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Socially Aware Blog

The Law and Business of Social Media

Social Links: Publishers claim ad blockers violate FTC rules; Twitter bags its “buy button”; has the IoT gone too far?

Posted in Advertising, Defamation, FTC, Internet of Things, Litigation, Marketing

The Newspaper Association of America has filed a first-of-its-kind complaint with the FTC over certain ad blocking technologies.

Is it “Internet” or “internet”? The Associated Press is about to change the capitalization rule.

Lots of people criticized Instagram’s new logo, but, according to a design-analysis app, it’s much better than the old logo at doing this.

Twitter has finally realized that people don’t use it to buy things.

Facebook wants to help sell every ad on the web.

A Russian law enforcement agency is investigating controversial groups alleged to have encouraged more than 100 teenage suicides on social media.

A self-proclaimed “badass lawyer” lost a defamation suit against a Twitter account that parodied him.

The Internet of every single thing must be stopped.

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Don’t Worry, Be (Un)Happy: Does U.S. Labor Law Protect a Worker’s Right to a Bad Attitude?

Posted in Compliance, Employment Law, Labor Law

Unlucky businessman being wet from raining instead he holding umbrella, misfortune or in trouble concept.

A few months ago, we noted that a Yelp employee’s online “negative review” of her employer might be protected activity under the National Labor Relations Act (NLRA), given that the National Relations Labor Board (NLRB) has become increasingly aggressive in protecting an employee’s right to discuss working conditions in a public forum, even when that discussion involves obscenities or disparaging the employer. This trend has prompted us to report previously on the death of courtesy and civility under the NLRA.

Now the NLRB has confirmed that it is not only courtesy and civility that have passed away—a “positive work environment” has perished with them.

A recent NLRB decision found that T-Mobile’s employee handbook violated the NLRA by requiring employees “to maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external customers, clients, co-workers, and management.”

According to the NLRB, employees could reasonably construe such a rule “to restrict potentially controversial or contentious communications,” including communications about labor disputes and working conditions that are protected under the NLRA. The NLRB concluded that employees rightly feared their employer would consider such communications to be inconsistent with a “positive work environment.” Similarly, the NLRB struck down T-Mobile’s rules against employees “arguing” and making “detrimental” comments about the company.

The main sticking point appears to be requiring employees to be “positive” towards co-workers and management. Earlier NLRB cases have indicated that requiring employees to be courteous only towards customers may not set off as many NLRB alarm bells. Nonetheless, employers should tread carefully—and try not to be too cheerful. Encouraging a positive attitude among employees could have negative results.

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For more on NLRA-related considerations for employers, please see the following Socially Aware posts:

A Negative Review May Be Protected Activity Under U.S. Employment Law

The Second Circuit Tackles Employee Rights, Obscenities & Social Media Use

 The Death of Courtesy and Civility Under the National Labor Relations Act

 Employee Social Media Use and the NLRA

Will Ad Blockers Kill Online Publishing?

Posted in Advertising, Litigation, Privacy

iStock_000092061867_SmallThe Internet contains over 4.6 billion Web pages, most of which are accessible for free, making content that we used to have to pay for—news, videos, games—available without having to hand over a credit card number.

What makes all of this possible is online advertising. As Internet industry commentator Larry Downes has noted, “If no one views ads, after all, advertisers will stop paying for them, and without ads the largely free content of the Internet has no visible means of financial support.”

The deal is pretty simple: We put up with the ads and, in return, we get free access to a bottomless pool of content.

This system worked well for two decades. And then along came ad blockers—software that allows Internet users to avoid online advertisements by targeting the technology used to deliver the ads, the URLs that are the source of the ads, or the mechanisms that enable the ads (even video ads) to be displayed in a certain way.

A Growing Threat to Online Publishers and Advertisers

The use of ad-blocking technologies by consumers grew by 41 percent over the past 12 months; there are now nearly 200 million active users of such technologies worldwide. In the United States, an estimated 45 million Americans are surfing an ad-free version of the Internet.

