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Adopt an Appropriate Social Media Policy in Light of the FTC’s “Endorsement” Rules

Seal of the US Federal Trade Commission (FTC)People are now sharing with the world their thoughts on any subject have exploded both in number and popularity.  Since the beginning of online discourse, employers have been concerned that employee criticism of their products and services being publicized in cyberspace could have a negative impact on business.  Due to recent federal regulations, employers now have to worry that they may be liable for unauthorized positive statements made by their employees about their products on social media websites.

Effective December 1, 2009, the FTC implemented new guidelines concerning endorsements and testimonials in advertising.   On October 6, 2010, I wrote about the new FTC guidelines prior to the guidelines becoming effective.  On October 16, 2010, I also posted about a comment made by the FTC concerning the degree in which they might enforce the new guidelines against bloggers.

Although at first glance, the regulations appear to relate to statements made by consumers, experts, organizations and celebrities, employers must be mindful of the section addressing employee blogging. In a nutshell, if an employee makes a statement on a social media website such as Facebook or a blog concerning his or her employer’s products or services, the employer may ultimately be held liable for damages a consumer suffers if the consumer claims to have detrimentally relied upon that employee’s statement in purchasing the company’s products or services.

 An “endorsement” is defined as “any advertising message . . . 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.”

 “Endorsers” and companies must fully disclose any connection between them “that might materially affect the weight or credibility of the endorsement.”   If a blogger posts a statement about his or her employer’s product or service, the FTC has taken the position that a person “should clearly disclose her relationship to the manufacturer to members and readers of the message board,” on the theory that a consumer’s understanding of the “poster’s employment likely would affect the credibility of her endorsement.”

 In the absence of the disclosure of such a “material connection,” an employer could find itself liable for damages suffered by a consumer who relied upon an inaccurate, inappropriate statement by one of its employees. Potentially, the aggrieved consumer might turn the claim into a class action. The FTC guidelines state, however, that employers who have established appropriate procedures governing employees’ endorsements on blogs and the like would be less likely to be prosecuted by the FTC in an enforcement action. As stated in my earlier posts, the FTC has also stated that it would not likely prosecute employers for the actions of “rogue employees.” But there is no guarantee that employers would be completely insulated from liability as a result of the actions of “rogue employees” either from FTC enforcement or from consumer litigants.

At this stage in the development of social media, and with the clear prospect of governmental regulation in this area, employers implement and enforce a social media policy (and provide training to their employees with respect to the policy) that either prohibits employees from making comments on-line concerning the employer’s goods and services, or requires employees to disclose their employment relationship when publishing any such on-line commentary.

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