times a day. Remarkably the focus does not longer seem to exclusively concentrate on telephone communication but on using social media platforms.

Scrolling, liking and sharing – these are now the basics of the smartphone generation and social media platforms gain more relevance than ever before. Almost all citizens in Germany under the age of 40 use social media platforms, YouTube (96%), Facebook (59%) and Instagram (73%) are the most popular platforms according to a current study by PricewaterhouseCoopers (PwC) (2018) called ‘Between Entertainers and Advertisers: How to influence our buying behaviour'. Bullwinkel (2018) draws the attention to the point that these platforms are accessed on a daily basis by many people searching for news, connecting to friends, relatives and even screening advertising content on products and the respective companies. From this perspective, classic advertising measures are becoming increasingly meaningless (FH Mainz - University of Applied Sciences, 2010). In order to transport the image of their own brand and products to the desired target group, more and more companies are looking for new individual ways (Laoutoumai & Dahmen, 2017).

A study by PricewaterhouseCoopers (2018) indicates that one out of three people has already become aware of a product especially in the areas of food, travel and fashion through social networks. Against this background, influencer-marketing (Ney, 2019) is currently one of the big trends in digital marketing (communication and marketing purposes) strategies of companies (Lehmann, 2017), in which individual users called ‘influencers' share their experiences and opinions with subscribers (followers) also in terms of products and brands (Henning-Bodewig, 2017), primarily for entertainment and inspiration purposes but also as guidance (PricewaterhouseCoopers, 2018).

The study by PwC (2018) also reveals that more than one out of four followers claims to trust contributions from influencer depending on age. Overall, 28% of the followers trust the product information provided by influencers. In order to build up that confidence, influencers first must have a large and extensive product knowledge (39%) and an authentic, credible appearance (37%). If these conditions are met, followers are inspired by influencers, trust their suggestions and are convinced by the product presentation. Taking everything together, this can ultimately lead to product purchases by followers (Brecht, 2018).

These findings are confirmed by a new consumer survey by the Bundesverband Digitale Wirtschaft (BVDW) e.V. about influencers. According to the survey, one out of five Germans purchased products because they were advertised by influencers. Regarding young adults, the parameter is almost one in two whereas 1.051 respondents (22%) feel annoyed by influencers doing advertisement for companies. After all, 40% consumers confirmed that it would not disturb digital communication, if content is marked as advertisement (Bundesverband Digitale Wirtschaft (BVDW) e.V., 2019).

Against this background and in times of advertising avoidance strategies and adblockers, Henning Bodewig (2017) draws attention to the fact that influencer-marketing makes it possible to directly address the relevant target group via a person of trust. In a sense, a product recommendation by influencers is perceived similar to a private recommendation and thus has the greatest potential impact on consumer-behaviour. Mallick and Weller (2018) complement that the scattering losses of advertising is therefore minimal in comparison to other advertising formats.

On the other hand, the lack of credibility of influencers, the 'purchase' of fake followers and the inadequate labellingof paid contributions are current hot topics for discussion. A recent study by digital association Bitkom (2018) underlines the significance of this problem: apparently, 48% of German social media users can hardly distinguish between advertising and content on social media platforms. According to the study, while the acceptance of advertising in social networks is increasing, 78% of the users surveyed are seeing an increase in the proportion of advertising posts.

However, according to Schonhofen-&-Detmering (2018) the seemingly 'legal-free space ' in which influencers have published promotional contributions for businesses in the past without any disclosure or labelling, seems to be over. Legal dimensions of the issue are currently taking on new forms and are driving the public discussion and image. Several influencers in Germany were warned or even sued for alleged 'sneaking’s postings' in social media like Instagram by the 'Association of Social Competition' (Verband-Sozialer-Wettbewerb-‘VSW’). These proceedings are mainly based on the allegation that posts have been paid for and should have been labelled as advertising (WELT, 2019; Müller, 2018). Therefore, Brecht (2018) and Gondorf (2018) point out that the majority of influencers has changed to markingeverythingas advertising using hashtags such as #ad, #sponsored or #advertisement in order to characterise the promotional nature of their posts with products named -regardless whether it is a paid product placement or a self-acquired product. This makes it even more difficult for followers to recognise whether the postings of influencers are truly personal or paid opinion. Thus, such 'inflationary' labelling raises the question whether it can also lead to the loss of trust and acceptance and change of consumers. Ultimately, associations like the VSW benefit from the unclear legal situation by initiating court cases on the following questions: How must advertising be featured on Instagram? What is allowed, what is not? All these questions are still open due to missing guiding judgements. In part, there are also different views by the courts (WELT, 2019).

1.2 Aims and Objectives

This dissertation's overall aim is to assess the current legal situation in relation to influencer-marketing in Germany, evaluate current jurisdiction and to critically analyse the effects of mandatory-labelling on theacceptance and consumer-behaviour by collecting empirical data in order to establish (tentative) hypotheses based on explored phenomena.

