Social Media Perils: A Primer for Businesses

An astonishing number of us use social media. Facebook claims to have 800 million users worldwide, with more than half signing on during any given day. Twitter says it has 100 million active users who generate 230 million tweets each day. LinkedIn reports more than 120 million members in 200 countries and territories, and logged nearly 2 billion people searches in 2010 alone.

The social media phenomenon is also becoming mainstream in the business world. A growing number of companies use Facebook, Twitter, YouTube and blogs to promote their products and services. For many business users, social media platforms are joining traditional e-mail as a routine vehicle for communicating.

These trends present enormous marketing opportunities but also pose significant legal risks for the unwary. Consider these facts:

• Libel and slander laws apply to online postings. In March 2009, a fashion designer sued rocker Courtney Love for making allegedly false statements about the designer on Twitter. The suit claimed that Love's attacks damaged the designer's reputation and livelihood. Love recently paid $430,000 to settle the suit after court rulings established that the designer had to prove only that Love was negligent in her postings, not that she knew them to be false. In a second, unrelated lawsuit, one of Love's former attorneys in a case involving the estate of Kurt Cobain seeks damages for defamation based on Love's tweet that the attorney was "bought off."
• Intellectual property laws apply to social media. If you use text or images that you did not create in social media postings, you may be violating someone else's copyright. Using another's trademark may result in an infringement claim if the owner can establish a likelihood of confusion about the source of the material. Publishing trade secrets or confidential information—for example, information that is prohibited from disclosure by a settlement agreement—exposes the user to potentially significant civil liability.
• The Federal Trade Commission is watching social media sites. The FTC's guidelines state that anyone promoting a product or service via Facebook, Twitter or other form of social media must incorporate a statement disclosing any financial agreement between those giving testimonials about the product or service and the company itself. Further, endorsements must reflect the genuine beliefs or opinions of the endorser and cannot otherwise be deceptive.
• Use of social media will increase the cost of litigation. When a business is involved in a lawsuit, it must turn over documents relating to all claims and defenses in the case. This obligation extends to electronically stored information (ESI) such as e-mail, voicemail and information posted on the Internet—including social media websites. Searching for ESI is expensive and often involves attorneys and third-party vendors who are given access to a company's servers, computers, tablets and smartphones. Court-imposed sanctions for failing to cooperate with electronic discovery can include adverse rulings and severe monetary penalties.

What does all of this mean for your company? As with most things in the world of business, the benefits of using social media come with very real risks. Understanding the potential minefields and taking steps to address them will help you build an effective social media strategy and harness this powerful marketing tool.