Could Your Company’s Social Media Activities Expose You to Legal Liability?

Last year, Cole Haan Inc. received a letter from the Federal Trade Commission (FTC) that alleged its photo contest on the popular social media website, Pinterest, violated Section 5 of the Federal Trade Commission Act. This contest incident proposes to all business owners, could your company’s social media activities expose you to legal liability?

According to the FTC, the shoemaker should have more conspicuously disclosed that users tagging their photos with hashtag #wanderingsole were offered a financial incentive to participate in the contest. Because many businesses are similarly unaware of their legal obligations in regards to their company’s social media activities, the FTC recently updated its enforcement guide regarding the use of endorsements. The revised “FTC’s Endorsement Guides: What People Are Asking” addresses the use of endorsements on a number of social media platforms, including YouTube, Facebook, and Twitter.

Under the FTC Act, businesses are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. The FTC defines endorsement as any advertising “that consumers are likely to believe reflects the opinions, beliefs, findings or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.”

In its latest guidance, the FTC makes it clear that the rules regarding false advertising apply equally to online activities. Although the FTC does acknowledge that it can be more difficult to determine every circumstance in which such rules apply, it does offer a few key takeaways:

Social media contests: The FTC presents the following scenario as an example of a social media contest that fails to properly notify readers that the post was incentivized: “Participants have to send a Tweet or make a pin with the hashtag, #XYZ_Rocks.” According to the agency, it is likely that many readers would not understand such a hashtag to mean that those posts were made as part of a contest or that the people doing the posting had received something of value (in this case, a chance to win the contest prize). As for what does work, the FTC advises that including the word “contest” or “sweepstakes” as part of the hashtag should be sufficient.

Employee endorsements: If your company allows employees to use social media to talk about your products, the FTC advises that you should make sure that the relationship is disclosed to people who read the employee’s online postings about your company or its products. The agency further states that the employees listing where they work on their profile page isn’t enough because not everyone will read the profile.

Outsourcing social media: While many companies use public relations or marketing firms to manage their social media, the FTC makes it clear that your company is ultimately responsible for what others do on your behalf. It recommends making sure that the firm has an appropriate program in place to train and monitor members of its social media network.

Do you have any feedback, thoughts, reactions or comments concerning this topic? Feel free to leave a comment below for Fernando M. Pinguelo and follow the twitter accounts @CyberPinguelo and @eWHW_Blog for timely comments on related issues. If you have any questions about this post or would like assistance with your legal needs, please contact me or the Scarinci Hollenbeck attorney with whom you work. To learn more about data privacy and security, visit eWhiteHouse Watch – Where Technology, Politics, and Privacy Collide (http://ewhwblog.com).