The objectives of this project are:

- To assess the increasing importance of influencer-marketing.
- To analyse the legal situation of influencer-marketing in Germany.
- To explore the best way to meet the labelling requirements in Germany.
- To identify practical issues (grey/unregulated areas, obvious weak points).
- To identify consumer-behaviour in relation to mandatory labelling.
- To explore how influencers, deal with the situation.
- To develop recommendations for influencers and companies how to deal with labelling requirements under competitive laws and on the effects of labelling requirements on consumers.

1.3 Research Questions

The following research question can be formulated on the basis of the objectives of this research-project:

RQ1: Legal Questions

RQ 1.1.: What are the main practical issues around the competitive law in relation to influencer-marketing?

RQ 1.2.: Where are grey areas in this context?

RQ 2:Marketing Questions

RQ 2.1.: How do influencers deal with the situation?

RQ 2.2.: How do influencers mark blog posts and interact with consumers?

RQ 3: Consumer Questions

RQ 3.1.: How does the follower react to the labelling obligations of the influencers?

RQ 3.2.: Does this negatively affect them?

RQ 3.3.: How does the consumer identify if the posts contain paid product placement or the real opinion of the influencer?

1.4 Chapter Outline

The Chevron Chart below will show the structure of the thesis.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1 Structure of the thesis (own presentation)

1.5 Limitations

The research-project is limited to the view on influencer-marketing and adhered legal obligations in Germany.

2 Review of Current Thinking

The second part of this thesis is considered to explain the theoretical and conceptional foundation of three topics:

1. Influencer-marketing as part of the whole marketing segment;
2. Consumer-behaviour to understand the psychology of the follower;
3. Unfair competition law which is relevant for all marketing topics.

This will lead to the third (empirical) part of this thesis, to find out if the labelling requirements of influencer-marketing have in fact an influence on the acceptance and consumer-behaviour.

2.1 Insights into the Review of Current Thinking

The first step is to bring influencers and influencer-marketing in the marketing-theory-context with definition, theory, classification, delimitation, characteristics. The second step is to describe the psychology of following which will lead to a deeper understanding of consumer-behaviour in relation to influencer-marketing. The third step is to give an overview of the regulations to be adhered to, the legal problems and requirements surrounding influencer-marketing in Germany as it finds its legal consideration in according to the field of unfair competition and -media law.

2.2 Literature Review Methodology

The literature-review-methodology can be classified according to the following 3 phases (figure 2):

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Figure 2 Literature review methodology process (own presentation)

2.3 Thematic Classification within Marketing

Bruhn (2016, p. 13 ff.) and Meffert et al. (2019, p. 6 ff.) mention that the basic idea of marketing is the consistent orientation of the entire company to the needs of the market. To achieve the communication and marketing goals, Aufleger (2018) draws the attention to the fact that, marketing strategies have to be created and then implemented operationally using the right marketing tools as part of the Marketing Mix which are based on the concept of the 4 P’s of Marketing by E. Jerome McCarthy (1960). The elements of the proposed marketing mix are according to Meffert (2019) P roduct, P lace, P romotion and P rice (figure 3 ).

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Figure 3 Marketing mix - own presentation according to Meffert (2019)

Based on the more diverse possibilities offered by the Internet and less confidence in traditional advertising, Kabani (2013) as well as Nirsch & Steinberg (2019) indicated that consumers prefer to follow recommendations from family-&-friends or experts. In this respect, collaborations of respective companies with persons who have a high reputation and reach in digital channels has become a new field of corporate communication according to Schach-&-Lommartzsch (2018, p. 27 ff.) as well as Husain (2016). Due to the direct communication with the consumer and buying appeal in principle, influencer-marketing is therefore used as a communication tool within the traditional marketing mix in the 4th category ‘ Promotion ’. Dexter (2017) completes this argument with the thought that another reason is the shift of information procurement away from offline channels to social media which also changed communication and simplified access to relevant audiences with marketing instruments through influential opinion leaders and multipliers.

2.3.1 Definition of Influencer

According to Deges (2018, p. 16 ff.) and an influencer is a naturalperson who writes a blog and/or has an account in social networks with information on a specific topic (e.g. fashion, travel, food), shares pictures/interests and is mostly followed by unknown persons, named as followers/subscribers, who like what the influencer does (Gruber & Robillard, 2019).

2.3.2 Definition of Influencer Marketing

Brown & Hayes (2008) and Meffert, et al. (2019, p. 739) explain that the targeted use of influencer in order to achieve marketing and corporate goals, making them relevant to all industries with the aim of increasing the value and credibility, is referred to as influencer-marketing. As the definitions of the above two sources are identical this definition is also used in this project.

2.3.3 Influencer Marketing and Companies

Schach & Lommartzsch (2018, p. 19 f.), Grabs, et al. (2018, p. 127 ff.) and De Veirman, et al. (2017) identify that influencers are also interesting for companies as digital opinion leader due to the reach and celebrity status. In this respect they can influence other people or potential buyers and complement traditional brand communication. In summary, influencer-marketing is about 'money' for 'content' (Firsching & Bersch, 2016) and therefore a marketing strategy to capitalise on the influence and reach of key influencers and incorporate them into corporate communications transmitting the message of a company. Based on the trust of the respective target group of the influencers, influencer-marketing is therefore used for product launches, brand awareness, or image enhancement (Firsching & Bersch, 2016; Schonhofen & Detmering, 2018). The enormous range of social media used for influencers ensures that the advertising messages of the influencers are perceived by a quarter of all Internet users in Germany. Influencer-marketing is expected to be especially pleasing among younger users, whereas 39% of 18-23-year-old and 37% of 14-17-year-old users are aware of specific products and services provided by influencers (Influry GmbH, 2017).

