Hidden Legal Landmines in Managing Social Media Proliferation

Today, The Altimeter Group released its new report  “A Strategy for Managing Social Media Proliferation” authored by Jeremiah Owyang. (See below.) In the report, Altimeter explains that companies’ resources are strained to manage all their social media operations and may need the help of outside vendors. The report offers a fascinating look at the current chaotic state of social media management and some possible solutions.

I would like to add some cautionary legal strategies to the mix.

Who owns your social media accounts? Altimeter’s report highlights that companies may have as many as 178 discrete social media accounts, not including employee accounts. I would wager that few of these companies have thought through the legal implications of who owns the intellectual property associated with the brand accounts and the employee accounts. The ongoing battle between PhoneDog and Noah Kravitz may prove instructive on this point in 2012. (I will be blogging more about that dispute. Check back often for updates.)

• Practice point: Establish ownership in writing BEFORE launching social media accounts. Do this in employee manuals, policy statements, and contractually with employees, and consider filing for trademark registrations to protect your monikers.

Outsourcing could be an invitation for disaster. Altimeter warns that the marketplace has a low barrier to entry for social media vendors, and consequently, companies need to understand their vendors’ capabilities and weaknesses before hiring them. Altimeter recommends a full test drive of products before hiring. There is another elephant in the room, however: legal liability. Social media vendors, as a whole, do not accept legal liability for their work. They are typically unwilling to warrant the legality of content or indemnify against enforcement actions. What happens if data security is breached? Who is clearing the sweepstakes that the vendor is helping you post to Facebook? And who is bearing the risk of liability? Digging even deeper, I wonder if most brands are investigating the patents of their vendors to determine if they are vulnerable. Imagine the business interruption after hiring a vendor, becoming reliant on them, and then losing them to a patent infringement lawsuit.

• Practice Point: Before you hire one of the vendors mentioned in Altimeter’s report or any other vendor, look carefully at your contract and assess not only potential legal liability but how the vendor will work with you to avoid an investigation or crisis from occurring in the first place.

Policies are not sufficient. Altimeter recommends the use of third party experts and taking the time for policy development. But policies, in and of themselves, may be insufficient. Take the FTC’s November, 2011 investigation of Hyundai Motor America regarding potential violations of the FTC’s Endorsement and Testimonial Guidelines. It seems an employee at Hyundai’s media agent had sought to induce a small group of bloggers with gift certificates to comment on Hyundai’s Super Bowl ads or link to videos. There was a happy ending for Hyundai in this investigation since the FTC determined that Hyundai did not know that its agency had provided the incentives, that the blogger recipients were few in number, and some had disclosed the material connection. The FTC noted that Hyundai and the media partner had established policies requiring bloggers to disclose compensation. Furthermore, the media firm rectified the situation as soon as it learned that its rogue employee had instructed bloggers improperly. But the FTC reminded the public that this was a fact specific inquiry and that advertisers are responsible for the actions of its agencies.

• Practice Points: The FTC’s Business Center blog offers the first practice point here. In December, describing the Hyundai case, it offered a new mnemonic, “M.M.M.” to help guide brands into compliance with the FTC’s Endorsement Guides: 1) Mandate a disclosure policy that complies with the law; 2) Make sure people who work for you or with you know what the rules are; and 3) Monitor what they’re doing on your behalf. I offer another practice point: It is essential to have your policies dictated by your practices and not the other way around. A policy crafted by an attorney in isolation from company marketing efforts will not serve you. Legal should be involved in the social media planning audit that Altimeter recommends from the inception and throughout all initiatives.

For more information on the Hyundai matter, see:

• FTC Blog Post
• FTC Closing Letter (PDF)