Outside Publication

Marketing Through Social Media, The Recorder

November 02, 2012

Reprinted with permission from the November 5, 2012 issue of The Recorder. (c)2012 ALM Media Properties LLC. Further duplication without permission is prohibited. All Rights Reserved.

In the past five years, social media use by businesses and consumers alike has grown exponentially, as have the platforms available for use. These social networking platforms have become popular household references, commonly relied on in all facets of consumers' lives. The popularity of these platforms has attracted businesses of all types to social media. Social media platforms provide a cost-effective means for all businesses to reach a broad range of consumers, not just tech-savvy consumers. By way of example, at the end of 2011, Whole Foods reportedly had 2.1 million consumers following its Twitter feed.

Nonetheless, companies often enter the social media marketplace by simply spending the five minutes or less needed for creating a profile on a social media platform. Somehow, social media platforms, given the easy-to-use formats and casual style, easily lull businesses into abandoning standard legal principles applicable to advertising and marketing, let alone complying with the newer rules designed to address specifically misleading consumers on these new platforms, such as the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertisings.

As the FTC guides recognize, in marketing activities on social media, companies need to adhere to "old-school" principles as well as "new" principles designed specifically to address consumers' need for accurate and not misleading information on social media. Just because tweets only can consist of 140 characters does not mean that a company is absolved from complying with consumer protection, false advertising standards or the FTC guides. From generally complying with state and federal legal requirements covering marketing and advertising activities to specifically complying with the FTC guides, companies need to proactively and continually address risks arising from the use of social media to avoid legal pitfalls as well as to maintain strong brand identities.

Internal Social Media Guidelines

To begin with, every business should implement a program to continually educate employees about how to use social media, including creating written internal guidelines addressing the company's social media activities. From social media, marketers often see what is "hot" among consumers and think they can engage in the same activity. In less than a year, Carly Rae Jepsen's popular hit song, "Call Me Maybe," has engendered hundreds of parodies from one by Cookie Monster to one by the United States Olympic swimming team. The swim team parody was posted on YouTube on July 26 and in less than three months has had 8,740,696 YouTube views - an advertiser's dream. Yet, if a business did a "Call Me Maybe" parody video to promote its brand, it could well find itself in a lawsuit over a host of legal issues, including copyright and right to publicity claims, among others. What might be protected free speech for consumers does not automatically translate to protected speech and prudent marketing for a business. Nor should companies assume that just because a competitor or another company engages in a social media activity that the company can and should imitate that same activity. These types of common assumptions should be addressed in social media guidelines to simply remind employees that social media does not eliminate intellectual property, false advertising and other legal risks for marketing and advertising activities. The same advertising and marketing rules apply to the new medium along with additional rules. Indeed, social media's inherent nature likely increases those risks, since oftentimes social media activities are widely shared and become more readily discoverable.

As part of social media guidelines, companies should assess social media platforms and identify those that best meet business needs. A bank, an alcoholic beverage company or other types of companies operating in regulated environments may have needs that are not met by a social media platform's standard terms of use. If those circumstances exist, a company needs to consider how it can address its regulatory needs on the platform through the implementation of its own terms of use or ultimately choose to use a different platform where it can better assure regulatory compliance. Likewise, if a company is concerned about negative social media comments, it needs to identify which social media platforms provide the company an opportunity to block "unwanted" followers or moderate posts, and to encourage or require use of those platforms rather than others.

The fact that the social media arena is no different than traditional media as to the disclosure of confidential and other business information may seem self-evident, but the fast, and seemingly, off-the-cuff nature of social media can inadvertently create mishaps. Thus, social media guidelines and training should always include at the very least reminders about use on social media of:

  • Confidential business information, including new product plans, unannounced financial results, pricing information and stock prices.
  • Personal opinions and views as opposed to opinions and view of the business.
  • Comments about competitors and their products.
  • Comments on legal matters.
  • Insensitive statements, including those that might be construed as discriminatory, harassing or culturally misguided.
  • References to individuals unaffiliated with the business. For example, it is one thing for a celebrity to state that he or she loves your product unprompted, but right to publicity issues may be raised if you start promoting the celebrity's use of your product without consent.
  • False, inaccurate or misleading information.
  • The intellectual property of others, including trademarks and copyrights.