2.3.4 The Theory of Influencer Marketing

Influencer or digital opinion leader who have an influence on the attitudes and behaviour of the respective recipients, can be examined from different research histories and perspectives. It is based on a theory that emerged from the study 'The People's Choice ' by sociologist Paul Felix Lazarsfeld (Lazarsfeld, et al., 1944), where he examined the responses of 600 voters to the messages and key figures of the US presidential election campaign in 1940 between Republican Willkie and Democrat Roosevelt.

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Figure 4 The two-step flow of communication own presentation according to Katz & Lazarsfeld (1955)

The study describes how mass media reaches audiences in two steps, how opinion leaders can lead an opinion-based discussion in their social environment and thereby influence the opinions of their fellow human beings in conversations (Katz & Lazarsfeld, 1955) as seen in figure 4. It became quickly the standard work of empirical sociology and was expanded in the following years with the participation of Elihu Katz to the two-stage flow of communication (1955; Katz, 1957). These fundamental results were not only expanded within the framework of sociology, but also transferred to marketing, is valid and still quoted in today's literature. It has been recognised that buying decisions of opinion leaders, so-called influencers, can be influenced in both directions. Influencers pass information and their views on products or companies filtered to their communities which in turn influences them in their decision to buy a product or to use a service (Value3 GmbH, 2019). Through the development of online communication, the topic is experiencing a new upswing in today's time, as reflected in the research efforts. Therefore, it also has the simple methodological reason that online media and social networks make communication visible and allow easier-to-access analysis - compared to conversation research in the 1960s and 1970s which make it to a today's still significant used model.

2.3.5 Classification and Delineation of Influencer Marketing

Influencer-marketing can be categorised into related forms of marketing, such as content marketing, referral marketing and social media marketing (Nirschl & Steinberg, 2019, p. 8 ff) as seen in figure 5.

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Figure 5 Differentiation and demarcation of influencer marketing - own presentation according to Nirschl & Steinberg (2019, p. 7)

Social media marketing leverages the power and impact of social media to disseminate corporate content, products and services to connect with users, and thus with potential customers and business partners. For example, communities within social networks are used to effectively place product and service offerings relevant to users (Nirschl & Steinberg, 2019, p. 8 ff). Influencer-marketing, however, goes beyond mere dissemination according to Nirschl & Steinberg (2019, p. 8 ff.), thus distinguishing itself from social media marketing since the scope and influence of the influencers is used to positively influence the perception of the company, brand, product or service, and finally to meet the corporate goals (Nirschl & Steinberg, 2019, p. 8 ff.). In any case, this novel form of content marketing can keep the advertising world at bay in much the same way as the advent of banner ads and interactive pop-ups - except that building relationships with really good, brand-appropriate influencers is far more complex (Nirschl & Steinberg, 2019, p. 8 ff.).

Meffert (2019, p. 740 ff.) resumed that in addition to operational aspects, such as the design of specific influencer campaigns or contractual agreements, influencer-marketing includes two key strategic areasof responsibility: influencer selection, and the creation and maintenance of the company-influencer-relationship and reach which is an advantage and can be achieved through the network of influencers, even in special target groups or niches (Dexler, 2017). However, these advantages can only be realised if influencers and companies conincide and the advertising messages are transmitted authentically to the consumer, so they are willing to build a relationship with the brand through interactions according to Schallehn (2012) and Eilers (2014).

Rest (2017) as well as Nirschl & Steinberg (2019) also consider this partly critical. The background is usually the sometimes seven-figure annual income of the influencers and the associated and often criticised legal aspects of the identification of product placement. The new billion-dollar industry is a parallel world in which surreptitious advertising is the rule, not the exception.

Influencers are becoming more and more important to consumers and companies in today's communications as they are perceived as particularly believable, inspiring their followers everywhere through tablets and smartphones (Kutzim, et al., 2017). For these reasons, influencers typically enjoy a great amount of credibility and trust within their community.

2.3.6 The Psychology of Following

The novelty of today's influencer-marketing is the high degree of networking in the social web and the resulting reach (Schüller, 2015, p. 189) which an influencer can contribute to the campaign in addition to his popularity in the target group. Moreover, Wenzel (2016), Henning-Bodewig (2017) and Mallick/Weller (2018) point out that in times of ’banner blindness’ and adblockers, influencer-marketing has the great advantage of placing commercial messages through influencers so that the target group follows them consciously and for entertainment and information purposes. The relevance of recommendation and trust in it is more valuable than ever, because of the reputation of an influencer, who comes directly from the target group, sharing their opinions and interests. This is also confirmed by a study by Nielsen (2015) whereas the personal recommendation is for 83% of consumers the most trusted form of advertising ever. Therefore, social media influencer seems to wield a huge amount of power over their followers, but how does this influence the acceptance and consumer-behaviour ?

