LEGAL PITFALLS IN
SOCIAL MEDIA MARKETING
AND BRANDING
Presented by:
Eileen Fitzgerald Addison, Esq.
eaddison@genovaburns.com
(973) 535-7114
June 26, 2013
494 Broad Street . Newark . New Jersey . 07102
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Social Media: Definition
• Social Media: “Media designed to be
disseminated through social interaction, created
using highly accessible and scalable publishing
techniques. Social media uses Internet and webbased technologies to transform broadcast
media monologues (one to many) into social
media dialogues (many to many).” Wikipedia,
2010
• Common social media forms: blogs, company
forums, wiki sites, YouTube, Facebook, Twitter,
Friendster, LinkedIn, etc.
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FTC and Social Media
• In December 2009, the FTC updated its rules
regarding the relationships between
advertisers and endorsers for the first time
in nearly three decades. The update
included specific examples of how the rules
apply in situations involving advertisement
through social media outlets, including blogs
and message boards.
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Purpose of this Presentation
• The purpose of this presentation is to help
familiarize you with how the FTC regulates
social media advertising in order for you to
ensure that your company avoids fines while
using these outlets to advertise.
• Also familiarize you with new court rules
related to non-compete agreements and social
media
• Give you some guidance on social media
policies.
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FTC Regulates Endorsements
Made Through Social Media
• An endorsement occurs when one does something
that causes the audience to believe that their
opinion (and not the opinion of the advertiser) is
being shared.
•
Example of an Endorsement: (this is not a real blog post)
Jack Nicholson states in a blog post that he
works out at Eclipse Fitness and loves the
equipment there and all of the amenities.
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Examples (Continued)
• Note: If any endorser represents that she uses a product or services, she must be a
bona fide user of the product or services at the time the endorsement is given and
for as long as the advertisement is broadcast.
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Examples (Continued)
• A blog post made by Donald Trump
discussing the benefits of the Trump
Tower in NYC would not be considered
an endorsement under the FTC
• The audience would likely assume that
the opinion being expressed is that of the
advertiser (the Trump Tower) and not an
independent third-party
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Rules Governing Endorsements
• Companies are subject to liability for:
1. False or unsubstantiated statements made through
endorsements; OR
2. Failing to disclose material connections between
themselves and their endorsers
– Note Also: In order to use an expert or celebrity
endorsement, the advertiser must have “good reason to
believe that the endorser continues to subscribe to the
views presented.”
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Example:
A fitness center owner offers a
health and wellness blogger
$1,000 and a free one-year
membership in his flagship
club in exchange for the
blogger to write a review. In
her subsequent review, the
blogger gives the fitness center
a glowing review and
incorrectly states that there is
a juice bar and parking garage
in the building.
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Company Liability:
The company is subject to liability for the misleading
representations made through the blogger’s
endorsement. The owner could also be liable if the
blogger did not disclose the receipt of the $1,000 and free
membership.
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How to Limit Liability:
The Company Should
Make sure that the
blogger has received
training concerning the
need to ensure that
her statements are
truthful and
substantiated (as well
as the need to disclose
the receipt of gifts in
exchange for blog
posts).
Monitor bloggers who
are being paid to
promote his fitness
center and take steps
necessary to prevent
false or misleading
communications.
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Customer Endorsements
Customer endorsements must be truthful and
representative of an normal customer’s experience. For
example, if gym club amenities such as a juice bar,
masseuse, and steam room are included only in
“premium” club memberships, it would be dishonest for
an advertisement to feature a customer raving about the
“included” amenities.
Note: General “Results Not Typical”
disclaimer MAY NOT be enough to
avoid misrepresentation
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Instead use a
disclaimer that
clearly states the
typical case:
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Employee Conduct
When employees endorse their company’s products or
services they must disclose their affiliation with the
company
– This applies to all endorsements, including those
made on blog posts, in message boards, on Facebook
pages, etc.
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Example:
A salesman makes numerous
posts on the message boards of
various websites such as
menshealth.com and Patch.com
explaining why the membership
perks and amenities offered by
the club he works for are better
than all other clubs in the area.
However, he does not disclose his
relationship with his fitness
center in these message board
posts.
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Liability:
Company’s Liability: The company is liable for
violating the FTC Regulations because it is an
advertiser that failed to disclose a material connection
between itself and its endorser.
Employee’s Liability: The employee is also liable for
violating the regulation.
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Potential Penalties Under the
Guides
Practices inconsistent with the FTC Guides may result in corrective
action by the FTC, and the penalties depend on the nature of the
violation.
The remedies that the FTC and/or the courts have imposed vary
greatly, and depending on the
violation, can be quite costly.
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Potential Penalties, cont’d.
Cease and Desist Orders:
• These legally-binding orders require companies to
stop running the deceptive ad or engaging in the
deceptive practice, to have substantiation for claims
in future ads, to report periodically to FTC staff
about the substantiation they have for claims in
new ads, and to pay a fine of up to $11,000 per day
per ad if the company violates the law in the future.
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Potential Penalties, cont’d.
