Paris, New York, Milan… and Decentraland?

The first metaverse Fashion Week launched in 2022, providing an excellent example of the new advertising opportunities available to brands like Dolce & Gabbana who participated. But how does metaverse advertising differ from other types of media and what legal issues do brands need to consider when venturing into this exciting new space?

What might a metaverse ad campaign look like? 

Metaverse campaigns have taken a variety of forms and are sure to keep evolving. Some have opted for hybrid events, like Gucci Garden, an interactive virtual exhibit that mimicked a physical experience in major cities. In Tommy Hilfiger’s metaverse pop-up, users could purchase a clothing NFT and redeem it for a physical counterpart. Others use the metaverse as a brand promotion tool. In Nikeland, users play games and clothe avatars. Balenciaga has created wearable NFTs for avatars, who can model pieces and be featured on billboards in Fortnite.

Whose ad rules apply? 

The first step to understanding advertising rules in the metaverse is working out which countries’ regimes apply. The decentralised nature of the metaverse might make it harder to work this out. But existing rules on online advertising are relevant, such as UK regulator the Advertising Standards Authority's (ASA) 2021 Online Remit Guidance. This sets out various principles which can cross over to a metaverse environment, such as:

• Paid-for ads that target UK consumers are in the ASA’s scope. Aspects such as currency and language are used to establish targeting, although in a metaverse scenario (where products may be priced in crypto) it may be harder to determine targeting. 

• Non-paid-for ads fall within the ASA’s scope where the advertiser is UK-based. Regulators are likely to increasingly need to collaborate with their counterparts in other jurisdictions such as through the European Advertising Standards Alliance in tackling metaverse ads, given their cross-border nature.

What are the key obligations for metaverse advertising? 

Existing rules apply to advertising in the metaverse, but the new context may change how these apply and their significance. Key risk areas that brands should have front of mind include:

• Ensure advertising is recognisable as advertising. The immersive nature of the metaverse can increase the risk of consumers not spotting what is advertising and what is not. Content displayed in ad spaces which replicate the real world, such as billboards, are less likely to be mistaken for other content. But when NFTs, clothing, advergames and avatars are presented in the metaverse, it may be unclear what is advertising and what is not, with text-based labels potentially harder to incorporate.

• Influencer advertising has been a focus for regulators for some time (see the DLA Piper Influencer Marketing Guide) and avatar influencers can expect no exception. How do you #ad an avatar? 

• Adverts that purport to mirror how a real-life article of clothing would fit or look such as displayed on avatars could give rise to claims of being misleading. Again, there is the issue of where and how disclaimers could effectively be incorporated. 

• Ads for age-restricted products must be handled particularly carefully to ensure targeting restrictions are not breached. For example, in the UK, products such as gambling, alcohol, high in fat, salt or sugar (HFSS) foods and cosmetic interventions should not be targeted at children. In a metaverse context, the proliferation of young audiences, use of avatars and the interconnected and decentralised nature of the platform raise new challenges with age verification and targeting.

• Brands deploying gamified advertising should consider the rules on in-game purchasing (particularly the needs for clarity on terms and to avoid unduly pressuring users).

• Brands who are releasing NFTs should be aware that they may be treated as cryptoassets, so additional obligations apply (in the UK, see the ASA’s guidance which includes the requirements to make investment risks clear and not to take advantage of consumers’ inexperience). 

Overall, while the issues thrown up by advertising in the metaverse are not new, the medium certainly creates heightened risks in some areas (particularly given its immersive nature, appeal to young people and connections with NFTs and gaming), and so is likely to draw regulator attention for the foreseeable future.  

London-based DLA Piper Partner John Wilks has extensive experience in a range of domestic and international intellectual property issues, advertising and marketing law, breach of confidence and data protection work. He can be reached at [email protected]. Hannah Potter is a trainee solicitor and is currently seconded to a client.