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Tech & Sourcing @ Morgan Lewis


In a recent article in The Wall Street Journal, market researcher eMarketer estimated that this year’s worldwide mobile advertising market budgets will be $69 billion in the aggregate. The article also cited analysts’ estimates that consumers will spend a significant amount of their time on mobile devices on apps owned by major social media companies. Wanting to be front and center with consumers, larger companies are increasingly using mobile apps and platforms for major portions of their ad spend but should consider the following potential legal pitfalls to reduce risk while maximizing mobile advertising and marketing capabilities:

  • Failure to Comply with Terms and Conditions. Each social media app and/or platform has specific rules applicable to using the app or platform for advertising and/or promotional purposes. For example, all major social media platforms have policies specific to advertising and promotional activities and periodically change those policies. These policies often include requirements to include a complete release of the social media platform by each entrant or participant and an acknowledgement that the promotion is in no way sponsored, endorsed, or administered by or associated with it and prohibit use of certain features to conduct promotions.
  • Failure to Consider Applicable Laws. App and platform terms and conditions generally also require compliance with all applicable laws, statutes, and regulations. The following are some relevant areas of law in connection with mobile advertising and promotion:
    • Sweepstakes Law. Many companies develop promotional programs described as contests or drawings for prizes to increase brand awareness and engage with their consumers. Failure to consider applicable laws in this area is potentially risky. For example, sweepstakes are subject to various federal, state, and country-specific laws; sometimes require registration (and payment of fees); and can easily be characterized as an illegal lottery if not structured appropriately. Implementation and enforcement of sweepstakes laws has never been consistent, and the laws have not been adequately updated to address the use of social media in connection with sweepstakes, making the use of mobile advertising a potential area for significant reputational and monetary risk. Clear promotion rules (drafted or reviewed by legal counsel) and compliance with laws is essential in this space.
    • Federal Trade Commission. The Federal Trade Commission (FTC) protects consumers against deceptive trade practices. FTC regulations are often overlooked when companies develop promotional materials based on examples that they saw online or that are drafted by a contractor who is only concerned about the creative content.
    • CAN-SPAM Act. If the promotion involves emailing promotional materials (directly from a company or even via a “friend” who provides a company with email addresses of his or her friends), companies must comply with the CAN-SPAM Act or face serious criminal and/or significant civil (monetary) penalties. Further, if companies conduct cross-border marketing campaigns, country-specific antispam laws should be reviewed for compliance.
    • Privacy. Because mobile advertising and marketing often involve interacting with customers and/or collection of customer information, the privacy policy applicable to a promotion should be available to customers and should clearly address the use of the information gathered in connection with the promotion.

When a company uses mobile apps and/or platforms to advertise and market itself and/or its products, it is important to comply with the rules of the specific app or platform, as well as all applicable laws and regulations. Although some companies either loosely comply or choose not to comply at all with such rules, laws, and/or regulations, larger companies are a potential target for consumers and for agencies tasked with enforcing consumer protection regulations. If companies plan to use mobile apps and/or platforms for their advertising and marketing programs, they should consult with their legal advisers to ensure that any advertising and marketing programs being implemented by companies (or by a marketing contractor on behalf of a company) comply with applicable rules, laws, and regulations. This approach will allow companies to expand their advertising and marketing presence in a way that meets their business goals without increasing potential liability.