Civil penalties, consumer redress and other
monetary remedies:
• Civil penalties range from thousands of
dollars to millions of dollars, depending on
the nature of the violation.
• Sometimes advertisers have been ordered to
give full or partial refunds to all consumers
who bought the product.
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Potential Penalties, cont’d.
Corrective advertising, disclosures and other
informational remedies
• Advertisers have been required to take out
new ads to correct the misinformation
conveyed in the original ad, notify purchasers
about deceptive claims in ads, include specific
disclosures in future ads, or provide other
information to consumers
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How to Limit Liability:
Comprehensive policies are an
Employer’s first line of defense
against the risks inherent in
employee use of social media.
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Social Media – Policy Issues to Consider
Challenges/Considerations:
– 1st Amendment: Craft policy narrow enough to restrict
or advise only on prohibited conduct
v.
– Employment Laws: Policies need to protect employees
in the workplace
v.
– Union Activity: Enforcement: Mindful of disciplinary
action against what might be deemed protected,
concerted activity
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Social Media: Legal Risks
Overbroad Policy Provisions
In a recent report by the NLRB Acting General Counsel, several
social media policy provisions were found overly broad,
including policies that:
• Limited employees to making “appropriate” comments on
social media websites
• Prohibited comments that were of a confidential, sensitive
or non-public nature
• Prohibited employees from making disparaging remarks
about the company
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Social Media: Legal Risks
Valid Policy Provisions
The key to a valid policy provision is providing examples to
employees of what conduct is prohibited.
In other words…
BE SPECIFIC!
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Social Media: Legal Risks
Valid Policy Provisions
• Prohibiting the use of social media to “post or display
comments about coworkers or supervisors or the employer
that are vulgar, obscene, threatening, intimidating,
harassing or a violation of the employer’s workplace
policies against discrimination, harassment or hostility on
account of a protected class under state or federal law”
• Requesting that the employee confine their social
networking to matters unrelated to the Company to ensure
compliance with securities regulations and other laws
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Social Media: Legal Risks
Valid Policy Provisions
• Most recent NLRB social media report clarified that using
examples of prohibited conduct may prevent a social media
policy provision from being unlawful and overbroad
• Clear examples that prohibit plainly egregious conduct
could not reasonably be read to prohibit “protected,
concerted activities”
• Prohibition of vague “malicious, obscene, threatening, or
intimidating comments” was cured by citing examples or prohibited
conduct, including harassment, bullying, contributing to hostile
work environment, etc.
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Practical Remedies: Policies
Other Relevant Policies To Consider:
• Electronic Communications Policy
• Internet Usage/Monitoring Policy
• Anti-Harassment/Discrimination Policy
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Practical Remedies: Training
Meaningful Training Program
• A meaningful training program offered to your
employees to review these policies and guidelines will
also provide an excellent defense to your organization
for an employee’s improper use of the fitness center’s
social media policy.
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Policy Distribution And Acknowledgement
Distribute Policies and Require that Employees Sign that
they Received Policy and are Responsible for Reading it.
Several Ways To Accomplish:
• Simply handing out and signing off
• Attach to paychecks or paystubs
• Email if there is some method of tracking receipt
• In a training session or meeting so long as the
employees have to sign in
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Can you use photographs of
consumers in advertisements?
It is unlawful to use or benefit
from the name or likeness of
another for one’s own benefit
without that other’s consent.
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How to Limit Liability:
The safest way to avoid
liability is to obtain signed
releases from consumers
consenting to the use of
their photographs in
advertisements.
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Social Media and Non-Compete
Agreements
• Can simply "connecting" with professional
contacts through networking sites violate
an agreement barring solicitation?
• MAYBE, according to a fairly recent Minnesota
case, TEKsystems, Inc. v. Hammernick
• TEKsystems specifically alleged that
Hammernick violated her employment
agreement by "connecting" to the other
employees via LinkedIn
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TEKsystems v. Hammernick,
cont’d.
In addition to alleging that Hammernick
improperly "connected" with contract employees,
all of whom she was barred from soliciting,
TEKsystems claimed that Hammernick unlawfully
sent messages to these individuals through the
LinkedIn service:
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TEKsystems v. Hammernick,
cont’d.
Tom—
Hey! Let me know if you are still looking for opportunities! I would love to
have [you] come visit my new office and hear about some of the stuff we are
working on!
Let me know your thoughts!
Brelyn
Hi Brelyn,
Indeed I am still looking. I have time, though!
Let's get together. Where are you working these days? Your profile still has
you working at TEKsystems. BTW - my email address is lipidfish@gmail.com
if you would prefer the non-LinkedIn route.
Tom
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TEKsystems v. Hammernick,
cont’d.
• Although this case was ultimately settled and dismissed, the
allegations made in TEKsystems raise a number of unanswered
questions about connecting on social networking sites:
– Will individuals have to "disconnect" LinkedIn contacts or
"de-friend" Facebook friends who are colleagues, customers,
clients, or former employers until the end of restrictive
covenant periods?
