Another Reason for Employers to be Wary of Social Media – Unfair and Deceptive Acts
The concerns employers face over the use of social media – e.g., blogs, Facebook, MySpace, etc. – has been widely discussed, including here and here. The Federal Trade Commission (FTC) has recently added to those concerns. Specifically, the FTC updated its guidelines about protecting consumers from misleading endorsements and advertising. Under these guidelines an employer may face liability over an an employee’s endorsements of the employer’s products or services on social media websites. Further, liability may exist even where the employer did not authorize or approve the employee’s remarks.
An Overview of the Guidelines
The FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising (16 C.F.R. Part 255) (the “Guidelines”), address the application of Section 5 of the FTC Act (the “Act”) – which prohibits unfair or deceptive acts or practices and unfair competition in or affecting commerce — to the use of endorsements and testimonials in advertising. An endorsement or testimonial subject to these guidelines is one “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.” Crystal clear for all, right? Further, the Guidelines require that employees endorsing their employer’s products or services to disclose their relationship to an employer when they give an endorsement or testimonial.
The duty of disclosure applies even when the employee’s endorsement appears on a site that is not maintained by the employer (e.g., Facebook, MySpace) or the employee (bulletin boards) and the statement itself is not misleading. See 16 C.F.R. Part 255.5 (entitled “Disclosure of material connections”). See example No. 8 under 16 C.F.R. 255.5. And failing to make the required disclosure may expose the employer to liability under the Act. For example, the FTC may bring an enforcement action against an employer if an employee makes a misleading statement about the employer’s products and services that result in injury to consumers. Additionally, if I’m an employer, I would be losing sleep over the preceding example because postings on blogs, MySpace, and Facebook pages may quickly reach wide audiences and, therefore, create the risk of large-scale liability like class-action litigation.
While not the focus of this post, Bloggers should also consider how the Guidelines may apply to their posts. For example, the Guidelines apply to any endorsement of products or services. And any kind of “material connection” between an endorser (like a blogger) and an advertiser must be disclosed to the consumer, e.g., cash payments, free samples, or other benefits to the endorser from the promoter. This is not an endorsement, and even if it was (read with slight sarcasm) I have not received any benefit in connection with writing this post or referencing to the following post and I have no material connection to the brands, products, or services offered by the following post. With that smooth and beautiful literature out of the way, a post bloggers may want to review is provided by Michael Hyatt (click here) (Again – just a suggestion that you may or may not want to follow, and not an endorsement).
The Take Away for Employers
The take-away for employers is to add another item to the “Things that Keep Me Up at Night” list, followed by a note to consider reviewing the company’s technology policies with an eye towards:
- Determining if you have a policy? You may not. But you should. And if your company has a policy, what does it say about how the use of the company’s name, trademarks, and other proprietary information may be used (if at all) in blogs and other social media;
- Whether the policies include either prohibitions or proper guidance about references to company products or services. Such prohibitions and guidance should go beyond addressing just criticisms of the employer and its products and services;
- If endorsements are permitted, employees must understand (and document this understanding) that any endorsement must be limited to truthful and verifiable statements;
- Whether employees should be required (probably a good idea) to obtain prior approval by management of any proposed endorsement; and
- A requirement that an employee’s statement of endorsement is accompanied by a written disclosure that the employee is not authorized to make statements on behalf of the employer and a disclosure of the employment relationship so that consumers can weigh the testimonial. This statement should be drafted by the company and made readily available to employees.
Additionally, don’t forget to review your marketing contracts. In light of the widespread adoption of “Word of Mouth Advertising” (there is even a trade group for Word of Mouth Advertising, click here) in the Web 2.0 World (I lost track, but I think we are still on 2.0 … right???) companies should also review their contracts with any marketing professionals. This is because such advertising depends upon leveraging social networks in making a product or service go “viral.” Thus, in addition to assessing company employment policies, companies will want to make sure that their marketing contracts properly address compliance with the FTC’s Guidelines (this is a polite way of saying, make sure your marketing firm is going to defend you or reimburse you if you get sued because of an endorsement. After you do this, make sure the marketing firm has the finances/insurance to cover your defense tab – If you can’t avoid risks, make sure someone else has to cover the bill).
Feel free to contact me with questions about this post, about how your company is responding to the FTC’s Guidelines or leveraging social media in general, or about exorbitantly paying me to endorse your products or services, which I’m not above doing if the price and FTC language is right. I’m just kiddin,’ but seriously, I’m not (a little hat tip to Dodgeball).