With the study 'The Psychology of Following', Olapic (2019) has made a comprehensive research of the attitudes, preferences and behaviour patterns of followers. The study identified that authenticity is the number one reason why people trust an influencer endorsement. Potential consumers know that influencers are paid to promote products, but brands need to be careful to create their influencer-campaigns to the psychological and practical patterns of the followers, and thus the potential customer base. It is also rare for users to look for a specific product on specific platforms, they are rather interested in the influencers´ lifestyle. If an influencer merely displays a product that cannot be linked to the lifestyle he or she represents, its authenticity and impact for the relevant target group (follower) will be lost (Olapic, 2019).

2.3.7 Critiques and Consequences of Influencer Marketing

Bauer (2015), Meffert (2019, p. 718) and Nirschl and Steinberg (2019, p. 39) summarise that influencer-marketing is an marketing instrument which unfolds its effect in particular because its advertising character is not obviously recognisable for the consumer. It has great potential to place a product recommendation accurately in the relevant target group when the influencer and the product can be meaningfully related so that the audience feels conversational and involved in the content of the campaign. This is equivalent to a private recommendation (Kilian, 2016) which may have the greatest influence on consumer-behaviour according to Henning-Bodewig (2017).

It must therefore be ensured that the influencer also fits the brand and the company. The extensive selection process must be individually designed and redeveloped for each campaign to avoid the risks described. Not only did the complex selection process take a long time, but the collaboration itself is also time-consuming (Heubel, 2019). Otherwise, there is a risk that the content produced will not have the desired effect or could even have negative effects.

A further problem can be the lack of labelling of contributions in collaboration with companies. Possible consequences could be warnings, injunctions and claims for damages which will be explained in the next chapter '(Media) legal framework'.

2.4 (Media-) legal framework

The increasing popularity of influencer-marketing, however, also reveals the legal dimension of this topic as this form of marketing does not have a distinctive legal area of its own, but instead touches on various legal areas such as competition law, trademark law, copyright law, tele and -broadcasting law as indicated by Leeb & Maisch (2019, pp. 29-40). When influencer share their advertising messages with their followers, this triggers legal issues currently affecting science, courts, and counselling practice as reflected by the contributions of Lehmann (2017) and Hennig-Bodewig (2017). For example, if an influencer advertises a product on his social media channel without disclosing that he has received a fee by the respective producer and the presentation is mixed with other, non-promotional content, then the overall character of the advertising is deemed disguised according to Köhler and Bornkamm (2012).

'I don't see, why I should lose my authenticity by labelling everything as promotion although I actually don't advertise' ¹

'If necessary, I will go up to the Federal Supreme Court (BGH)' ²

These are only two statements from Cathy Hummels, model, influencer and wife of football player Mats Hummels who fights in court against restriction of freedom of her personal expression: Cathy Hummels would, if necessary, go up to the Federal Supreme Court (BGH). Promotional or non-promotional? That's the question in the process of Cathy Hummels' Instagram account, in which the influencer herself testified. However, a definite answer was not found yet (HORIZONT, 2018).

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Figure 6 Cathy Hummels' Post 7th July 2018 (Hummels, 2018)

The cause of the lawsuit: Hummels has entered into advertising contracts with several fashion companies. These collaborations appropriately characterize Cathy as a 'paid partnership'. The VSW has sued her for 15 postings that lacked the disclosure of such fact (HORIZONT, 2018) as illustrated in figure 6. An update (29. April 2019) on the judicial procedure can be found in appendix 1.

But why is the case so important? The legal topic of 'unlawful surreptitious advertising' has always been closely linked with this type of product presentation. If the targeted placement of the products is not identified as what it is -namely advertising - then there is an impermissible surreptitious advertising (Lampmann, 2017). The company or the agency which uses the influencer as a marketing instrument, but also the influencers who promote products of such company on their social media channel, must disclose such promotional collaboration. Otherwise this can lead to severe legal consequences.

However, the lack of legal certainty in this area results from trade associations such as the Association for Social Competition ('VSW') which systematically sue many influencers and collaborating companies for disguising the promotional nature of paid contributions on social platforms such as Instagram. Moreover, there is currently still a lack of clear case law by the courts providing guidance when and how such disclosure must be made (Brünen, 2017). Since the announcement of the first court decisions after 2017, many influencers now simply mark each of their contributions as advertising, regardless of the specific content (Leeb & Maisch, 2019). However, from a transparency perspective, the exact scope of the disclosure obligation remains problematic.

Contrary, the following chapter provides an overview of the regulations to be adhered to and the legal problems surrounding influencer-marketing in Germany.

2.4.1 General Classification

In general, the influencer-marketing finds its legal basis according to Mach (2018) in the field of competition- and media law. In the view of Schonhofen and Detmering (2018), it is legally assessed on the basis of the ‘Rundfunkstaatsvertrag’ (RStV), the ‘Telemediengesetz’ (TMG), the ‘Gesetz gegen unlauteren Wettbewerb’ (UWG) which regulates the extent of the labelling obligations as well as the legal consequences of non-compliance.