– What if a former employee leaves to work for a competitor,
then updates his LinkedIn profile to reflect his new position?
– What if LinkedIn automatically messages the former
employee's contacts to announce his change in employment?
– What if the employee had "connected" with his former
employer's key customers just before quitting?
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Social Media and Non-Compete
Agreements
• Can status updates, postings, and messages on
social media sites violate restrictive covenants,
even though they are contained within an
individual's existing social media contacts?
• YES, according to the 2011 Third Circuit case,
Coface Collections North America, Inc. v.
Newton
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Coface Collections v. Newton,
cont’d.
• Newton voluntarily left his position as President of Coface
in December 2008.
• Around January 5, 2011, Newton formed, and began
actively operating, a new company, Newton, Clark &
Associates, LLC
• Around this time, Newton updated his LinkedIn profile to
reflect his new status as “Chairman of the Board” at
“Newton Clark.”
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Coface Collections v. Newton,
cont’d.
• On Facebook Newton stated that his "non-compete
ends on 12/31/2010 and I have decided that the USA
needs another excellent, employee oriented
Commercial Collection Agency.”
• Newton’s posts encouraged experienced
professionals to contact Newton or Clark Pellegrin,
also a former Coface employee, to apply for a
position with Newton Clark.
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Coface Collections v. Newton,
cont’d.
• Coface sought an injunction restricting
Newton from owning, operating, or
participating in any business "similar or
competitive to" Coface.
• Coface argued that Newton's conduct violated
several express terms of his employment
agreement, including the restrictive covenant.
• The District Court granted the injunction and
the Third Circuit affirmed.
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Social Media and Non-Compete
Agreements
• Do passive messages promoting job opportunities
on social media sites qualify as solicitations?
• Do job postings to a public group of social media
qualify as solicitations?
• MAYBE… two recent, similar cases, with different
results:
– Amway Global v. Woodward (Eastern District of Michigan)
– Enhanced Network Solutions Group, Inc. v. Hypersonic
Technologies Corporation (Indiana Court of Appeals)
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Amway Global v. Woodward
• The case focused on a blog entry in which a distributor
announced his decision to join a competitor and gave
his reasons for doing so, stating,
"If you knew what I knew, you would do what I do."
• The former employee argued that to the extent his
former employer relied upon blogs and website
postings to establish violations of the non-solicitation
provision in the Rules of Conduct, such passive,
untargeted communications fail as a matter of law
to qualify as actionable solicitations.
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Amway Global v. Woodward,
cont’d.
• The court disagreed, deciding that the statement posted
could be readily characterized as an invitation for the reader to
follow the individual's lead and join the former employer's
competitor:
"Common sense dictates that it is the substance of the
message conveyed, and not the medium through which it is
transmitted, that determines whether a communication qualifies
as a solicitation… Solicitations do not lose this character simply
by virtue of being posted on the Internet.“
• The court affirmed the arbitrator's award for a breach of a nonsolicitation provision.
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Enhanced Network Solutions Group, Inc.
v. Hypersonic Technologies Corporation
• The two companies entered into a SubContractor
Agreement through which ENS would acquire certain
services from Hypersonic to serve ENS's own clients
• Pursuant to the terms of the Agreement, the parties were to
refrain from soliciting employees of the other parties
• During the parties' contractual relationship, Hypersonic
posted an open position for an outside sales representative
on its LinkedIn web portal
• The LinkedIn posting was available for viewing by the people
who belonged to a certain LinkedIn user group
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ENS v. Hypersonic, cont’d.
• After reading the job description, Dobson, a field
representative for ENS, noticed the job posting and
informed Mettler, the President of Hypersonic, that
he was interested in applying for the position.
• Hypersonic's owner and Mettler met Dobson for
lunch in April of 2010. Hypersonic offered Dobson
the job and he accepted.
• Hypersonic filed a complaint against ENS for
declaratory judgment, seeking a decision as to the
enforceability of the Agreement.
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ENS v. Hypersonic, cont’d.
• The trial court issued an order concluding that
Hypersonic did not solicit, induce, or attempt to solicit
or induce Dobson to terminate his employment with
ENS and accept a job with Hypersonic.
• The appellate court agreed that Hypersonic did not
breach the non-solicitation clause of the agreement:
– Dobson made the initial contact with Hypersonic after reading the job
posting on a portal of LinkedIn, Dobson solicited Hypersonic, not the
other way around.
– Dobson made all the major steps to initiate conversations about the
position.
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CONCLUSION
• Make sure endorsements are truthful and honestly represent
your company’s products or services.
• Endorsers MUST disclose their relationship with your company,
even if the endorsements are limited to social media websites.
• Implement a social media policy that informs your employees
about the rules governing employee endorsements and noncompete agreements, and give examples.
• Be sure to include clear social media provisions in your noncompete agreements.
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Thank You!
Eileen Fitzgerald Addison, Esq.
eaddison@genovaburns.com
(973) 535-7114
494 Broad Street . Newark . New Jersey . 07102
WWW.GENOVABURNS.COM
973.533.0777