Social media is becomingly increasingly relevant as a valuable platform to connect with consumers, but despite this recognition, many Australian companies either have not engaged with consumers in this way, or engage without full realisation of the risks involved. Others have found themselves to be unsure of how to react or respond as the target of unwanted social media attention. Regulators too have been late to the game, but now with a spate of action in this area, some are sitting up and taking notice.

Who’s “trending” and who’s “following”?

Popular opinion suggests Australian companies tread cautiously around social media, such as Facebook, Twitter and YouTube, but that’s not as much of the case as you might think.  Web Profits statistics reported by Business Review Weekly1 indicate that the traditionally risk-shy, big four Australian banks are all among the top 100 ASX 100 companies using Facebook and Twitter.  Qantas, Telstra and Westfield also have a substantial and growing social media presence.

Interestingly, however, the Web Profits survey indicated that a huge 46% of the top 100 ASX companies were not using any form of social media at all, and only 25% of the top 100 ASX companies were using Facebook to engage with consumers. 

Regulators appear also to have hopped on the social media bandwagon.  Regulators like the ACCC are increasingly using social media as a method of communicating to consumers about their rights under Australian competition and consumer law, with new apps, YouTube videos, and other social media feeds.

Many of the legal issues arising from the uptake in social media activity stems from the failure of those who have engaged with it to appreciate that, although social media platforms have given birth to new communities, the same conventional legal rules will apply across conduct in those platforms without special exception or dispensation. It is quite common to see copied video material uploaded to social media platforms with the accompanying comment “No copyright infringement intended” (or similar), as though real-world legal rules somehow cease to apply in the social media world. Equally, many users of social media seem to consider that comments they post are somehow immune from legal principles such as defamation, advertising regulations, intellectual property laws and consumer protection laws.

Are the regulators “talking about this”?

In similar fashion, there is a perception that regulators globally have been slow to respond to market realities and reticent in embracing the impact of social media in the marketplace.  However, this has changed somewhat recently, with regulators globally taking an interest in disclosure via social media.

  • In April 2013, the SEC issued guidance to financial organisations, permitting them to post earnings and investment updates to Twitter, Facebook and other social media channels, as long as investors are notified beforehand that material disclosures will be made on those platforms. This guidance was issued following the SEC’s investigation around a Facebook post by the CEO of Netflix in July 2012. The investigation was in relation to the CEO’s use of his personal Facebook page to disseminate company metrics that have been considered material, non-public information and which should have been disclosed in accordance with Regulation FD (which requires US public companies, when disclosing material non-public information to the market, to file it with the SEC or disclose it through a channel that provides for broad and non-exclusionary public dissemination). The SEC decided not to pursue an enforcement action against Netflix or its CEO, but issued a report on the investigation which included guidance on the use of social media, and how guidance issued in 2008 in relation to dissemination of information via a company’s website, was applicable for assessing dissemination by social media.
  • In Australia, in March 2013, the ASX revised Guidance Note 8 on Continuous Disclosure and included guidance on the importance of companies paying attention to what information the market is trading on, including information appearing on social media, in making decisions about disclosure obligations and the need for trading halts (at least to the extent that it is aware of social media platforms that regularly post statements or comments about the company, such as for example investor blogs).

The ACCC has not published guidance on disclosure via social media platforms, but it has published broader guidance on the use of social media, dealing in particular with the risk under the Australian Consumer Law (ACL) of making misleading claims. 

There is a close connection between compliance with disclosure obligations and the potential for misleading and deceptive conduct, as was demonstrated in ASIC’s action against Fortescue and its directors

The risk of misleading and deceptive conduct through social media

Companies can be liable for misleading and deceptive conduct via social media publications, including (depending on the circumstances) for statements not made directly by the company.

