Metaverse Brand Activations: A Practical Case Study with Chipotle

July 27, 2022

Chipotle was the first restaurant brand to open a virtual location on Roblox and the first restaurant brand that allowed players to exchange virtual items in the metaverse for real world items. Chipotle legal and marketing executives discussed how brands can address practical considerations and legal issues associated with metaverse marketing, while maintaining a focus on the business objective of delivering an innovative marketing campaign.

Key Takeaways

“Metaverse” first appeared in the 1992 sci-fi novel Snow Crash to describe an immersive virtual reality world to escape life in the real world. It’s a term that refers to new ways for users to interact with the internet and technology, not a single type of technology. It may include:

The metaverse ecosystem is made up of different networks where a user can play, socialize, dress up, create, and work. It does not exist in a single location. Some of the most common examples include Roblox, The Sandbox, Fortnite, and Decentraland. On the other hand, The metaverse is not to be confused with Meta, a platform with a stated focus on the future of the metaverse.

The metaverse allows brands to connect with the next generation of its superfans, while also providing marketers with new ways to build relationships with existing fans. The metaverse’s underlying technology expands the aperture of what’s possible for brands and businesses and how they show up in the future for their consumers.

From a legal perspective, even though the metaverse is a new medium, traditional legal principles still apply concerning consumer protection law, false advertising, contract law, and intellectual property. The popularity of the metaverse has outpaced lawmakers, regulators, and even litigants. The medium is so new that there have been very few lawsuits.

The metaverse exists on third-party platforms. Key considerations for brand activations in the metaverse include:

Audience: Is your target audience active on the platform?

Terms of Service and Platform Policies: Do the platform terms and policies permit the type of activation that the marketing team wants to launch? If not, the platform may terminate the activation or take other corrective action to enforce its terms.

Official Relationship or General Platform User: Is the brand working with the platform in an official capacity or is the brand going to activate on the platform as a general platform user?

Metaverse activations require work with specialized developers who have creative and technical skills required to make the marketers’ vision a reality on the target platform. Many developers in the space are early-stage companies comprised of expert platform users.

Contracts with developers should cover:

  1. Intellectual property ownership: Leveraging development for future programs and protection for the company if the marketers select a different developer in the future.
  2. Clear obligations throughout the lifecycle: Key milestones and schedule for delivery, ongoing maintenance and support, issue escalation and response plans.
  3. Representations and warranties
  4. Indemnities
  5. Insurance

Legal uncertainty is leading brands to seek expanded registered rights to cover the metaverse, NFTs, and web3 uses of trademarks. In July 2022, the European Intellectual Property Office (EUIPO) released trademark filing guidance for virtual goods, NFTs, and the metaverse, which are open for comment through October 3, 2022. The U.S. Patent and Trademark Office (USPTO) has begun to issue first office actions for digital goods and metaverse-related filings. Additionally, the USPTO and U.S. Copyright Office launched a joint study of issues related to NFTs. Some brands have opted to rely on existing trademark presentations for real-world goods and services.

For promotional activations in the metaverse (i.e., sweepstakes/contests, premium offers, privacy issues virtual currency), traditional consumer protection rules apply, pending further legal and regulatory developments. Any promotional offer or limited access should be governed by a set of terms and conditions stipulating the offering, eligibility, and limitations while incorporating key protections for the brand. The contract should ensure that the terms align with the platform terms and policies.

Metaverse platforms are the latest space-constrained medium online where brands are faced with making important disclosures to consumers to avoid an “unfair or deceptive act or practice.” Content published by brands in the metaverse is brand advertising even if it does not pose a specific commercial transaction. The Federal Trade Commission (FTC) guidance in its .com Disclosures (guidance on making disclosures in digital advertising, applying advertising law principles to the digital world) applies to disclosures in the metaverse until new updates are released. In June 2022, the FTC solicited comments related to its plans to revise the .com Disclosures seeking public comment about whether revised guidance should specifically address advertising in the metaverse.

Components of the FTC’s .com Disclosures include:

  1. The same consumer protection laws that apply offline apply online.
  2. Advertisers should incorporate limitations and qualifying information into the claim instead of relying on a separate disclosure.
  3. Disclosures must be clear and conspicuous.
  4. Hyperlinks are permitted in space-constrained formats, subject to specific requirements.
  5. Avoid scrolling to display a disclosure.
  6. Disclosures must appear before consumers make a decision to purchase, repeat disclosures in lengthy formats or for claims made multiple times.
  7. If the disclosure cannot be made in a way that meets these requirements, or a platform does not accommodate clear and conspicuous disclosures, the advertisement should not be distributed.

To meet the “clear and conspicuous” standard, disclosures should be placed in close proximity to the triggering claim, viewable across all platforms and devices where the ad or ad content is viewable, prominent and unavoidable, and stated in clear language that is easy to understand. Ads should be reviewed from the perspective of a reasonable consumer.

The metaverse exists on third-party platforms that may have routine updates, maintenance, or other activities that affect a brand activation. Platform outages may cause a brand activation to be partially or wholly unavailable. Brands should proactively include protective provisions in terms and conditions that govern the experience / promotion to permit the brand to modify or discontinue the experience/promotion based on the impact of the unexpected event.

With regards to metaverse influencers, FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising set out general principles that apply to the use of paid endorsers in advertising. They require that endorsements reflect the honest opinion of the endorser and that any unexpected material connection between a brand and an endorser be clearly and conspicuously disclosed. “Material connection” is broadly defined to include any form of value exchange or unexpected relationship. If an unexpected material connection exists and it is not disclosed, the endorsement is misleading and could expose the endorser, the advertiser, and the advertiser’s agency to liability.

Metaverse influencers may be activated to promote the activation on social media outside of the platform (e.g., standard influencer services) or to attend the activation during a specific window and interact with other users within the metaverse activation.

Advertisers who engage influencers to attend metaverse activations and interact with consumers should:

  1. Consider how the influencers can clearly and conspicuously disclose their relationship with the brand in interactions with consumers. The disclosure can be organic to the messaging, but should be easy to understand and hard to miss.
  2. Provide instructions to influencers on how to make disclosures including pre-approved scripts.
  3. Include a contractual requirement in influencer contracts to comply with the FTC disclosure requirements.

CLE Materials

Source

“Brand Activations in the Metaverse: A Practical Case Study with Chipotle.” Mike McGawn, deputy general counsel of operations at Chipotle; Candice Beck, director of social media and influencers at Chipotle; Jenny Williams, social and digital activations manager at Chipotle; James Stewart, an associate at DLA Piper. 2022 ANA Law Virtual One-Day Conference, 7/27/22.

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