Overall, the guidelines should set out the company's best practices for social media initiatives, including the goals for managing, monitoring and posting on social media. Given the evolving nature of social media, it is also prudent to establish how new approaches and issues can be efficiently and effectively addressed and evaluated by the company before implementation, so that the company can remain nimble, but at the same time act in a prudent business manner to avoid unwarranted legal risks. In fact, the guidelines should not be viewed as set once issued, but should be reviewed regularly to assess new platform issues and keep current with evolving legal principles.

Guidelines for Web Endorsements and Bloggers

In addition to guidelines as to how the company can use social media, guidelines also need to address how third parties can and should use social media on the company's behalf. Companies should implement guidelines specifically for blogging and bloggers, and endorsers with whom the company works. The FTC guides make it clear that publication and implementation of a policy or guidelines on endorsements and bloggers and blogging can influence the nature and likelihood of FTC action. Although failure to follow the FTC guides is not in and of itself illegal, business practices that stray too far risk being investigated. If the business practice is found to be misleading, inaccurate or unfair under §5 of the FTC Act, an FTC proceeding could be commenced invoking the act's attendant penalties, followed by possibly claims asserted by others under applicable state laws.

The FTC Guides reinforce fundamental principles of advertisements and marketing. Endorsements must (a) be truthful and not misleading; (b) be based on proof that the endorser's experiences with the product are typical or disclose conspicuously the typical experience; and (c) disclose any connection between the endorser and the company that would affect the reasonable consumer's evaluation of the product. The FTC generally does not distinguish between mediums as to these fundamental principles.

There are certain specifications, however, that the FTC made applicable to social media to protect consumers. It is important to recognize that social media may create more ambiguities about needed disclosures than traditional media. While consumers, through long experience, may understand that celebrities are paid to appear in television ads promoting a company's products - so that disclosures as to payment may not have to be explicit - that is not the case for an endorser's product references on social media. The nature of social media creates a very different environment. It is much harder to know whether a person has been paid or received free goods from a company when she simply tweets, likes, posts, pins or blogs about a product or company. Indeed, because of the seemingly personal nature of the Internet, consumers may be surprised to learn that the person praising a product online or in a blog received the product for free or at a discount. Thus, the FTC Guides require disclosures whether in tweets, blogs, posts or videos of a relationship with the advertiser or marketer. Given the nature of social media that is not always easy. How do you disclose in a 140-character favorable tweet that you received the product at a discount? Rules about this type of issue and others continue to evolve, but at a minimum whether by words or a hashtag indicating that the tweet is an ad or sponsored, some disclosure of a relationship should be made so as to avoid misleading consumers.

Across online media, commercial relationships can be important to consumers, but disclosures can be tricky. Is it enough to list in your blog or profile that you are an employee or that you have a relationship with a company or the product that you post about? The answer is it all depends. For example, is it unclear that the product on which you are commenting relates to or is made by your employer, or can your comment be forwarded to another consumer who would not have access to your profile? If the answer to either question is in the affirmative, it is prudent to disclose the relationship in or with your product comments even if a more general disclosure appears on a personal profile. Similarly, if a business gives free goods or compensates bloggers for referring to their products on their blogs or reviews, the business should have a policy that bloggers or endorsers disclose the relationship with the business when commenting on the business or its goods or services. This includes disclosures in connection with what might be characterized simply as positive product comments on third-party sites.

Under the FTC guides, the business as well as the blogger can be responsible for the nondisclosure by a third party who has been compensated or even just given free goods or discounts. In fact, the FTC has more often focused on businesses for its enforcement activities than on bloggers.

Conclusion

Social media platforms have forever changed the business/customer relationship, challenging businesses fundamentally to reappraise the way they market and advertise, while at the same time requiring compliance with existing as well as new legal requirements. Having policies in place, educating employees and third parties about these policies, and assessing compliance are important to effectively using social media to create a strong brand presence while minimizing legal risks.

Rochelle D. Alpert is a partner in the intellectual property practice in Morgan, Lewis & Bockius's San Francisco office. She can be reached at ralpert@morganlewis.com.