PR News’ Twitter Conference

MANAGING LEGAL RISKS IN SOCIAL MEDIA

November 10, 2011

Allison Fitzpatrick

Partner212.468.4866afitzpatrick@dglaw.com

© 2011 Davis & Gilbert LLP

Managing Legal Risks in Social Media 1

POTENTIAL LEGAL RISKS ON TWITTER AND IN SOCIAL MEDIA

»FTC Endorsement and Testimonial Guides»Twitter Sweepstakes and Contests »Twitter Terms of Service »Twitter Squatting

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COMPLIANCE WITH FTC ENDORSEMENT GUIDES

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FTC ENDORSEMENT AND TESTIMONIAL GUIDES

»FTC Endorsement and Testimonial Guides revised as of Dec. 2009

»FTC has long held that “material connections” (e.g., payments or free products that the consumer would not expect) must be disclosed

»Applies to blogs and social media

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BLOGGING/TWEETING

»A blogger/word-of-mouth marketer has a duty to disclose whether received free products or payment from marketer

»Celebrities have a duty to disclose their relationships with marketers when making endorsements outside the context of traditional ads, such as on talk shows, blogs or in social media

»Employees who promote their employer’s products or services in social media should clearly and conspicuously disclose their employment relationship

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FTC ENFORCEMENT – ANN TAYLOR LOFT INQUIRY

»FTC declined action against Ann Taylor for providing gift cards to bloggers who posted about their collection were:- There was a sign at the event instructing

bloggers to disclose the gifts if they posted about the event

- By time of action adopted written social media policy for bloggers

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FTC ENFORCEMENT –REVERB COMMUNICATIONS

»In 2010, the FTC settled with Reverb Communications, Inc., a California-based public relations firm in the video game industry, and its sole owner Tracie Snitker

»Endorsed their clients’ gaming applications by consistently giving their client’s applications four or five stars or by positively commenting on them- Prohibited from making endorsements unless they

prominently disclose their material connections- Snitker duty to notify FTC of her

business/employment for period of 5 years

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FTC ENFORCEMENT –LEGACY LEARNING

»In March, the FTC settled with Legacy Learning and its sole owner Lester Smith- “Review Ad” affiliate program encouraged affiliates

to promote courses by posting positive endorsements in articles, blog posts and other online editorial copy

- Generate commissions ranging from 20% to 45%- No disclosure of material connection or buried in

hyperlinks

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FTC ENFORCEMENT –LEGACY LEARNING

»Settlement Terms: - Pay $250,000 - Implement a monitoring program for their

affiliate marketers • Top 50 earning affiliates• Random sampling of another 50 affiliates

- Smith duty to notify FTC of his current business/employment for period of 5 years

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50 CENT / TWITTER INCIDENT

»50 Cent (Curtis Jackson) Tweeted (Jan. 2011) –“HNHI is the stock symbol for TVG there launching 15 different products. they are no joke get in now”- Curtis Jackson owns 7.5 million shares &

warrants for 22.5 million more »“(My) own HNHI stock thoughts on it are my opinion.

Talk to (a) financial advisor about it. HNHI is the right investment for me it may or may not be right for (you)! Do ur (sic) homework”

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ASHTON KUTCHER AND SOCIAL MEDIA

»While serving as guest editor of online Details magazine, Kutcher failed to disclose his investments in Internet companies profiled (Foursquare, Flipboard etc.)

»NY Times article raised questions whether he would face FTC investigation

»FTC official said he could be investigated

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WHAT CAN WE LEARN FROM THE FTC’S ACTIONS

»Implement a social media policy for all bloggers, word of mouth marketers and employees (Ann Taylor)

»Provide training to spokespeople on making appropriate disclosures

»Companies may be held liable for their affiliate marketers’ failure to disclose material connections

»Owners of companies may be held individually liable for violations

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WHAT CAN WE LEARN FROM THE FTC’S ACTIONS (continued)

»Companies have an obligation to monitor theirendorser’s disclosures and to act on their non-compliance

»Companies should cease sponsoring endorsers who do not adhere to social media policy

»Disclosure should not be posted on an ABOUT US or GENERAL INFO page or behind a poorly labeled hyperlink or in site’s terms of service

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WHAT SHOULD BE INCLUDED IN A SOCIAL MEDIA POLICY

»Comply with FTC endorsement guides and disclose your connection to company

»Give your honest and truthful opinion »Only make factual statements that are truthful and

can be verified»Respect intellectual property rights»Reserve the right to monitor and terminate if not

in compliance with social media policy or all applicable laws

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HOW TO MAKE A DISCLOSURE IN SOCIAL MEDIA

»There is no special language but the goal is to effectively communicate your relationship with the marketer- Acceptable:• “Company gave me this product to try….”• “Some of these products I’m going to use in

the video were sent to me by Company.”

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HOW TO MAKE A DISCLOSURE IN SOCIAL MEDIA (continued)

- Not acceptable: • “Many of the products I discuss on this site

are provided to me free by their manufacturer”• Button that says DISCLOSURE or LEGAL• ABOUT US or GENERAL INFO

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HOW TO MAKE A DISCLOSURE ON TWITTER

»How can I make this disclosure on Twitter?- #paid ad- #paid- #ad

»Word of Mouth Marketing Association (WOMMA) also suggests:- #spon- #paid- #samp

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HOW TO MAKE A DISCLOSURE ON TWITTER

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PROMOTIONS ON TWITTER

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RULES ON TWITTER

»Post abbreviated rules in successive tweets»CMP.LY for Rules»Include a link to Official Rules or abbreviated

rules in tweet

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»In June 2009, website builder Moonfruit conducted a Twitter promotion where users who sent a Tweet with the hashtag #Moonfruit received an entry to win a Macbook - No limit on number of entries- With no explanation, Twitter discontinued the

promotion- Users complained that the promotion

encouraged user-generated spam

TWITTER PROMOTIONS

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TWITTER TERMS AND CONDITIONS

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TERMS, CONDITIONS, POLICIES, GUIDELINES, yada yada…

»Twitter- Terms of Service- API Terms of Service- Guidelines for Use of the Twitter Trademarks- Guidelines for Use of Tweets in Broadcast or

Other Offline Media

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TWITTER – TERMS OF SERVICE

»You retain rights to any content you submit…By submitting, posting or displaying Content on or through the Service, you grant us a worldwide, non-exclusive, royalty-free license (with the right to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods (now known or later developed)).

»You agree this license includes the right for Twitter to make such content available to other companies, organizations or individuals who partner with Twitter…

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TWITTER IMPOSTERS -A NEW FORM OF CYBERSQUATTING

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TWITTER SQUATTING

»La Russa discovered that someone set up a Twitter account bearing his name

»According to the complaint filed in May in California, one tweet of the now-deleted account read: “Lost 2 out of 3, but we made it out of Chicago without one drunk driving incident or dead pitcher”

»For those who don't follow baseball, Cardinals pitcher Darryl Kile died in his hotel room in 2002 of a heart attack and relief pitcher Josh Hancock was killed in a car accident while driving under the influence

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KEY POINTS

»Make sure you have a social media policy for all bloggers, word of mouth marketers and employees

»Despite character limitations, material connections must be disclosed on Twitter (e.g., #ad)

»Promotions on Twitter must include Official Rules»Check all Twitter terms before doing anything with

tweets or on Twitter»Do not engage in Twitter squatting

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QUESTIONS?

Allison Fitzpatrick

Partner

212.468.4866afitzpatrick@dglaw.com