Archive for May, 2009

Has your company created a social media policy yet? It’s probably a good idea to think about doing it now, rather than later when the !@#%$ hits the fan. You know that your employees are social networking, both personally and on behalf of your company and your clients (if you are an agency). But you may not have thought about the fact that if the employee’s messages are in furtherance of the company’s or its client’s goals, the employee’s statements may be attributable to the company, even if only made on the employees own social networking pages during their own time. Over-arching issues you are going to have to consider are those relating to false advertising, intellectual property, as well as SEC compliance.

Disclosing material connections and what it means for you

Most notable are those issues that relate to the FTC’s recent proposed changes to the Endorsement and Testimonial Guidelines. One issue you are going to have to deal with is “disclosing material connections”.  Specifically, the FTC has taken the position that employees who post endorsements on message boards on behalf of their company or their clients should disclose their connection with the company. They also have taken the position that bloggers who receive a free product from an advertiser must disclose the gift when making an endorsement of the product, even if the endorsement reflects the honest opinion of the blogger. The FTC believes that consumers would not otherwise expect these kinds of connections, and thus, the required disclosure. This gets pretty tricky when you try to deal with it from practical perspective. For example, if I become a fan of the new KFC Grilled Chicken on Facebook, isn’t that an endorsement of the product? If so, in becoming a fan, do I have to disclose that I do legal work for KFC? I hope not, because this doesn’t even seem possible.

Understand the  “typicality of consumer experience”

In the proposed changes to the Endorsement and Testimonial Guides, the FTC indicated that a consumer’s product endorsements will be interpreted as a “typical” experience such that an endorser’s experience needs to be representative of what consumers will achieve, otherwise the endorser must disclose the generally expected performance (and have proof of it). Interestingly, they indicated that the old “results not typical” disclaimer isn’t good enough. It’s not entirely clear how this issue will shake out in the final rule, but in the meantime, it certainly raises issues from a social media perspective. Is the FTC saying that when you give a blogger some free product to try and they blog about their personal experience with your product, that you have to somehow get them to disclose what a typical consumer’s experience is with the product? I just can’t get my head around how a company could get a blogger to disclose the typical experience of other consumers, which it probably doesn’t even know.

Reducing your company’s liability

The FTC did provide some nice guidance with regard to how an advertiser can reduce their liability when using social media. In particular, the FTC indicated advertisers who hire blogging and other similar services should:

1. Require companies to provide guidance and training to their bloggers about the need to be truthful and to disclose material connections;
2. Monitor the bloggers to confirm compliance with the training; and
3. Take action to have posts removed that don’t comply with the guidance and training when they are identified.

Notice that the FTC doesn’t seem to be maintaining a zero tolerance policy, but rather is asking companies to take good faith attempts to assure that its guidelines are followed.

These materials have been prepared by Winston & Strawn for informational purposes only. These materials do not constitute legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code.