Copyright © 2017 Holland & Knight LLP. All Rights Reserved

Ethics in Social Media 2017: Risks of Social Media

March 17, 2017 ● New York, NY

John Maltbie

Director of Intellectual Property, Civil Enforcement

Louis Vuitton Americas

Kelly Pellicci

Attorney

Dun & Bradstreet

Michele Huresky

WW Counsel, HPE Software Services

Hewlett Packard Enterprise

Richard Raysman

Partner

Holland & Knight LLP

» Introductions*

*The views expressed herein are those of the participants and

not of their respective companies.

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FTC Disclosure Guidelines

Question 1:

Is a hyperlink that links to a full disclosure

statement detailing the terms of the endorsement

sufficient?

Yes or No?

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FTC Disclosure Guidelines

The Federal Trade Commission (FTC) Endorsement and Testimonial Guidelines provide that “[a]dvertisers are subject to liability for false or unsubstantiated statements . . . or failing to disclose material connections between themselves and their endorsers. Endorsers may also be liable for statements made in the course of their endorsements.”

» Advertisers and endorsers can be liable for false statements made by the endorser and for failure to disclose “material connections.”

» The endorsement must reflect the honest opinions, findings, beliefs, or experiences of the endorser and must not convey claims that would be deceptive or unsubstantiated if made directly by the advertiser.

» “Material connection” is defined as a “a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) . . . .”

» Any “material connection” must be disclosed – #sponsored, #promotion, #ad

» Disclosures must be “clear and conspicuous.”

» The advertiser is responsible!

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FTC Disclosure Guidelines

The Good, The Bad, and The Kardashians

Employee Use of Social Media

Question 2:

Can an employee speak profanely on social

media about their employer and avoid

termination?

Yes or No?

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Employee Use of Social Media

» Concerted Activity – Protected by NLRA

˗ Whether or Not Unionized

˗ Communication Looks Toward Group Action versus Griping

» Uses of Social Media That May Not Be Protected

˗ Profane/Harassing

Totality of Circumstances

Vicarious Liability

˗ Derogatory/Critical

˗ False/Misleading

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Employee Use of Social Media

» Employer Social Media Policies

˗ Pitfalls

˗ Best Practices

» Employer Monitoring of Employee Use of

Social Media

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How are Trademarks, Copyrights and Rights of Publicity Handled?

Question 3:

In Advertising and Marketing Departments, can

Quotes from other Platforms be used?

Yes or No?

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How are Trademarks, Copyrights and Rights of Publicity Handled?

» Rights of Publicity

» Fair Use

» Third-Party Materials

» When Is Preapproval by the Law Department

Necessary?

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Infringement Issues

Question 4:

Is the use of another brand’s mark as a hashtag an

infringement?

Yes or No?

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Infringement Issues

From an intellectual property perspective:

» Social media provides new venues that must be monitored for

infringing conduct, e.g., the sale of counterfeit product; unauthorized

use of images, products, trademarks.

» High visibility – dealing with the threat of going “viral.”

» Make sure the call isn’t coming from “inside the house.”

» Be sensitive to First Amendment/parody issues.

» What goes around comes around – weigh the risks.

» Can provide good evidence in support of confusion claims or

secondary meaning.

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Managing Risk Within the Organization

Question 5:

According to one survey, do executives consider

social media risk one of the three largest risks

facing a company?

Yes or No?

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Managing Risk Within the Organization

» Social Media for Business Users

» Company Committee (including Employment, IT, IP,

Branding, Legal)

» Leverage for a Business Purpose

» Tool – everything can be tracked, audited

» Risk Examples: Passwords, Complaints, and

Regulatory Issues

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How Should Lawyers Respond when their Clients Receive

Negative Attention on Social Media?

» Reputational Issues

» Be Prepared

» Who will Respond?

» Crisis Management – Generally

» Crisis Management Team

» When Customer Complaints go Viral

» Inappropriate Comments by Organization’s Spokespeople

» How are Negative Postings and Complaints Handled?

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Staying in Front of Your Brand on Social Media

» Internationally – China, Japan, Europe and South America

» Risks of Brand Management Online

» Protecting the Brand on Social Media

» A Good Offense is the Best Defense

» Counter Measures to Mitigate Risks

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Sub-Title Top Guide 6.22

Chart-Title Top Guide 5.35

Body Top Guide 4.16

Body Bottom Guide 7.80

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guide

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Right

guide

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Regulatory Issues

» Public securities cases – disclosure and fraud

» Regulatory issues » Food and Drug Administration (FDA)

» Federal Trade Commission (FTC)

» Securities and Exchange Commission (SEC)

» Federal Reserve Board

» Office of the Comptroller of the Currency (OCC)

» Federal Financial Institutions Examinations Council (FFIEC)

» Consumer Financial Protection Bureau (CFPB)

» Regulatory agencies monitor social media

» Third party reporting to regulatory agencies (e.g., competitors)

» Position – social media director

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FFIEC Supervisory Guidance: “Social Media: Consumer Compliance

Risk Management Guidance”

» The Guidance attempts to address applicability of consumer protection and

compliance laws to communications made by banks, financial institutions and other

regulated entities via social media.

» A financial institution should have a risk management program that allows it to identify,

measure, monitor and control the risks related to social media.

» Such risks include but are not limited to: reputational, operational, compliance and

legal.

» The risk management program should be designed from specialists in numerous fields

and with additional training and guidance for employees.

» This program should have a clear structure, stand-alone or incorporated policies and

procedures, oversight processes for monitoring information posted to proprietary

social media sites, and include audit and compliance functions.

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Regulatory Issues

Federal Trade Commission v. COORGA Nutraceuticals Corp., --- F.

Supp. 3d ----, 2016 WL 4472994 (D. Wyo. 2016)

» The Federal Trade Commission (FTC) brought an action under the FTC Act alleging

that a developer of dietary supplement made unfair and deceptive statements in its

advertising of hair color retention products.

» Defendant disseminated ads for the product in part via its social media pages.

» Such ads claimed that the formula for the product was “science based” and that

studies supported a causal connection between the product and a change in gray hair.

» The Court found these claims to be unsubstantiated and therefore deceptive under the

FTC Act, as ads were replete with statements regarding a scientific basis for the

efficacy of the product.

» Individual defendant found personally liable and permanent injunction issued against

all defendants.

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Regulatory Issues

Securities and Exchange Commission v. Fleet Mutual Wealth Limited, 2014 WL 12567798 (C.D. Cal. Mar. 17, 2014).

» The Securities and Exchange Commission (SEC) sued investment company for violations of various federal securities statutes and rules based on the defendants’ misrepresentations to investors distributed in part via its social media page.

» The defendants falsely claimed, inter alia, they were registered with the SEC and that they conducted “high-frequency trading,” while instead directing investor funds to offshore accounts.

» Defendants made these claims in part on its social media sites, “thus potentially reaching more investors if not enjoined.”

» Such claims were material misrepresentations insofar as they were made in connection with the sale of a security.

» Preliminary injunction was issued against the defendants.

» But see In re WWE Entm’t, Inc. Sec. Litig, 180 F. Supp. 3d 147 (D. Conn. 2016) (media company did not violate securities laws even if statements in investor communications regarding the number of its social media followers were arguably misleading; such statements were not materially misleading given context of statements and absence of contrary information)

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Regulatory Issues