2.4.2 Principle of Separation

From the point of view of media law, influencer-marketing is about the clear recognition of advertising or commercial communication, the prohibition of surreptitious advertising and the clear distinction and separation of advertising and editorial content, all aspects, closely related to the general prohibition of deception (Henning-Bodewig, 2017). As a general rule, any image or product advertising must be equally identifiable (Ohly & Sosnitza, 2016) to consumers as an advertisement 'at first sight'. This is because recommendations from third parties are generally given greater trust and importance by consumers (Strack, 2017).

For this reason, the Telemediengesetz (TMG) provides in §6 (1) Nr. 1 (TMG) that any commercial communication must be clearly recognizable for all internet matters. Further, the person behind such communication must be disclosed. Moreover, the Rundfunkstaatenvertrag (RStV), provides in §§7, 58 RStV the principle of separation and labelling requirement for advertising (Henning-Bodewig, 2017). Such principle also extends to social media networks such as Facebook, Instagram or Youtube. The principle of separation protects the integrity of the economic decision-making basis of the addressee by avoiding a deception with respect to the true nature of the presentation (Mach, 2018).

2.4.3 Law Against the Unfair Competition (UWG)

Procedurally, labelling requirements of advertising is largely enforced on the grounds of the UWG which protects consumers against unfair commercial practices. According to §5a (6) UWG disguising the commercial purpose of a business act is deemed unfair und unlawful (Mallick & Weller, 2018). However, according to Henning-Bodewig (2017) the legal classification of influencer-marketing depends on two-central-questions:

- Must the respective post in question be classified as a commercial act with a promotional intent?
- If so, is the commercial purpose and the promotional intent of the presentation clearly identifiable or sufficiently marked ?

2.4.3.1 Commercial Act

The fundamental prerequisite for the applicability of the UWG is always the existence of a commercial act pursuant to §2 (1) no. 1 UWG according to Köhler & Bornkamm (2012). Commercial acts are related to the promotion of sales of an own or another's business. In this end, the commercial act must be capable of significantly influencing the economical behaviour of consumers. The background here is that consumers should not be (mis-) lead by an unfair and unlawful commercial to take a purchase decision act which he would otherwise not have made (Mallick & Weller, 2018).

2.4.3.2 Commercial Act of the Advertising Company or Agency

The regulations of the UWG apply both to the companies and agencies which instruct an influencer, as well as to influencers themselves (Mach, 2018). The remuneration of the concrete action is not a strict requirement to trigger the application of §2 (1) no. 1 UWG. Moreover, a commercial act is regularly accepted if the respective products are provided to the influencer for free (KG Berlin, Decision of 11.10.2017, Ref. No. 5 W 221/17, 2017). Any promotional activity generally qualifies as commercial act within the meaning of the UWG. It is not relevant whether such promotional act finally results into an increase in sales (Köhler & Bornkamm, 2012; Köhler & Bornkamm, 2017).

2.4.3.3 Commercial Act of the Influencer

With respect to influencers, there are generally two possibilities how their activities can be legally classified as commercial: Either influencers are viewed as entrepreneurs who promote their own products to build up their image. Or influencers can act with a promotional intent to the benefit of a specific company in order to promote their sales (KG Berlin, Decision of 11.10.2017, Ref. No. 5 W 221/17, 2017).

2.4.3.4 Recognizability of the Commercial Character

Any promotional contribution from influencers needs to be marked as commercial if the commercial purpose does not already result ‘ directly from the circumstances’ [§5a-(6)-UWG] or from ‘ the content or type of visual or audible representation’ (No.-11 of the-Blacklist of the UWG). Such disclosure based on §6-(1)-No.-1-TMG is necessary if the commercial character of the communication is not sufficiently recognizable with little effort (Spindler; in Spindler/Schmitz, 2018). According to the decision of the OLG Hamburg, 28.06.2010 – 5 W 80/10 (2010) such test depends on the view of the ‘ average informed, adequately attentive and reasonable average consumer or the average member of the addressed consumer group’.

2.4.4 Infringing Acts/Individual Standards

If a specific presentation qualifies as commercial act, then both the company or agency and influencers will be subject to the obligations under the UWG. If disregarded, such presentation or communication can be viewed as unfair advertising behaviour (Lehmann, 2017). In this respect, the following provisions of the UWG need to be considered.

2.4.4.1 §3a UWG – Infringement of the Law

According to §3-a-UWG a person acts unfairly if he infringes a statutory provision which is also intended to regulate market conduct in the interests of market participants. Moreover, such infringement must be likely to significantly prejudice the interests of consumers, other market participants or competitors (Bundesministerium für Justiz und für Verbraucherschutz, 2019). Such legal provisions arise from the TMG with respect to the above-mentioned labelling obligation under §6-(1)-No.-1-TMG and the so-called imprint obligation pursuant to §5-(1)-No.-1-TMG. Thus, violations of these obligations may constitute an unfair commercial behaviour within the meaning of §3-a-UWG.

