What happens when a promoter wants to put on an event, hypes it, markets it extensively, and then just isn’t able to deliver? Can that be treated as a class action? When does the marketing go too far and how does that affect the legal landscape of any potential class action?
These issues were brought to life in the ill-fated Fyre Music Festival. Organized and designed to be a once in a lifetime experience, the plan was to host a multiday music festival on a secluded island in the Bahamas with flights included, no need for cash, and top-billed acts. A self-contained package deal like no other.
The marketing side of the plan was a social media blitz. The festival organizers paid dozens of social media “influencers” (or what they regrettably called, “Fyre Starters”) to promote the event by staging elaborate photo shoots and sexy stylized promo videos. These influencers included models, celebrities, actors and sports stars, who were paid hundreds of thousands of dollars. In each of these (now deleted) promotions, there were never any disclosures relaying the relationship between the festival and the influencer.
In total, the marketing program hit 300M social media impressions and 1.5M media impressions.
When the day finally arrived, concert goers deplaned and arrived at a nearly empty piece of land. There were multiple rows of cheap white tents, but no celebrities, no staff, no food or drinks and almost no infrastructure. People described it as “post-apocalyptic” and, rather indelicately, “like a refugee camp.” Aft er the dust settled and everyone realized they had been duped, people were furious.
This seems like a straightforward fraud case. Company promised X in exchange for $Y. And to a certain extent it is. But, what happens when there are dozens of social media influencers plugging product X without disclosing that they are financially benefitting? Does that change the legal landscape?
To answer that question, we turn to the FTC, where this new era of modern marketing is just starting to be examined and addressed. Less than a year ago, Warner Brothers settled an FTC complaint about a shadow marketing campaign similar to the Fyre Fest. Warner Brothers paid influencers to post positive reviews and videos of a new video game on YouTube. In that case, the FTC found that there were some disclosures, but they were below YouTube’s “show more” tab, hidden among paragraphs of descriptions and other irrelevant language. According to the FTC, these were inadequate and violated Section 5 of the FTC Act. “Consumers have a right to know if reviewers are providing their own opinions or paid sales pitches,” the director of the FTC’s Bureau of Consumer Protection said.
The festival could face regulatory exposure just as Warner Brothers did. That much is clear. However, what about private class action exposure? Well, since two cases have already been filed obviously, there is exposure. One of the interesting quirks of some state consumer laws, including Ohio’s, is that they refer, in the statute language itself, to the FTC Act. Specifically, the Ohio CSPA states that “[i]n construing [what is constitutes an unfair or deceptive practice in connection with a consumer transaction], the court shall give due consideration and great weight to federal trade commission orders, trade regulation rules and guides, and federal courts’ interpretations of subsection 45(a)(1) of the ‘Federal Trade Commission Act.’” ORC 1345.02(C). So, in short, class action plaintiffs can hang their hat on FTC rules and regulations to argue that an act is deceptive. This appears to be one of those instances.
However, can you go aft er the influencers themselves for failing to disclose they were paid promoters? This is an issue in the now-filed Fyre Festival cases because it appears that the festival organizers blew all the operations money on photo shoots and on these influencers. It was all a marketing façade. So, in order to recover, to some extent, you need to go aft er that squandered money and try to get it back from the influencers themselves.
Can you do that? Well, it depends on how you frame the case. And that’s where good lawyering comes in. In the first class action filed against the Fyre Festival, the plaintiffs only name the company itself. The second class action, however, names the influencers. As part of the second case, the plaintiffs emphasize equitable remedies of disgorgement. So, by naming these influencers, plaintiffs are seeking a disgorgement of the consumers’ money which was used not to provide a service to consumers, but to overpay the influencers. Framing the case through the remedy – beginning at the end – could just be the creative theory necessary to recover on behalf of these consumers.
We are just starting to see the nascent application of consumer protection law to new era marketing, and creative lawyers in the government and both bars will move this area of law into the future. Patrick J. Brickman
