Top Issues for Safeguarding Brand Reputation When Engaging In Social Media Activities

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1 Top Issues for Safeguarding Brand Reputation When Engaging In Social Media By: Alan L. Friel, Akash Sachdeva, Jesse Brody and Jatinder Bahra Social media has changed the way people communicate, and enabled brands to directly engage with consumers and companies are turning to social media platforms to structure innovative and edgy marketing and promotions, that often include a mix of user-generated content, text messaging, Twitter messaging, Facebook applications, blogging, viral marketing and other social networking elements. However, the tech-savvy marketing professionals that are entrusted to do so are often unaware of the complex legal overlay of the digital world and the potential pitfalls for their company s failure to comply. In working closely with our clients engaged in social media marketing, we have identified the following top compliance issues to consider: 1. Statements made in social media will be held to the same standard as traditional advertising claims. Laws regarding advertising and consumer protection apply equally to social media and traditional mediums. All claims must be substantiated and the message taken as a whole must not be deceptive. If the message cannot be made in an ad or commercial, it cannot be made via social media. 2. Companies may be responsible for what their customers, employees, celebrity spokespersons and contractors say about them in social media. The Federal Trade Commission ( FTC ), which regulates deceptive advertising and unfair business practices, updated its Endorsement and Testimonial Guidelines specifically to address use of social media to promote a company or its products or services. Other countries have similarly applied their consumer protection and advertising laws to social media. In the U.K. the Advertising Standards Authority and the Office of Fair Trading ( OFT ) have actively done so. In short, if there is a material connection between the speaker and the company, it must be disclosed in a clear and conspicuous manner proximate to the message. Employees, contractors and spokespersons have a material connection because they are all paid. However, merely giving a blogger free products to sample and write about or sweepstakes entries to consumers each time they Tweet may also be enough to trigger disclosure requirements. The FTC and OFT have initiated investigations and enforcement actions against companies that gave gift bags to bloggers attending an advance product demonstration, paid for blog posts, and gave sales lead commissions to bloggers that linked readers to an e-commerce site all where the bloggers failed disclose they got something of value from the company.

2 3. Where the company does not review and approve social media messages of those with material connections to it before they are publicly distributed, it needs a program to train and monitor those that speak for it and to take corrective action when violations occur. Frequently, in social media promotions it is not practical for the company to review and select or approve the messages its social media influencers are making. The FTC will nonetheless hold the company liable if its influencers fail to make the required disclosures or if they make false, misleading, atypical or unsubstantiated claims. To minimize the risk of this happening, companies need to educate their influencers on what the law requires and how to comply, require them to follow these rules, make reasonable efforts to monitor them and take appropriate corrective action for violations. 4. Maintain a good social media policy, which influencers are contractually obligated to follow, may help to stave off liability. Although the FTC has stated that having a good social media policy and compliance program is not a safe harbor, it will take such efforts into account in exercising prosecutorial discretion. Indeed, after investigating a failure by paid bloggers to disclose their connection to an automaker, the FTC closed its investigation when it was shown that the brand had a policy that was followed, which required educating bloggers on their obligations and contractually required them to comply. 5. Be careful about restricting employee speech in your social media policy and using social media to make human resource decisions. To avoid running afoul of the FTC s requirements, many companies have simply prohibited employees from using social media to talk about the company or its products or services absent company review and consent. However, the National Labor Relations Board has been very active in investigating companies taking this approach for illegally restricting an employees right to organize and to speak about the conditions of their work and workplace. The laws protecting employee rights are even more protective of employee speech in the U.K. Accordingly, social media policies need to be carefully tailored not to infringe upon employees rights. You social media policy should, however, address ownership of the company s social media accounts and the account s followers, especially when the account is opened by an employee on behalf of the company to avoid problems when account operators leave. Six states in the U.S. have passed laws that prohibit requiring applicants to make their social media accounts available to a potential employer so that it may review private content. Similar laws are under consideration in other states. These password disclosure requirements would also violate the fundamental right of privacy in Europe. Further, even looking at publicly available social media profiles and postings of job applicants might create problems, for instance where sexual orientation, religion or political affiliation is learned and is alleged to be the basis of a decision not to hire. If a company is going to include a review of public social media content as part of its pre-employment screening, it may want to

