Ankura CTIX FLASH Update - April 26, 2022

Milan Fashion Week and Fashion Law Trends: Fashion in the Metaverse – a New Era for Brands

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From updating retail experiences, to wearable technology, innovation is continuously inspiring and influencing trends and fashions. Also, following Facebook rebranding into “Meta” in late 2021, the term “Metaverse” definitely entered the common vocabulary and fashion brands are continuously seeking to conquer this new innovative world.

The Metaverse is a new virtual universe characterized by an augmented reality that combines aspects of the digital and physical worlds, allowing people to adopt new ways of digitally exploring their everyday life and living a second life through 3D avatars controlled by technology that incorporates the real into the virtual.

In this innovative context, thus, companies need to find new ways to stay relevant and the rise of the Metaverse still represents a big challenge – but also a huge opportunity – for fashion brands. In fact, innovative technology within the fashion industry is more apparent than ever. Entering the Metaverse, fashion brands transform the purchasing experience, also taking inspiration from the physical retail in order to become “phygital”. In this new world, avatars can indeed visit new malls and fashion shops that offer digital garments to be bought with virtual currency, experimenting a new kind of hyper-realistic shopping that goes beyond the traditional physical in-shop experience.

Over the course of the last year, a number of major brands have already taken a place in the Metaverse expanding their business in a variety of ways.

In particular, Nike, Gucci and Forever 21 partnered with Roblox in 2021 and invited digital customers to embark on a unique trip respectively in Nikeland, Shop City or the virtual Gucci Garden. Also Balenciaga successfully accessed Web3 through a collaboration with Fortnite, creating an authentic and exclusive collection of Balenciaga x Fortnite looks that users can purchase for their gaming avatars. Similarly, Ralph Lauren partnered with South Korean social network App Zepeto to release a virtual fashion collection for its players.

As part of fashion’s integration into the digital landscape, also the Fashion Week has gotten “phygital”. Brands like Dolce & Gabbana, Etro and Elie Saab took part in the first Metaverse Fashion Week that was run in Decentraland in 2022, featuring luxury brands, household names and digital-native designers promoting their collections at 3D catwalks and exclusive events.

Alongside the development of more diverse worlds and fashion experiences, brands also exploit NFT projects and more 3D designer engagements. In particular, Dolce & Gabbana bagged the record for the most expensive suit ever sold, a digital Glass Suit, which fetched the Italian brand a cool $1 million late last year, whereas Gucci’s Queen Bee Dionysus virtual bag has been recently sold for 350,000 Robux (an in-game currency) meaning $ 4,000 (that is more than the bag’s real-life valuation). Louis Vuitton, instead, launched a new video game that allows players to hunt for 30 NFTs hidden within its digital world. Such NFTs then permit to gain access to various exclusive events organized by the luxury brand.

If the Metaverse is plenty of new opportunities, it is also full of risks. In fact, companies operating in the Metaverse shall be ready to redefine their strategy to duly consider the relevant regulatory framework and the legal issues that may arise in this new age. In particular, the creation of new virtual worlds populated by our avatars may arise issues concerning the processing of the user-avatar’s personal data collected in the Metaverse, as well as regarding the regulation of the contractual relationship that may be established within it.

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In particular, brands must ensure that users and their avatars benefit from the protection reserved to them as consumers also in the virtual B2C retailing world. It is now a consolidated principle that consumers who buy online, wherever they are and whatever brand they are buying from, can benefit from the protection granted to them by the laws of their country of residence that are more favorable to the consumer himself, even though they may differ from those applicable to the seller. In light of the above, the same rules shall also be applied in the Metaverse to protect avatar-consumers.

Entering the Metaverse is also about marketing a fashion brand to a new community made up of players and their avatars meaning consumers who are immersed in the Metaverse and likely willing to connect virtually with beauty and fashion brands.

These can include influencers who, even in their virtual form, promote the most famous brands, sponsoring their products and services (the so-called “virtual influencers”). By way of example, Meta’s platforms now host more than 200 virtual influencers, including Nefele, the twins Eli and Sofi, Shudu, Lil Miquela, Noonoouri, Rozy and the virtual streamer CodeMiko that is well-known on Twitch.

There are already many fashion brands that are turning to these virtual influencers to advertise their products. Examples include Rihanna, who chose Shudu to promote her cosmetics brand Fenty Beauty, as well as Prada, Chanel, and Fendi that have been collaborating with the famous Lil Miquela for years. This means that new forms of commercial communication are developing and brands shall not forget to comply with the legal requirements for advertising even in the Metaverse.

In fact, from a self-disciplinary perspective, the transparency obligations to comply with are those already set forth in the Digital Chart Regulation, whereby even virtual influencers are required to explicitly declare the advertising nature of their contents published online, where it is the result of commercial agreements, identifying it through hashtags such as #ad, #adv or #sponsored or, alternatively, #suppliedby or #giftedby in the case of goods or services received without a compensation for their advertising.

In this regard, the Italian Istituto dell’Autodisciplina Pubblicitaria (IAP) and the Italian Antitrust Authority (AGCM) have reiterated the principle that not declaring the advertising nature of a content means violating the Code of Marketing Communication Self-Regulation and engaging in an unfair business practice. Thus, the fundamental principle underlying all advertising regulations is the prohibition of hidden advertising and the need for commercial communications to be transparent, clear and fair.

In addition, it is necessary to make the unreal nature of these characters on the platforms used to convey advertising messages explicit, so that the user is aware that he or she is interacting with an avatar and not a human. Indeed, companies should aim to develop technologies that are both ethically and morally reliable in order to be useful for society and commensurate with human needs.

Therefore, although the metaverse represents an opportunity to evolve the manner in which companies interact with their customer/user base, it is fundamental that the new virtual world is able to provide avatars with the same legal protections gained by consumers in the physical world.

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Source article at www.lexology.com

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