Social Media Legal Risks: Seven Ways to Maintain Social Media Marketing Legal Compliance

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In October 2009, the Federal Trade Commission released it’s updated “FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.” The purpose of the update was to address the increasing use of endorsements by consumers, experts, organizations and celebrities in online marketing. The update is particularly relevant to the explosive growth of social media as a marketing tool.

The updated FTC Guides contain two notable areas of concern for marketers. First, the Guides removed the safe harbor for advertisements featuring a consumer’s experience with a product or service, the so-called “results not typical” disclosure. Second, the FTC Guides underscored the longstanding principle of disclosing “material connections” between advertisers and the consumers, experts, organizations, and celebrities providing reviews and endorsements of products and services.

Even with the illustrations provided within the FTC Guides themselves, it is still confusing for advertisers, marketers, bloggers and social media users to know how to comply with the guidelines. The purpose of this article is to provided simple, concrete standards to determine (1) when to make certain disclosures and (2) the type of disclosures required by the situation. I have grouped the disclosures into seven categories: Personal Opinion, Free Samples & Free Gifts, Promotional Relationship, Employment Relationship, Affiliate Relationship, Healthcare Disclosures, and Financial Guidelines & Disclosures. The key requirement to keep in mind is the obligation to disclose any relationship that may have influenced you.

1. Personal Opinion

If you write a review or blog post and your post contains only your own opinions, you haven’t received any compensation for the review or post, and you otherwise have no material connection to the topic of your post, you have nothing to disclose.

2. Free Sample/Free Gift

If you have been given a free copy, sample, or gift of a product or service and you write a review or blog post, you must disclose the facts and circumstances of how you received the item or service, even if you have not been paid to review or post on that topic. You do not run afoul of the disclosure rules if you receive payment unrelated your content. This disclosure is useful to keep in mind when your content relates to product previews, reviews of samples, services, gifts, books, software, music, movies, etc.

3. Promotional Relationships

If you write a review or blog post and your post is based upon an advertising relationship, and you have received compensation (cash, free services, product samples for personal use or a gift) for the review or post, you must disclose the nature of the relationship, whether you received anything of value, and information about relationships with advertisers or endorsers that would have a material impact about how a prospective consumer would view the message. This disclosure is useful to keep in mind when your content relates to paid posts, sponsored messages, tweets, fan page postings, etc.

4. Employment Relationships

If you write a review or blog post and your post is based upon an employment relationship, e.g. you are an employee or shareholder of a related company, you have a “material business relationship” to disclose, even if you are not being directly compensated for the message. You may post on behalf of a business or brand. In fact, it may even be part of your job description. Again, be mindful of the requirement to disclose any “connections” that may have influenced you, including both direct and indirect relationships.

5. Affiliate Relationships

If you write a review or blog post and your post is based upon an affiliate relationship, e.g., you have included affiliate links on your page, you must disclose the fact that the relationship exists and that you will be paid for referrals from your page.

6. Healthcare Disclosures

If you write a review or blog post and your content is based upon a connection to a pharmaceutical or healthcare product or program, you need to include relevant healthcare-related disclosures or information safety warnings, side effects, or official links with information.

7. Financial Guidelines & Disclosures

If you write a review or blog post and you work for a financial services company, you may be making investor-relations communications and your communications are subject to regulation by the NASD, SEC, FINRA and potentially state and federal regulatory agencies. The FINRA Guidance on Blogs & Social Networking Sites” can be found here. Record Retention: ensure that you can retain records of those communications. Suitability: a particular communication a “recommendation” for purposes of NASD Rule 2310 and is it suitable for potential recipients. Public Appearances: determine whether  your post part of an “interactive online forum” and whether supervision is required. Third-Party Posts: If your firm created or “sponsors” and online forum, be aware that, under certain circumstances, a customer’s or other third party’s content on a social media site may become attributable to the firm. Whether third-party content is attributable to a firm depends on whether the firm has (1) involved itself in the preparation of the content or (2) explicitly or implicitly endorsed or approved the content.

Clearly, legal and regulatory compliance for social media remains a minefield. Although this article is intended to give you a working knowledge of the types of risks created by, and disclosures required for, the use of Social Media, it is NOT LEGAL ADVICE. Each situation is unique and you should consult with qualified legal counsel regarding your specific circumstances.

ABOUT THE AUTHOR

David M. Adler, Esq. is an attorney, author, educator, entrepreneur and partner at the boutique intellectual property, entertainment & media law firm LEAVENS, STRAND, GLOVER & ADLER, LLC based in Chicago, Illinois. My responsibilities include providing advice to business units and executives on copyright, trademark, ecommerce, software/IT, media & entertainment and issues associated with creating and commercializing innovations and creative content, drafting and negotiating contracts and licenses, advising on securities laws and corporate governance and managing outside counsel. Learn more about me here: www.ecommerceattorney.com and here: Leavens Strand Glover & Adler, LLC.

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5 thoughts on “Social Media Legal Risks: Seven Ways to Maintain Social Media Marketing Legal Compliance

  1. […] #ABA #ABAEntLaw What to disclose and how on Soc. media: adlerlaw.wordpress.com/2011/08/24/soc… […]

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  2. […] For concise guidance on when, how and what to disclose, see my article here. […]

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  3. […] FTC guidelines in the areas of advertising any marketing, as well as consumer privacy and security, have raised […]

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  4. Jina says:

    It highlights another feature of network marketing and is the teamwork and support.
    Social media is a powerful tool that can be
    used to build brand awareness and develop customer relationships.
    Video marketing needs a special mention as it is
    very effective in conveying a company’s ideas, products, services, and values to a large global audience.

    Like

  5. […] First, identify and disclose a material connection between a product user or endorser and any other party involved in promoting the product. A “material connection” is a relationship that affects the credibility of an endorsement and wouldn’t be reasonably expected by consumers. See our article about complying with the endorsement guides here. […]

    Like

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