Note: This article originally appeared in The Wall Street Journal on December 31, 2014.
The marketing landscape is evolving faster than the speed of light, fueled by changes in technology and marketing strategies that are creating enormous legal challenges for brands. The laws have not kept pace with technology, yet many of the marketing practices that are integral to today’s hottest digital media trends are very much a focus of current regulatory scrutiny and raising novel legal issues. Heading into 2015, the following issues stand out as creating the most significant legal challenges for marketers.
1. Heightened Regulatory Scrutiny
Perhaps the greatest legal challenge that marketers currently face is heightened regulatory scrutiny of marketing practices at the very core of many of today’s most popular digital media campaigns. This includes the Federal Trade Commission’s (FTC) expanded enforcement of its testimonial and endorsement guides, focus on native advertising and demand for increasingly prominent disclosures in advertising.
The FTC’s Testimonial and Endorsement Guides require that any “material connection” between an advertiser and endorser must be disclosed. Recently, the FTC’s view of what constitutes an endorsement and what constitutes a material connection has become so restrictive that even the most benign social media campaigns could be implicated.
In a case involving a Cole Haan sweepstakes in which winners were asked to pin five images of Cole Haan shoes onto a Pinterest board to enter, the FTC determined that the mere act of pinning an image constitutes an endorsement and that a sweepstakes entry was a material connection that had to be disclosed. The FTC also recently reached a settlement with Deutsch L.A. after the agency asked employees to tweet about a client and employees did not disclose that they were employees of client’s agency.
As brands increasingly look to consumers to blog, tweet and post photos of their products, they should be mindful that even these simple interactions with the brand or the brand’s product, if incentivized in any manner, could trigger these endorsement guides.
The FTC has also set its sights on native advertising, particularly the blurring of advertising and editorial content. The FTC is demanding greater transparency and disclosure of the sponsored nature of content. With recent data showing that consumers are five times more likely to click on a native ad compared to a traditional ad, marketers will be increasingly challenged to preserve the organic nature of the content, while at the same time satisfying regulators’ demands for greater transparency.
2. Privacy and Data Security
With retargeting, personalization and big data emerging among the top media trends, we can expect concerns over privacy and data security to take center stage this year. Even if Congress is not successful in implementing new privacy legislation, marketers can expect the FTC and the class action bar to remain vigilant in scrutinizing companies’ marketing and data practices.
As the channels through which data is being collected and shared become more complex, brands will be increasingly challenged to understand exactly what information is being collected and how, and with whom and how it is being shared. This will require closer alignment between data specialists within companies and their privacy counsel to ensure that privacy policies accurately reflect existing privacy practices. The vast majority of privacy cases brought in 2014 resulted from the failure to honor stated privacy policies and promises. And as the sheer volume of data being collected, including highly sensitive data, continues to increase, concerns over data security and potential breaches will likewise intensify. The high-profile data security breaches that occurred at Target and other top retailers should be a stark reminder to marketers of the reputational damage that can result from the failure to properly secure sensitive data.
3. Respecting and Protecting IP Rights
The social media world is built on a culture of sharing—sharing photos, videos, tweets and posts. That culture, however, is creating enormous challenges for brands who are struggling to determine where the boundaries of intellectual property lie. What is the legal status of a hashtag, can consumer tweets and posts be shared, can they reach out and “touch” or communicate with consumers who have commented on their brands? While social media platforms may permit sharing, the rules of engagement for brands are different as copyright, trademark and laws of privacy and publicity may apply.
This year, Duane Reade’s retweeting of a photo of Katherine Heigl holding a Duane Reade bag resulted in a $6 million lawsuit that ultimately settled. These and similar questions are likely to continue to plague brands. Furthering this challenge, real-time marketing has become the new norm requiring that these decisions be made quickly. Witness the speed with which the now famous Oscar night selfie was retweeted across the globe. Brands will have to assess their own risk tolerance levels and adopt policies and procedures that afford marketers the flexibility to react in real time, while not creating undue legal risk for the company.