For example, this is the case in connection with §5-(1)-no.-1-TMG, if a business-like account is operated and no imprint is listed, since lacking the corresponding marking can give the false impression that influencer was not at all operating a business or not be commercially active. §6-(1)-No.-1-TMG also comes into play with regard to contributions on the Internet, if editorial content is mixed with advertising and commercial communication in order to directly or indirectly promotes the sale of goods and services (Laoutoumai & Dahmen, 2017; Lehmann, 2017).

If, for example, influencers are instructed by a company (for a fee) to act on behalf of such to promote their products, then the presentation made in this context are to be clearly marked as commercial (Lehmann, 2017). In the absence of a corresponding disclosure, such presentation would constitute an unfair commercial act within the meaning of the §3a-UWG.

2.4.4.2 §5a-(6)-UWG –Surreptitious Advertising

§5a (6) UWG specifically regulates the case of so-called surreptitious advertising. Surreptitious advertising occurs when the commercial purpose of influencer-marketing has not been identified, the promotional character does not arise directly from the circumstances, and the lack of disclosure/clear labelling might induce consumers to make a business decision that they otherwise would not have taken (Laoutoumai & Dahmen, 2017). Above all, it is therefore crucial that whenever a commercial purpose is pursued, such character is sufficiently disclosed (Henning-Bodewig, 2017) and can be recognized by the addressees of the respective target group at first glance (OLG Celle, Decision of 08.06.2017, Ref. No. 13 U 53/17, 2017). Hidden marks that can only be found after a long search or that can only be found at the end of a long post, are not sufficient. As a general rule the identification of the promotional character must be always based on the specific circumstances of the case and the means of communication used (Köhler, in: Köhler/Bornkamm/Feddersen, 2019).

2.4.4.3 Annex to §3 (3) UWG – the Black List

No.11 of the appendix to §3 (3) UWG ('the-Black-List') further provides that sponsoring of editorial content for commercial purposes without disclosing such purpose (advertisement disguised as information), also constitutes an inadmissible commercial act within the meaning of §3 (3) UWG (Köhler & Bornkamm, 2017).

2.4.5 Legal Consequences

Within the social media field, photos, videos and music are mostly affected by copyright, trademark, competition and tele and -broadcasting law. First, if influencers distribute contents protected by copyright (e.g. texts, videos or photos), this constitutes an infringement of copyright unless the creator's consent has been obtained. The enforcement of such rights can only be driven by the respective right owners. In addition, the enforcement of violations of labelling obligations depend significantly on the legal provisions that have been infringed. Pursuing to §8 UWG, violations can be enforced by way of warning letters, injunctions and claims for damages. The enforcement of the broadcasting provisions is subject to the state media authorities which may, according to §59 RStV, complain about a certain behaviour and prohibit and impose fines under Article 49 RStV (misdemeanour). The unfair competition law regulation and the media regulation are inter-connected by the mechanism provided by §3a-UWG, because the respective regulations in RStV and TMG constitute market behaviour rules which shall protect interest of consumers (Lehmann, 2017; Köhler, in: Köhler/Bornkamm, 2017; von Jagow, in Harte-Bavendamm/Henning-Bodewig, 2016). Thus, any violation of the regulations under the RStV and TMG will automatically also trigger a breach of §3a UWG.

2.4.6 European Directives

According to Wandtke et al. (2011) and Köhler & Bornkamm (2012, pp. 51, 3.1), large areas of German copyright and competition law which are relevant for social media and influencer-marketing, are based on requirements of European law. In this respect, a distinction is made between directives and regulations. European regulations apply directly to all natural and legal persons within the European Union. Directives do not apply directly because they must be transformed into national law by the individual member states of the European Union (Europäische Union (a), 2007). The most important directive in unfair competition law is the ' Directive 2005/29/EC' concerning unfair commercial practices which provisions were transformed into German law by the Unfair Competition Act of 22.12.2008. It contains a final and binding regulation (Europäische Union (b), 2005; Omsels, 2019). Another important directive is ' Directive 2006/114/EC' on misleading and comparative advertising. The provisions on misleading advertising provide only a minimum standard in the directive so that stricter national provisions are permitted in this area. However, the scope of application of the directive in this area is limited to commercial transactions between entrepreneurs. For business transactions with consumers, 'Directive 2005/29/EC' contains binding and conclusively regulated prohibitions of misleading information for all member states of the European Union (Europäische Union (c), 2006).

Furthermore, the EU has been discussing a reform of copyright law. The aim is to adapt copyright law to the requirements of the digital age (Ritter von Strobel-Albeg, 2018) and to regulate more clearly the use of protected works such as texts, images, videos and music on the Internet. The current EU copyright law dates to 2001 - a time when Facebook, Twitter and YouTube did not yet exist (Bundeszentrale für politische Bildung, 2019). The proposed directive must be adopted by the competent ministers of the member states in the council of the EU, but this is considered a formality. The EU member states will then have two years to transform the provisions into national legislation. In this respect, article 13 is particularly controversial and recently discussed in media. If implemented, platforms on which users can upload videos or audio files will be subject to stricter regulation to prevent copyright infringements. Protected content would then have to be licensed before it could be retrieved on the platforms (Süddeutsche Zeitung, 2019; Europäische Kommission, 2016).

