In today’s competitive marketplace, brands are relying heavily on social media and other digital methods to communicate with consumers and to structure innovative and edgy marketing campaigns. Marketing departments and advertising and public relations agencies are staffed with hip Web-and-mobile-savvy professionals who wish to execute highly elaborate marketing campaigns that often include a mix of user-generated content, text messaging, Twitter messaging, Facebook applications, blogging, viral marketing and other social networking elements. However, these same tech-savvy marketing professionals are often unaware of the complex legal overlay of the digital world and the potential significant financial repercussions of their companies’ failure to comply. Advertising, marketing and promotions, both via digital and traditional channels, are governed in the United States by a patchwork of federal, state and local laws and regulations. Failure to understand and follow these requirements can potentially lead to expensive litigation or government enforcement actions and negative publicity that can harm a brand. Further, the advancement of technology makes things possible that may not be well-received by consumers, even if they are currently legal. Understanding the evolving legal and consumer protection landscape will help brands to identify and manage their legal risks and to more effectively work with employees and vendors in developing and implementing campaigns. We recommend that you consider the following legal issues before launching a social media and digital advertising campaign:

  1. The Content: The content of your ad needs to be cleared with respect to intellectual property and other potential third-party rights arising out of the materials used. While numerous companies now maintain an active presence on social media sites, such as Twitter, Facebook and Instagram, the extent to which brands can lawfully interact with other platform users for advertising and similar commercial purposes is still not clearly defined, and, consequently, the legal risk associated with each post is not always properly weighed before a promotional social media campaign is launched. 
  2. The Claims: Any advertising message is deceptive if it contains a statement or omits material information that is likely to mislead a reasonable consumer and is material or important to a consumer’s decision to buy or use the product or service. A statement may also be deceptive if the advertiser does not have a reasonable basis to support its claim. These traditional advertising law concepts apply regardless of the specific medium where the ad will appear. Advertisers should make sure their disclosures are clear and conspicuous on all devices and platforms that consumers may use to view their ads. This means that if an ad would be deceptive or unfair (or would otherwise violate an FTC rule) without a disclosure – but the disclosure can’t be made clearly and conspicuously on a particular device or platform – then that ad shouldn’t run on that device or platform.
  3. Advertising on Third-Party Platforms (“Like” Facebook): Each social media platform has its own terms of use that determine issues of ownership and control of the content and activities on that platform. Some websites and other social media platforms prohibit any commercial use other than as a paid advertiser. Before engaging in a promotional campaign on a third-party website, it is a good idea to review and follow the rules of the applicable venue. Also, just because a user posts something online does not mean advertisers can reuse it to promote their products or brand on another platform.
  4. Sweepstakes, Contests and Prize Promotions: The first step when structuring a promotion where you give away a prize to entrants is to ensure it is not an illegal lottery. It is not uncommon for people to use the terms “sweepstakes” and “contests” interchangeably without realizing that distinct legal differences exist between them. A promotion that is administered on a social media platform may also be subject to platform-specific promotions guidelines, so make sure to review any such guidelines when structuring your promotion. Next, ensure that there are official rules made available for the promotion and that you include mandatory material disclosures on all advertising of the promotion, including disclosures on the entry form and abbreviated disclosures in any social media advertising of the promotion. Also, make sure you don’t need to register and/or bond your promotion, which is required in certain states. Finally, obtain a release from the winners.
  5. E-mail and Mobile: CAN-SPAM governs the sending of commercial e-mails, which requires, in part, that the e-mail identifies the sender, the subject line accurately reflects the contents of the message, the sender provides the recipient with the ability to opt out of receiving future commercial e-mail from the sender, and that the sender maintains and scrubs against a “suppression list” of prior opt-outs. CAN-SPAM violations have resulted in expensive settlements with the FTC, and consumers can bring e-mail marketing claims if deception is alleged. The TCPA, telecom carrier rules and the Mobile Marketing Association’s Best Practices Guidelines govern the sending of text messages and e-mails to mobile domain addresses. Companies must satisfy notice and express advance-consent requirements before sending a commercial text message. TCPA violations have spawned many class-action lawsuits, resulting in tens of millions of dollars in settlements paid by advertisers that failed to fully comply.
  6. Product Endorsements and Testimonials: Brands that are involved in encouraging a message about their products/services in traditional and nontraditional media (e.g., Twitter, blogs), even if the speaker is a consumer or a celebrity, will be responsible for the message and for making reasonable efforts to ensure that those it activates to spread the word about the products/services disclose any material connections to the advertiser, such as an entry into a promotion, employment, payment or being the recipient of samples or other things of value.
  7. User-Generated Content (UGC): Beware that when consumers submit videos to your website, they may violate the rights of others or include negative content about the sponsor’s brand, product or service. To the extent user content will be published on the company’s website, it may be possible to take advantage of certain protections afforded Web operators under two federal laws, the CDA and DMCA, from some but not all types of content-related infringement and tort claims. Each law has its own set of requirements to qualify for the protection. A company runs the risk of losing protection under these laws depending upon the degree of involvement it has with the UGC.
  8. Special Rules When Advertising to Children: Given that children lack the same capacity as adults to recognize and evaluate advertising messages, both the government and industry self-regulatory bodies have put greater burdens on advertising when it is targeted to children. For example, a federal law known as COPPA requires Internet sites and services and mobile app operators to obtain verifiable parental consent before knowingly collecting personal information from a child under the age of 13, and sites that target kids have further complex obligations. Compliance includes requiring a clear and prominent link to the Web operator’s privacy policy, which must include certain information about the advertiser’s privacy practices.
  9. The Industry: The content of your ad needs to be cleared with respect to intellectual property and other potential third-party rights arising out of the materials used. While numerous companies now maintain an active presence on social media sites, such as Twitter, Facebook and Instagram, the extent to which brands can lawfully interact with other platform users for advertising and similar commercial purposes is still not clearly defined, and, consequently, the legal risk associated with each post is not always properly weighed before a promotional social media campaign is launched.
  10. IT and Data Security: Technology has enabled advertisers to track consumers with precision and more effectively communicate with and service them as a result. However, the issues of notice, consent and choice, protection from intrusion into sensitive areas, and the need to secure data to prevent identity theft and other potential harms have become the focus of the press, regulators and elected officials. As a result, consumer data privacy and security have become the consumer class-action issues of the moment, sucking hundreds of advertisers into expensive lawsuits. A variety of laws and self-regulatory schemes already address consumer data privacy and security, and a number of additional measures are working their way through state and federal legislatures. Companies need to understand their consumer data and behavioral advertising practices, reflect them in understandable policies that are effectively communicated to the public, give consumers meaningful choice and protect the security of the data. In the age of outsourcing, companies need to ensure that their vendors and contractors are complying with the companies’ policies, providing adequate safeguards, defending and indemnifying the company and maintaining adequate and appropriate insurance.

Conclusion

The last decade has seen technology change the ways brands can interact with consumers in ways hardly imagined before. The results can be beneficial to both the company and consumers, but consumers also face real risks and burdens as a result. Companies need to weigh the benefits and risks of proposed advertising and sales schemes and campaigns and be aware of the changing regulatory landscape that is evolving as technology advances. Further, the most important asset a brand has is its consumer goodwill. New marketing and sales approaches that consumers appreciate build goodwill, but those that are perceived as misleading, unfair or too intrusive can harm the brand.