8 Tips to Help Identify Legal Risks of Social Media

Social media has changed how companies communicate with customers, creating opportunities for much more direct marketing of a brand’s products and services. There are, however, numerous potential legal risks involved in the use of corporate social media.

Legal advisors involved in developing a corporate social media strategy should review the following tips to help prepare for the possible risks involved:

1. Review social media platform terms of use

Key point: Most people don’t read a social media platform’s “terms of use,” but it should be the first item on a legal advisor’s to-do list.  

• Terms of use and community guidelines on popular social media platforms such as Facebook, YouTube, Twitter, and Instagram are all different, and those differences are important.
• Be aware of specific posting restrictions and prohibitions, particularly those that apply to advertising, marketing, promotions, and sponsored content.
• Common prohibitions pertain to content that promotes alcohol, tobacco, drugs, guns, or pornography—but there are many others.

Preventive measure: Thoroughly review a platform's terms of use to ensure the company’s content on the site will be in compliance.

2. Understand intellectual property rights

Key point: Ownership of intellectual property (IP) is handled differently on different platforms, and companies are responsible for infringing content posted by customers on their pages.

• Pay special attention to policies for copyrighted material or trademarks appearing on the platform, as well as customer information collected through—or posted on—the platform.
• Be aware that many social networking sites prohibit the posting of content that infringes upon a third-party’s rights, including intellectual property, privacy, and publicity rights.
• Make sure ownership or licensing of intellectual property collected or generated through use of the company's page conforms with the platform's terms.

Preventive measure: Thoroughly review IP policies for each social media platform a company is using.

3. Pay attention to privacy policies

• Privacy policies vary, so be sure the company's intended use of the platform does not violate the platform's policies for which personal information the company may collect from users and how it may use and share that information.

Note: Platforms may update their privacy policies from time to time, so they should be regularly monitored for updates that might push the company out of compliance.

4. Monitor usage for compliance

Key point: Don’t rely on the platforms to monitor content posted on a company’s page(s).

• Companies should monitor their own page(s) for content that infringes on its (or another third party’s) intellectual property rights, damages or defames the company (or anyone else), or contains the company's confidential or proprietary information.
• Many companies hire third-party vendors to monitor content, and others use company employees. Either way, an internal response team should be assigned to handle damaging statements and comments.

Preventive measure: Consider implementing a monitoring program that will alert companies to offensive or infringing posts on their site.

5. Respond to comments appropriately

Key point: Companies are responsible for monitoring and responding to public comments on their social media streams.

• Customer service-oriented complaints should be handled by customer service or public relations personnel that are trained to handle angry or disappointed customers with tact and diplomacy.

Note: Other measures may be necessary if the comments are somehow damaging, defamatory, or misleading.

Defamatory or misleading comments about the company, its products, or its services should generally not be ignored. Depending on the circumstances and severity of the conduct, an appropriate response might involve:

• A request to take the offending post down
• Correcting the misleading or inaccurate information
• Deleting false or misleading posts
• Communicating directly with the poster
• Responding via a press release or other social media outlets
• Sending a cease and desist letter
• Filing a lawsuit

Preventive measure: Establish a clear and consistently enforced social media response policy, one that includes a response team and escalation process to manage damaging posts and conduct.

6. Make sure endorsers disclose their material connections

Key point: Companies that use bloggers, influencers, or other endorsers to promote their products through social media should be aware that the Federal Trade Commission (FTC) requires these endorsers to fully disclose any material connection they have with the company.

• A “material connection” can be direct payment to an endorser, but it also includes gifts, free products, discounts, travel, and other perks.
• Failure to disclose a material connection can result in regulatory scrutiny and damage to a company’s reputation.
• Endorsers should understand they are also liable for not transparently disclosing their relationship with a company.

Preventive measure: Companies should make sure their endorsers fully understand the terms of their relationship with the company, as well as their responsibility to openly disclose that relationship with their audience. Likewise, companies must also monitor their endorsers to ensure that material connections are disclosed clearly and conspicuously.

7. Make sure endorsers do not make false or misleading statements

Key point: The FTC’s main concern is that social media advertising—including endorsements—remains truthful and does not mislead consumers. This concern applies to endorsement messages on social media made by third parties sponsored by the company.

• Companies should be aware they can be held liable for false or misleading statements about their products made by the endorsers they hire.
• Endorsers should understand that when reviewing a product, their assessment should be honest and truthful.
• Companies may want to give endorsers key message points about claims for which they have the evidence to back up.

Preventive measure: Any product reviews made by endorsers should be monitored to ensure the claims they make are truthful and the company has evidence to back them up.

8. Security-related risks

Key point: Information delivered through social media to investors, industry professionals, and the general public is subject to the same legal standards as other types of corporate communication.

• The Security and Exchange Commission’s (SEC) Regulation FD prohibits selective disclosure of non-public information via social media.
• Restrictions regarding the disclosure of certain types of financial information through social media channels also apply.

Preventive measure: Companies should educate their employees about insider-trading rules and the associated legal liabilities. Employees need to know what information they can and cannot communicate electronically in order to remain within the limits of the law.

Social media can be an extremely effective tool for marketing, creating brand awareness, and communicating with customers. However, companies and their legal advisers need to assess the risks and potential liabilities of pursuing such a strategy and develop policies for monitoring and responding to communication channels that social media engagement inevitably open.

As in so many other areas, a careful plan, consistent policies, and thoughtful managerial oversight are the best ways to ensure success in the continuously evolving world of social media.