2.5 Summary of Literature Findings

Influencer-marketing is a new form of advertising and can be categorized into related forms of marketing, such as content marketing,referral marketing and social media marketing. It is special in that the company does not advertise its products itself, but instead induces so-called influencers -possibly against payment- to report on its products within the framework of any written text, posting or as a blogger on social media channels such as Facebook or Instagram. Various authors [e.g. Bauer (2015), Bruhn (2016), Henning Bodewig (2017), Meffert (2019) and Nirschl & Steinberg (2019)] agree that influencer-marketing has therefore become an effective marketing tool for companies. They state that product recommendations from influencers have a more credible impact on the community than articles in newspapers and magazines, social media friends' recommendations, classic print advertisements, or TV commercial. This is because influencer-marketing is perceived as equivalent to a private recommendation which may have the greatest influence on consumer-behaviour. However, these advantages can only be fully exploited, if influencers and companies conincide and the advertising messages are authentically transmitted to consumers, so they are willing to build a relationship with the brand through interactions. This can only work when both, influencers and companies, build collaborations that fit their image. There is a general consensus amongst authors, [e.g. Wenzel (2016), Henning-Bodewig (2017) and Mallick/Weller (2018)], that influencer-marketing as such is generally permitted but there are certain legal conditions and limitations which must be observed. This is particularly important on the backdrop of the significant, sometimes seven-figure annual income of influencers and the critical legal aspectsof hidden product placement.

Influencer-marketing finds its main legal basis in the area of unfair competition- and media law but also touches on various legal areas such as trademark law and copyright law. While these regulations differ in some detail, they all recognize the principle of clear recognition of advertising or commercial communication, the prohibition of surreptitious advertising and the separation of advertising and content. Therefore, the legal classification of influencer-marketing depends on two central questions according:

- Can the respective post in question be classified as a commercial act with a promotional intent?
- If so, is the commercial purpose and the promotional intent of the presentation clearly identifiable or sufficiently marked ?

Both questions are subject to further legal discussion as reflected by the ongoing litigation (s. for further details the overview provided in chapter 4/key arguments of current decisions). In any event, the general legal limits and requirements outlined above must be observed as provided by §3-(3)-UWG, §5-a-(6)-UWG, annex to §3-(3)-UWG/the-Black-List as well as, section §6-(1)-No.-1-TMG and §§7,-5-RStV. As many influencers have been warned or sued for allegedly disguised advertising and missing labelling compliance with respect to their posts, there remains a significant grey-area of legal uncertainty. This legal uncertainty mainly pertains to the questions of the exact scope of the labelling obligation of commercial communication which needs to be further clarified either by the courts or by new law and regulations. Whereas in this part the fundamentals of the legal framework were reviewed, there will be a further part in the research sections to provide further details of that ongoing discussion.

3 Research Design and Methodology

The following chapter deals essentially with the research-methods and ethical considerations envisaged in this research-project, applying the principles of Bryman (2016) and Saunders et al. (2009) will be used.

3.1 Research Methodology Theory

According to Jonker & Pennink (2010) and Saunders et al. (2009) the conduct of the research is a specific 'goal-oriented' action and the research methodology is therefore the framework for the research that constitutes the process by which information and data are collected empirically. In this respect a two-criteria-structure is sufficient which should be the most appropriate for the achievement of all research objectives and can be applied to other researches in general for replication (Daniel & Sam, 2011). As systematic approach to develop the appropriate research-method, Saunders et al. (2009) have developed the so-called 'research-onion'.

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Figure 7 Research onion by Saunders et al. (2009)

With the help of Saunders' research process (figure 7 and 8), the researcher should proceed step by step (from outside to inside) to derive the appropriate research-methodology for the problem under study.

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Figure 8 Research process – own presentation according to Saunders et al. (2015, p. 128 ff.)

First, three research philosophies can generally be distinguished. In addition to basic research, the next step is the research approach for the problem which should be investigated. The choice of a suitable approach depends on how clearly the theory that should be used already exists at the beginning of the research. The next step includes the selection of an appropriate research strategy/method, which can be clearly assigned to the deductive or inductive approach. The next step is data acquisition and analysis.

3.1.1 Research Philosophy

'A single perception of reality does not exist' according to Jonker & Pennink (2010, p. 3 ff.) and in this regard the research-philosophy represents 'the researcher's view of the world' and provides 'a framework for the research-project, capturing the source, evolution/development and nature of knowledge' (Saunders, et al., 2009). This is also a justification of how the implementation of research is handled.

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Figure 9 Comparison of four research philosophies own presentation according to Saunders (2009, p. 119 ff.)

In order to achieve the research objectives of the research-project, four different options (positivism, realism, interpretivism and pragmatism) can be chosen Saunders et al (2015) and Jonker & Pennink (2010, p. 61 ff.) whose definitions can be found in figure 9 above.

