Social Media Advisor – FTC Says To Be Careful What Your Employees Say

                        Many commentators – including us – have analyzed and described the potential perils to employers in conjunction with the use of social media.   The focus of many of those discussions has been centered on issues such as potential liability for discrimination, alleged violation of privacy rights, and the likelihood of unauthorized disclosure of trade secrets and other confidential or proprietary information.

                        However, on December 1, 2009, the United States Federal Trade Commission (“FTC”) revised its rules pertaining to the use of endorsements and testimonials in advertising in a manner that has a direct impact on the use of social media by businesses and their employees.    The new FTC rules highlight the need for employers to understand the need to pay attention to what their employees do and say as it may relate to the products and services offered to the general public, and to create and effectively communicate workplace policies on social media use.

                        The purpose of the FTC’s new rules is to apply the use of advertising endorsements to Section 5 of the FTC Act, which prohibits certain unfair and deceptive practices in commerce.    An “endorsement” is defined by the FTC’s rules to include:

“any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) 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.”   

                      The FTC’s rules should be considered by any company that has employees who may be blogging opinions about the company’s products or services. An employer can face potential liability for opinions offered by its employees, even if the opinions are not authorized or sponsored by the company in the first instance.   According to the FTC’s rules, any endorsements “must reflect the honest opinions, findings, beliefs, or experience of the endorser,” and “many not convey any express or implied representation that would be deceptive if made directly by the advertiser.”   Under these regulations, the company would be the “advertiser” and an employee blogger would be an “endorser.”   In fact, the rules specifically address blogging and the duty to monitor blogging when an individual (particularly those paid) are speaking about the company’s products or services:

“In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.”

                    Beyond the general considerations set forth, the FTC’s rules generally address (i) endorsements by consumers, experts, and organizations, and (ii) disclosure of relationships between the endorser and the advertiser of the product or service.    Thus, certain guidelines must be followed when one is deemed to be a consumer speaking about the performance of a product or service, as well as when one holds himself or herself out to be an “expert” in the particular field discussed, as it relates to some aspect of a product or service such as quality, price, or uniqueness.   Again, an employee discussing any aspect of the employer’s products or services may fall within the reach of the FTC’s guidelines.

                    Finally, the FTC’s rules provide that any individual who is endorsing a product or service, and who also has a “connection” with the seller of the product or service, must disclose that connection. Thus, for example, an employee who provides testimonials about her employer’s products would need to disclose the fact that she is an employee of the company.  

Employer Take Away – What should every employer take away from this development?

(1)       In light of the FTC’s rules, employers should consider and devise a strategy addressing the extent to which they may want employees to communicate with the general public over the Internet about their products and services, or the extent to which such communications are likely to occur even without knowledge or authorization, given the nature of particular employees’ roles.

(2)        It is also imperative that employers adopt an appropriate policy generally on social media use by their employees, and communicate and train employees on those policies. Such policies should include, at a minimum, the types of posts and statements that are inappropriate and unacceptable, prohibitions on certain company- and client-related disclosures, and appropriate direction for disclosing the employee’s relationship with the company. Maintaining effective policies will minimize the risk of potential liability for statements made by employees about the employer’s products and services through blogs and other forms of social media.  

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