Liability can extend to comments made on a personal Facebook page.   For example:

  • The Federal Court has held that comments posted by the principal of White Sands, an Australia swimwear label, on her personal Facebook Page and the page of her business, implying that Seafolly, a competitor of White Sands, copied some of her swimwear designs, were “in trade and commerce” and misleading and deceptive.2   The Court held that the principal of White Sands was not simply making statements as an industry commentator, and that her statements were intended to have an impact on trading activities.
  • Despite the statements only being up for approximately 30 hours, the comments were found to have been made erroneously and recklessly, and would not have been interpreted as a statement of opinion which was honestly held.

Companies can also, in some circumstances, be liable for comments by others posted on a company’s social media platform.   For example:

  • The ACCC has been successful in obtaining Court findings that the owner of Facebook and Twitter pages will become the publisher of third party content once it becomes aware of the content and decides not to remove it.
  • In a case brought by the ACCC first in 2009, the Federal Court found that Allergy Pathway was in contempt of court by breaching undertakings given in relation to misleading and deceptive statements made about its ability to test and cure allergies, as a result of testimonials written and posted by clients on Allergy Pathway’s Facebook wall, and client testimonials posted on Allergy Pathway’s Facebook and Twitter Pages.3
  • Liability for user-generated content may also exist beyond misleading and deceptive conduct. For example last year, the Australian Advertising Standards Bureau determined that user comments on an advertiser’s Facebook site were an advertising or marketing communication for the purposes of the Advertiser Code of Ethics4.  In one of these decisions, an advertiser was also held liable for user-generated comments on its Facebook page, the key finding being that the owner of a Facebook page had a reasonable degree of control over those user-generated comments by virtue of its ability to post-moderate them and remove offensive or other material that was in breach of the code

Know the rules of engagement

Another risk associated with social media engagement arises from companies not knowing how to respond when targeted with unwanted social media commentary. The nature of social media platforms is that certain comments can “go viral” and proliferate quickly, with the result being that the subject of those comments comes under an expectation to offer some reaction to the viral commentary. While every situation should be assessed on its merits, companies should understand the culture of particular social media forms before playing in them, take a circumspect approach to the deployment of formal remedies, look beyond strict legal enforcement as a first response and, most importantly, not over-react. One of the most successful stories in this regard is Coca-Cola’s response to an unofficial Facebook fan page. Instead of threatening the page owners with legal remedies, Coca-Cola invited the page’s owners to partner with them. The site subsequently became one of the most popular fan sites on Facebook.

Think before you post – five key things to remember

  1. Do your research before you post.  Posting on Facebook, Twitter or YouTube is like advertising in a store or on television. Make sure what you say about your products or your competitors is accurate and can be substantiated.
  2. Monitor your fans and followers. You can be liable for misleading and deceptive conduct in relation to posts or comments that third parties make on your social media platforms. You have an obligation to correct and/or remove any third party comments that are misleading. It’s in your interests to have a system for doing that promptly (the ACCC has suggested within a day is an appropriate time period), given the increased potential for such comments to “go viral” through social media and be very broadly disseminated in a short period of time.
  3. Understand the significance and benefits of social media usage.  Implementing a good social media policy within the business which has oversight from the legal team can go a long way to ensuring social media can be used to the company’s best advantage. Ideally, that policy should deal with what employees can and can’t do in posting content on the company’s social media platforms, and on their personal Facebook pages and the like if it concerns the company. Companies should also ideally have “terms of use” which explain the basis on which third parties can post content; and implement systems for dealing promptly with customer complaints notified via social media, and for removing problematic content. However, companies also need to be careful not to adopt an overly legalistic approach. Misunderstanding the culture of social media can negatively impact how a company is perceived by the very customers it wishes to engage with through those platforms.
  4. Be aware that statements and comments on personal Facebook accounts may lead to liability under the ACL. These statements can be considered to be “in trade or commence” where the statements have a connection with the business or the business of others. 
  5. (v)Understand the role of the ACCC and other regulators in monitoring social media presence. Regulators have begun to focus on social media, and will apply the same rules and standards to communications via social media as they do to more traditional means of communication.