False advertising on social media has been a problem since companies first harnessed its power as a sales tool. One of the earliest examples was the apparently independent blog ‘Wal-Marting Across America’, on which a couple wrote about their positive experiences of the chain as they travelled across the United States in 2006.

The exposure appeared too good to be true, which in fact it was –. ‘BusinessWeek’ subsequently revealed that the couple had received financial and logistical support from Wal-Mart through an interest group set up by its PR firm. Once the scheme was exposed, Wal-Mart pulled the plug and the PR adviser was forced to apologise.

Despite the potential for embarrassment, businesses continue to sail close to the wind. In the UK, the Advertising Standards Authority recently ruled against Nike for failing to inform consumers that tweets from footballers Jack Wilshere and Wayne Rooney were, in fact, marketing communications,; while hair salon Toni & Guy was censured after a TV celebrity’s postings were found to breach the watchdog’s code.

In China, too, the brand manager of infant formula company Meng Niu and employees of a Beijing internet PR consultancy were arrested in 2010 for allegedly making false posts that defamed the safety of rival Yili’s QQ Star Children’s Milk.

Last February it was reported that the State Administration of Industry and Commerce (SAIC) had taken action against the Chinese merchant Paris Wedding Dress after a representative posed as a consumer to post comments in praise of its services on a public forum. Action was also taken against a Shanghai company for employing agents (also known as ‘internet review packagers’) to post hits, comments and favourable reviews about its products.

The phenomenon is a particular concern for the authorities in Hong Kong and China, where social networks are arguably more powerful than anywhere else in the world. Social media penetration rates and smartphone usage in Hong Kong are among the highest in the world (double the global average and much higher than the United States), while more than half of China’s 600 million internet users actively participate in social media.

Data metrics consultancy Nielsen has described Chinese micro-blogs as ‘the key social media source for all user needs, including news, connecting with friends, and entertainment’.

In a country where purchasing decisions are often influenced by recommendations from family and friends, the need to regulate advertising in cyberspace is of paramount importance to the Chinese authorities.

The regulators’ response

Regulators around the world are responding to false and misleading advertising on social media. The UK Advertising Standards Authority (ASA) has recently extended its self-regulatory remit to include social media platforms, while the reach of the US FTC Guidelines on Online Advertising Disclosure has been expanded to encompass social media.

In Hong Kong, Custom and Excise’s enforcement guidelines for the newly amended Hong Kong Trade Descriptions Ordinance (TDO) directly bring social media practices within its scope. The guidelines create requirements for companies that post comments and reviews about their own products and services in online forums and social networking platforms. These obligations are backed with criminal sanctions for non-compliance.

China does not have a specific law or regulatory approach that addresses social media postings. Nevertheless, a patchwork of general laws and regulations have been applied to regulate advertising and marketing on social media.

Prevention through awareness – how companies can respond?

The scale of the alleged offences in the Meng Niu case highlight the importance of adequately supervising digital PR and marketing strategies. Businesses need to implement strict controls and protocols around PR campaigns that involve all key stakeholders, not just the marketing teams. Doing so should ensure that no unlawful campaigns are instigated that could have an impact on the good standing and reputation of the company.

Of equal importance is a robust social media policy that can help companies manage the potential legal and reputational risks. A social media policy should provide clear guidelines to employees on how to use the company’s social media accounts appropriately. They should also explain what content is allowed and, if employees comment on the company’s products or services on their own accounts, where labelling of commercial intent and affiliation with the company is required.

Good governance is vital if businesses are to prevent a digital marketing strategy turning into a PR disaster.