The use of ad blockers cost publishers an estimated $22 billion in 2015. That’s because each Internet user is worth an estimated $215 a year in revenue from online ads, and—as heavy Internet users—people who use ad blockers are likely worth even more.

Moreover, the situation is growing worse, as more people embrace ad-blocking technologies; the damage inflicted this year is expected to be over $41 billion.

Nor do consumers seem concerned by the threat that ad blockers pose to the Internet ecosystem; according to one survey, a mere two percent of Web surfers expressed a willingness to pay for ad-free access to online content.

What’s a Beleaguered Publishing Industry to Do?

As more consumers adopt ad blockers, publishers are searching for ways to curtail the harm to their businesses. Unfortunately for publishers, many of the solutions being considered are unlikely to alleviate the problem.

Litigation against ad-blocker vendors is one option, but the chance of success may be low. No major lawsuits against ad blockers have been filed in the United States but, in Germany, where at least six publishers have sued Eyeo, the owner of Adblock Plus, the courts have held each time that ad blockers are legal.

Some publishers are looking for technological solutions to the problem. The New York Times, for example, is reportedly exploring the use of technical mechanisms to thwart ad-blocking software, but so far there’s been no word on the success of those technical mechanisms. One imagines, however, that any blocker-busting technology adopted by the publishing industry will simply spur the creation of next-generation ad blockers designed to circumvent such technology.

“Native advertising” was once viewed as a promising strategy for sneaking ads past ad-blocking technology. Characterized as advertising that “follows the natural form and function of the user experience in which it is placed,” native advertising is often called “sponsored content” or an “advertorial.” But ad blockers have become more effective at suppressing native ads, with help from Federal Trade Commission rules that limit online advertising from too closely resembling editorial content.

Out of frustration, some content providers have turned to brute force to combat ad blockers. Forbes, for example, is walling off all ad-blocking Internet users from its Forbes.com site. Others have taken a softer approach, appealing to their site visitors to resist blockers.

More Promising Approaches?

A better solution than the approaches discussed above is for online advertising to become more compelling and less obtrusive. Improving consumers’ online advertising experiences might be the publishing industry’s answer to the ad-blocker problem because, while a majority of the consumers who install ad blockers do it because they find most ads distracting and useless, a sizable portion of ad-blocker users have expressed an appetite for some online ads.

While 45 percent of the ad-blocker users surveyed in one recent survey said they install the software because they find the ads annoying (as opposed to installing it to stop online ads from compromising their privacy or the speed of their Internet connections), 30 percent said they block ads in order to remove only “a subset of specific advertising.” PaigeFair, the self-described “ad-blocking solutions” company that conducted the study that produced all of these statistics, advises marketers to “tailor an appropriate advertising experience” to that 30 percent.

Syracuse University advertising professor Brian Sheehan writes that one way to improve consumers’ experiences with online advertising is to “vastly improve native advertising,” not because it will prevent ad blockers from working but because, when it’s done with sufficient “flair, relevance and journalistic integrity,” native advertising can become “terrific content” and “a great read.” In other words, it could become advertising that consumers value and don’t necessarily want to block.

Yet one has to wonder if marketers have the discipline to commit to creating more subtle, less obtrusive ads. If anything, the trend has certainly been in the opposite direction, toward in-your-face ads that are impossible to overlook. Even if advertisers were suddenly to tone down their act, it’s questionable whether the explosive growth of ad blockers can be reversed. Will Internet users, having grown accustomed to having their cake and eating it, too, be willing to abandon or even curtail their use of ad blockers? It seems unlikely.

Many advertisers and publishers are seeking to make online ads more palatable by creating bespoke online advertising experiences.

The Guardian, for example, is reportedly working with the Interactive Advertising Bureau to implement a customized ad experience that “puts the user in control.” James Harris, chief digital officer of the European media giant Carat, applauds the move, noting that “the rise of ad blocking is partly due to the industry ‘hitting people with bad-quality ads numerous times, via programmatic trading.’”

