Matthew Piston Casual - Evans Fox LLP

When Your Endorsing Celebrity Falls From Grace

Celebrity endorsements and collaborations can really boost sales of a product, especially in the craft beer and spirits industry. Followers of the celebrity will be introduced to your product, bringing a new customer base and potentially increasing your market to new geographic regions. Your product can rapidly “go viral” and increase your brand presence in the marketplace.

However, there is another side to the coin. If the celebrity falls from grace, your brand reputation can be tarnished and suffer from the association with the disgraced celebrity. Scandals are in the news all of the time, especially for sports figures: Lance Armstrong, Ryan Lochte, Maria Sharapova, and Abby Wambach to name a few. Scandals also follow musicians and actors but the public seems more forgiving of their transgressions, even enhancing their public popularity at times. Depending on the scandal, a brand owner may need to disassociate with the celebrity endorser to prevent negative publicity and media attention to the brand. Despite the popular adage, not all publicity is good publicity.

This is where a written celebrity endorsement agreement is essential. It gives the brand owner the right to terminate with nothing more than a written notice in most cases. Without a written contract giving the affirmative right to terminate the contract on those grounds, it is not so clear what rights each party has in the situation. A brand owner may end up paying the endorsement fees to the celebrity as agreed, even if chooses not to use the celebrity because of the scandal. A simple written agreement avoids this altogether. (There is also insurance protection for this situation called “death & disgrace” insurance that can be explored with your insurance agent.)

Most agreements with celebrities have these “morality clauses,” but they differ in terms of what types of scandals give rise to the brand owner’s right to terminate and what the celebrity’s compensation rights are (or if the celebrity may owe the brand owner for damages). Many clauses use broad definitions like “offense against public decency,” “brings the celebrity into disrepute.” These terms are subjective and can be open to interpretation. For example, is a DWI arrest or conviction shocking in this day and age? Is a womanizer’s solicitation of a prostitute shocking? Is a musician’s use of cocaine so unexpected it is against public decency under modern moral standards? There is also the situation where the celebrity’s character, reputation, and behavior have always included the alleged disgraceful behavior. Is it a breach when the celebrity acts as he or she always has? Is that why they are a popular celebrity in the first place?

Having clearly defined procedures in place can be essential to minimizing damage in this day and age when news goes viral in a matter of hours. These celebrity endorsement agreements are easy and affordable protection. Be careful about using a one size fits all template agreement if the damage to your brand could be more than a few thousand dollars. In that situation, a custom agreement is the better decision to protect the brand reputation that you have worked hard to earn from the public. The investment can give you more ROI than one situation. Once
you have a custom agreement that works for your business, addresses your particular needs and morality standards, you can likely use that agreement as a template for future situations with other celebrities.