Leveraging the Schooling Effect: Opportunities and Challenges in Asian Sponsorship Deals

CELEBRITY endorsements are a multi-million dollar business and especially prominent in the world of sports. Companies such as Nike, Under Armour, Puma and Omega spend millions of dollars securing prized endorsements from famous athletes such as Michael Phelps, Usain Bolt and Serena Williams.

Here in Singapore, we are already witnessing the “Schooling Effect“, with various brands seeking to leverage the star power of Singapore’s first ever Olympic gold medallist. While celebrity endorsements can be a great way to build awareness of and position the brands, there are some important legal and commercial considerations for brands to bear in mind. Here are our eight key takeaways for brands.

Have a contract in place

This is to avoid false celebrity endorsement, where it appears that there is an endorsement by a celebrity for a brand when there is in fact none. The celebrities have a right to take legal action against a brand if the brand comes across as misrepresenting its association with the individual. They may be allowed to do so to protect them against damage arising from a false claim or suggestion of endorsement of a third party’s goods or business. In some cases, celebrities have registered intellectual property rights such as trademarks and these could also be infringed where there is no contract in place. In short, tread carefully when leveraging star power.

Be clear as to what the celebrity must do

For example, how many shoots must the celebrity show up for? Are they doing sponsored tweets? If so, how many and when? Do they have to seek approval before posting comments on social media? Clearly defining the celebrity’s responsibility goes a long way in avoiding future disagreements.

Protect yourself from brand damage

By connecting your brand with a celebrity, you obviously hope to generate substantial goodwill. By the same token, however, if there is an incident involving the celebrity with adverse media coverage, then that could actually damage your brand or adversely affect the reputation of your business. This is usually addressed through contractual protections, including commitments from the celebrity and termination rights.

Define and scope out exclusivity

This will ensure that the value of the investment on the celebrity endorsement will not be eroded because of an association between the celebrity and a competitive product. As a rule of thumb, the endorsement deals should set out the period and scope of exclusivity. You might want to prohibit the celebrity from undertaking incompatible or potentially offensive, inappropriate or controversial marketing programmes. Consider whether the celebrity should seek approval before entering into any other endorsement. It is also important not to agree to contracts that conflict with one another.

Stay tuned to sponsorship issues and restrictions, especially with sports events

For example, in the past, Olympics athletes were prohibited under International Olympic Committee (IOC) rules from tweeting about non-official sponsors. With the recent changes to IOC’s rules, athletes can now endorse non-official Olympic sponsors on social media but they need to be careful not to suggest that they are an official sponsor of the Olympic Games themselves. There can be similar issues with other large international sporting events.

Beware of ambush marketing: Non-sponsors of the Olympics are also not allowed to feature Olympic athletes that they have sponsorship deals with in ads. The IOC has always taken a very hard stance on this issue because it considers it as “ambush marketing”. The IOC is keen to protect sponsorship as a key source of its revenue. Simply put, ambush marketing is seen as a way for companies to leverage the Olympics by creating an unlicensed association with the games. According to reports, the IOC has recently written to the Singapore National Olympic Council on concerns over companies in the city-state associating their name with Joseph Schooling. Various other companies and countries have also been warned by the IOC in the past on similar issues.

Protect ownership of intellectual property rights

the endorsements should state that all content – whether created or contributed by the celebrity or featuring the celebrity on all media, including online content, television and social media – are owned by or assigned to the brands for an unlimited period of time. Of course, the celebrity should retain his or her image rights but grant the brand a licence to use them as part of the campaign.

Decide what approvals the celebrities have over the materials

On one hand, celebrities may want approval rights on the use of their name, photographs and likeness to protect their reputation. However, they should not be able to withhold approvals unreasonably and there should be a defined process around it. For example, brands could set out the scope of materials for approval and a timeframe within which the celebrity must approve the materials.

All good things must come to an end

It is important to have safeguards in place in the event of termination or expiry of the endorsement deals. Key termination clauses to include are: (a) termination (and disclaimers) rights if the athlete is injured, suspended for doping or bad behaviour; and (b) winding down period of the product endorsements for a temporary period of time after termination or expiry.

With thanks to Matt Pollins of Olswang Asia

*Article is published on The Business Times and Singapore Law Watch.  

Yos Pang

Author: Yos Pang

Yos is a commercial tech and media lawyer, with a strong background in intellectual property, at Holborn Law, an independent Singapore law practice that works in association with CMS.

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