Positivism means that this underlying research-strategy uses the existing theory to develop hypotheses that have been tested and confirmed, leading to the further development of a theory (Saunders, et al., 2009). The philosophy of realism is that there is a reality totally independent of the mind and can be subdivided into the direct realism or critical realism. Direct realism assumes that a person's experience accurately represents the world while critical realism expresses that person's experience as sensation. In this regard, the direct realist would perceive the world as relatively unchanged (one-stage study), while the critical realist would experience constant change (multi-stage study). Moreover, interpretivism is based on the view that researchers understand the differences between man and goal. Therefore, the social scientist focuses on details of situations and the reality behind these details. According to Saunders et al (2009, p. 109 ff.) the pragmatic perspective is the most important factor as a variation between epistemology, ontology and axiology of the term helps pragmatists to interpret data in different ways. For this master's thesis the pragmatism approach is the appropriate philosophy (Saunders, et al., 2009, p. 109 ff.) as for a pragmatist the research starts with a problem and the aim to provide a practical solution. This can ultimately lead to influence the future practice. In addition, the pragmatism research philosophy can integrate the use of multiple research-methods (qualitative and quantitative) and action research methods to collect credible, reliable and relevant data (Kelemen & Rumens, 2008; Saunders, et al., 2009).

3.1.2 Research Approach

Depending on the envisaged research questions it is now possible to decide how empirical research will be designed.

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Figure 10 Inductive and deductive research approach (Burney, 2008)

Burney (2008), Bryman (2016), Daniel & Sam (2011) as well as Saunders et al. (2009, p. 124 ff.) all distinguish between an inductive and deductive research-approach which is presented in figure-10 according to Burney (2008) . According to Burney (2008), Wilson (2010, p. 7 ff.) and Colins (2010, p. 42) research-methods are in many cases associated with two approaches, the deductive and inductive research. Deductive research is about drawing a conclusion from a general statement to an individual case in order to validate a general theory by a direct example based on existing knowledge on a particular subject and then tested again by an empirical test. On the contrary, the inductive-approach first collects data and, as a result of the data analysis, develops a (tentative)-hypothesis that moves from specific observations to broader generalizations and theories. In conclusion, with an inductive research, a theory will be established, in a deductive research an already existing theory will be tested.

Although 'influencer-marketing', 'competitive-law' and 'consumer-behaviour' have well established theoretical foundation, an inductive approach was chosen because the combination of influencer-marketing, consumer-behaviour in relation to legal aspects with labelling requirements is tested through an empirical validation. It might not be possible to develop a new theory as required by an inductive research approach, but at least (tentative) hypotheses.

3.1.3 Research Strategy

According to Bauer-&-Blasius (2014, p. 42 ff.), theoretical-statements and forecasts must be kept in the empirical review. It is not possible to conduct empirical research without the methods of empirical social research, since these establish the rules according to which data are collected, linked with theories and subsequently evaluated. As a general rule, empirical research methods can be divided into qualitative and quantitative methods, which, however, do not work against each other but complement each other. The difference between qualitative and quantitative methods, according to Saunders et al. (2009), is that these contain numerical and non-numerical data.

The research strategies can be classified as follows:

- An experimental research compares expected results with actual results, is useful for all fields of research and considers a relatively limited number of factors (Saunders, et al., 2009, p. 213 ff.);
- an action research is an approach which 'brings together action and reflection, theory and practice, in the pursuit of practical solution to issues' (Bradbury, 2015, p. 1 ff.);
- a case studyresearch can draw generalisations and compares experiences of different parties majoring a deep understanding of real-life context. The grounded theory has an inductive approach and the theory is derived from collected data (Glaser, 2014);
- a survey/questionnaire needs to be analysed empirically and is therefore in most cases a quantitative methodology (Bryman & Bell, 2015).
- an ethnography includes an observation of people and the cultural interaction and meaning, where the researcher uses perspective of the people being observed (Bryman, 2016);
- finally, with an archival research an analysis of the existing materials and systematic literature review (or historical research) can be made (Flick, 2016; Saunders, et al., 2009, p. 150 ff.).

The selected research strategy for the first part of this research-project will be an archival research since research question 1 can be answered by analysing and interpreting court decisions. The selected research-strategy for the second part of this research-project is a case study, since it can be used 'to accomplish various objectives such as the generation of theory, the test of a theory and the description of a phenomena' according to Eisenhardt (1989, pp. 532-550). In this respect, a case study is very useful to answer how and why questions of this research project and aims to use multiple sources of data (influencers and consumers) to deal with the much-controversial labelling obligations in influencer-marketing. Surveys, as mentioned above, are very popular in economic research because of enormous range of information that can be generated through them and are therefore best suited for this research-project and defined research questions two and three.

3.1.4 Research Choices

Quantitative and qualitative techniques and procedures can be differentiated according to Saunders et al. (2009, p. 151), into a mono method or multiple methods (figure 11). The mono method defines the use of a single data-collection-technique and corresponding analysis methods, while several methods can be identified as the use of more than one data-collection-technique and analysis methods.

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Figure 11 Research methods - own presentation according to Saunders et al (2009, p. 152)

To answer research-questions 1-3, this research-project uses a mixed-method of quantitative (from the questionnaire) and qualitative data (from the questionnaire and the interviews).

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¹ Original (German) 'Ich sehe es nicht ein, meine Authentizität zu verlieren indem ich alles kennzeichne, obwohl ich dafür keine Werbung mache'

² Original (German) 'Notfalls bis zum Bundesgerichtshof'