Live Online Shopping: Dead or Alive?
If Live Online Shopping takes off in the US, how do we apply old rules to this new frontier?
Consumer brands acknowledge that success today is tied to having a robust online and mobile presence. During the pandemic, e-commerce took off, and hasn’t dissipated since, with online sales expected to grow to over $1.1 trillion in the US in 2023, even as brick-and-mortar retail re-emerges.
But if China offers any prescient view of our retail future, the next frontier in the US may be in live online shopping. What is it? It’s TV home shopping on steroids.
Live shopping events target a younger demographic’s perceived need for immediate gratification, desire to be constantly entertained, and fear of missing out. Platforms are developing and exploring interfaces for interactive events where either anyone with a phone can livestream and sell name-brand products from their home, or the platforms (or brands) hire known influencers to peddle products on more heavily-produced live shows.
There are conflicting reports about the viability of online live shopping, but estimates have it accounting for as much as 25% of China’s retail market, or $647 billion this year. Whereas Chinese online live shopping is dominated by a few core channels (e.g., Alibaba’s Taobao Live, Douyin and Kwai), the US market is diversified and developing - leaving consumers with no single place to find their desired shopping show. Thus, right now, the livestream shopping market in the US is less than 5% of China’s market.
Nonetheless, startups and some established platforms and brands are getting into the business - betting that consumers not only want to make a deal, but want to have a fun experience while doing it. Along with Poshmark’s live Posh Shows, the big brands of Amazon, Walmart, YouTube, Ebay (and, at a slower pace, TikTok) are all exploring and investing in this shopping outlet. This, despite Meta’s decisions in October 2022 and March 2023 to curb live shopping on Facebook and Instagram, respectively.
It’s certainly possible that the US appetite for live online shopping won’t take off because of inherent American shopping habits and patterns. However, a good scout is always prepared. If it’s live, that means less control and review by brands and platforms. This makes some marketers (and their lawyers) uncomfortable. Here are some legal considerations in this space:
False Advertising?
To the audience, the advantage of a live broadcast is the sense that the content is unscripted and off-the-cuff. But there’s little to stop talent on a live feed from getting things wrong about the product being sold (not to mention, saying horrible things in general!). “This soup was 100% made in the USA,”; “This purse has never been offered at this price before,” “This shirt is more durable than the competitor’s,”; “These shoes are as good-as-new after walking for 10 years and 100k miles!” If consumers rely on these false or misleading claims, the competitors, consumers, the Federal Trade Commission (FTC) and other regulators may have grounds to object. It is extremely difficult to check whether claims are substantiated when the on-camera talent doesn’t stick to a pre-arranged script.
The issues get even more complicated in situations where the brand doesn’t produce the show - and instead, a fan produces her own independent show, making unfounded claims as she sells her favorite brand’s products. Are brands going to be OK with an expansion of these types of shows, putting their intellectual property and reputation in jeopardy? These scenarios could put brands at odds with the platforms who may be forced to limit authorization to only approved live channels/shows. And brands could find themselves writing a ton of cease and desist letters to individual, unaffiliated sellers.
Endorsement Issues?
Similarly, the live element makes it difficult to stay on top of endorsement issues. Per the FTC’s Endorsement Guides, marketers and influencers must clearly and conspicuously disclose their material connection to the advertiser if it’s not otherwise obvious from the context. If the well-known brand CEO is live selling brand products, a disclosure isn’t needed because the material connection of the CEO to the brand is obvious. When brands engage an influencer to live-sell their products, clearly these Guides apply, and the necessary disclosures are likely required.
The livestreaming platforms may need to explore expanding their array of overlay and voiceover options to make it easier to disclose the connection in a live setting. And the brands may need to live-monitor their shows in back-end control rooms, to watch for both the false advertising and endorsement issues. Once the disclosure is missed (or false statement is uttered) in the live feed when the purchases are made in real-time, it is exceedingly difficult to rectify the failure.
Counterfeit goods?
Many consumer product and retail brands have entire divisions dedicated to stopping the sale of counterfeit goods. If live online shopping takes off, it may put more stress on these divisions to catch the counterfeit items before the livestream is over - and the technology might not be ready for that.
Who is behind the sale?
It may not be obvious from each live seller platform how the money flows. The platform almost always takes a percentage, but there may be setups where one of, or both, the primary seller and brand share in the proceeds. It’s certainly possible a consumer’s purchasing decision will be affected by knowing to whom the money is going. Further, if any of the parties does not get a % of sales, it might factor into deciding how responsible that party should be for problems with the sale. See below on that!
Contractual enforceability?
The knee-jerk counterargument here is to provide protections via contract. Brands can negotiate deals with influencers, and platforms can provide online terms and conditions to consumers and sellers, each spelling out responsibilities and disclaiming liability where appropriate. Unfortunately, contracts with influencers only work when the brands actually engage influencers (which will not be in every situation in this space); contracts likely cannot limit a brand’s inherent obligation to monitor and enforce its policies; contracts don’t stop regulators from getting involved; and online terms and conditions may have limited enforceability, given they are often ignored.
So, who is responsible??
For all of these issues, as between the platform, the brand, and the influencers, who should be responsible when things go wrong? At least in the endorsement realm, the FTC has been fairly clear that brands, agencies and talent might all be held liable. The FTC has also pushed platforms to make it simpler for brands and influencers to make disclosures.
However, if the brand is completely out of the flow of money and knowledge when its products are sold live online, there’s a strong argument that the brand should not be held responsible. It may not be reasonable to expect brands to monitor every secondary sale of their products, even via live sales. That being said, as noted above, the brands may still have to contend with reputational risks when unauthorized individuals (and platforms) promote their products in a manner the brands would not otherwise have approved.
The scope of live online shopping is what makes the responsibility question so difficult. When anyone can take an item from their closet and put on a live show and sell, it is not going to be practical for regulators and others to go after all the sellers. Thus, at a minimum, it may mean tighter scrutiny on platforms and brands to follow reasonable procedures, and post reasonable guidelines for these sellers to help them avoid these pitfalls.
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As with most advertising legal issues, the issues aren’t novel, but the landscape for applying them is. And a “live” landscape moves as fast as possible, making it difficult for everyone (retailers, regulators, lawyers) to keep up. Stay tuned!
For legal questions about the live online shopping industry (or any advertising/media legal needs), reach out to us at S2 Advertising Law - michael@lawofadvertising.com or wendy@lawofadvertising.com