3 consider having that done by a party that will not be making hiring decisions and have that person provide to the decision makers only information that would be appropriate in making legal hiring decisions. Finally, taking disciplinary action against employees for their off-duty speech, unrelated to the company and on their own social media accounts could potentially violate employee rights. 6. Consider the medium, platform, industry and jurisdiction in designing compliance efforts. There are specific regulatory requirements, including opt-in or opt-out options, for using e- mail, social media system messaging and text messaging for promotional messages. In addition, social networks have their own terms of use, end user license agreements, privacy policies and rules that govern the use of the platform for commercial purposes and the ownership of content and data passing through the platform, which should be carefully considered before a third party platform is incorporated into a company s promotional marketing. Also, there are a myriad of additional requirements applicable to specific regulated industries such as food, alcoholic beverages, drugs, tobacco, telecommunications, insurance, financial services, gambling, automobiles, gasoline and health care. 7. Special considerations for children. As of July 13, 2013, the U.S. Children s Online Privacy Protection Act ( COPPA ) Rule will prohibit use of social media plug-ins on children s sites, or to be knowingly used in connection with children under 13 years of age. Similarly, online behavioral advertising ( OBA ) and use of persistent identifiers for other than limited internal operational purposes is prohibited for children and children s sites. This not only means no integration of social media into children s sites, but it means even operators of mixed use and general audience services will need to disable social media tools if they become aware that a user is 12 years of age or under, such as may be the case if a user attempts to register or enter a sweepstakes indicating an age under 13 years. 8. Respect third party intellectual property and publicity rights and determine an appropriate policy regarding ownership of user submitted content. Laws in various jurisdictions, the nature of the platforms selected and the manner in which a social media promotion is structured will affect the degree to which companies will be responsible for infringement of third party rights arising out of user generated content promotions, including claims of copyright infringement and defamation. Further, in the U.S., a company must have consent to associate a person with the promotion of a company or its products or service. Failure to obtain adequate permission to do so has led to lawsuits against brands arising out of social ads on social media platforms (e.g., Alan liked Acme) and adding uncleared photos of individuals on Facebook Timelines. For these reasons, companies should be cautious with repining, re-tweeting and reposting.

4 Before launching functionality on a company web site or mobile app that will allow a user to post or submit content (even if it is just a feedback form), you need to assess whether and to what extent you want to claim ownership of that content or take a license from the user in that content, to guard against theft of idea or intellectual property claims from the users. To the extent user-generated content will be publicly posted, and a company merely takes a nonexclusive license, it may be possible to take advantage of certain protections afforded online operators under two U.S. laws, the CDA and DMCA, from some but not all types of content-related infringement and tort claims. European laws offer less protection for online publishers. A company runs the risk of losing protection under these laws depending upon the degree of involvement they have with the user-generated content and depending upon whether certain requirements have been met. 9. Perform diligence on vendors and obtain an indemnity in your contract with them. Companies frequently engage vendors to help execute social media campaigns. Often, these vendors come out of the public relations and web development industries, which do not have the same culture of legal compliance as advertising agencies. They may also be small and lack any legal counsel or the ability to stand behind a meaningful indemnity. Undertake due diligence regarding the company and its ability to comply with laws and indemnify the company for any failure to do so. Vendor agreements should include specific compliance obligations (including following the company s social media policy and requiring it to educate its employees and subcontractors) and warranties and an indemnity. Consider requiring vendors to maintain errors and omissions and cyber-liability insurance coverage. 10. Don't forget about social media evidence in litigation. If your company is involved in litigation, chances are social media evidence could be relevant. Although the best known uses of social media evidence tend to be in employment discrimination, disability, or personal injury cases where a party s lifestyle or physical or mental condition is directly at issue, there are even areas of intellectual property litigation where social media evidence can be important. Whether it is using corporate tweets as evidence in a false advertising case or LinkedIn connections to show a business relationship between two individuals in a trade secret or patent dispute, be prepared to ask for, and hand over, social media postings during discovery in litigation matters. Remember that a user s restrictive privacy settings do not immunize his or her postings from discovery. Anything potentially relevant, whether or not it is viewable by members of the public, is discoverable. It also is critical to preserve social media evidence, just like other types of evidence, as part of litigation hold. Content on your organization s blogs, Facebook Pages, and other social media accounts most likely continually evolves, with some posts being regularly deleted. However, when faced with litigation, failure to preserve such information could violate discovery obligations. Remind employees about social media sources in particular when issuing litigation holds, and, if necessary, use forensic collection tools designed to capture social media information for discovery, ensuring that metadata - important for authentication purposes - remains intact.

5 Social media is an important and effective way for brands to engage with consumers. However, doing so presents numerous regulatory, intellectual property, labor and employment and other potential liability issues. Edwards Wildman s U.S. and U.K. Advertising, Marketing and Promotions and Digital Media and e-commerce practices regularly assist companies in developing appropriate social media policies, executing social media promotions and contracting with social media promotions vendors. For more information, contact the authors.