But it’s hard to believe that bespoke advertising will stop Web users from employing ad blockers. The more ads are tailored to individual users’ interests, the greater the potential “creepiness factor” for many such users, driving them to install ad blockers. It’s a Catch-22 for the interactive industry: Users hate generic, irrelevant ads but they dislike highly targeted, directly relevant ads as well.

The End of the Web as We Know It?

With no real solution for reversing or even slowing the ad-blocking trend, the free Web model is headed toward major disruption. Currently, 16 percent of U.S. Web surfers use ad blockers—what happens when that number surpasses 30 percent, as it has in parts of Europe? Or reaches 50 percent?

One thing is certain—for publishers, ad blockers are becoming the ultimate killer app. Without advertiser support, the amount of professionally produced, high-quality content made available online will decrease over time. By definition, professional content costs money to create and, without a return on investment, such content will disappear behind pay walls, or just disappear.

We’ve seen how the rise of online publishing has led to the near demise of traditional publishing. But who could have anticipated that the online publishing industry would so quickly find itself facing its own existential threat?

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This post is an expanded, “director’s cut” version of an op-ed piece that originally appeared in MarketWatch.

For more on the business and legal challenges confronting online content creators, please see our recent Socially Aware  post, Show Me the Money: Are Social Media Celebrities and Other Online Content Creators Really Raking in the Cash?

 

Social Links—Twitter loosens up; case against Google stands; should millennials be in charge of big social media campaigns?

Posted in Litigation, Livestreaming, Marketing, Privacy, Section 230 Safe Harbor

Here’s how Twitter is loosening up its 140-character limit.

The federal government will now check the social media history of prospective employees before granting them security clearance.

One expert says C-level executives shouldn’t entrust millennials with their companies’ social media feeds.

Federal court refuses to dismiss a lawsuit against Google for allegedly removing sites from its search engine results.

Before a larceny arrest, a “cry for help” on Facebook.

Do strong social media campaigns really beget successful brands, or is it the other way around?

A lawyer representing students suing Google is questioning the impartiality of the federal judge hearing the case because the judge was just hired by this unrelated tech giant.

The New York Times live streamed one of its pitch meetings on Facebook Live, and not everyone thinks it was a great idea.

Some social media marketing satire, courtesy of The Onion.

Show Me the Money: Are Social Media Celebrities and Other Online Content Creators Really Raking in the Cash?

Posted in Advertising, Compliance, Digital Content, Endorsement Guides, FTC, Online Endorsements

iStock_000034905072_MediumSocial media has allowed aspiring authors, musicians, filmmakers and other artists to publish their works and develop a fan base without having to wait to be discovered by a publishing house, record label or talent agency. And that seems to have made at least modest celebrity easier to achieve. The financial rewards that we usually equate with fame, however, might be just as elusive as they were in the pre-Internet age—perhaps even more so, in an era where content, once posted online, can be exploited by others in ways that typically don’t generate money for the creator of the content.

Sure, some hard-working social media stars are scoring big profits based on their popularity. The YouTube channel CharlisCraftyKitchen, for example, which features videos of a young girl making treats and which boasts 29 million views a month, averages monthly ad revenue close to $130,000.

The Swedish gamer PewDiePie’s net worth is estimated at $61 million—a big sum for a guy who is unknown to most people over 40 years old.

And, having secured a book deal and endorsement contracts with brands like L’Oreal, self-taught makeup artist/vlogger Michelle Phan is now at the center of a true life rags to riches story.

I suspect, however, that a far more common tale is the one told by Gaby Dunn, co-star of the YouTube comedy sketch channel Just Between Us, in a fascinating article entitled “Get Rich or Die Vlogging: The Sad Economics of Internet Fame.”

Dunn reports that, despite her channel’s “more than half a million subscribers” and “hungry fan base,” she’s broke and has to take menial jobs to make ends meet.

Dunn says that she and her vlogging partner, Allison Raskin, make money from the “ads that play before [their] videos,” and by freelance writing and performing, “but it’s not enough to live, and its influx is unpredictable.”

Almost as frustrating as brands not believing that Dunn’s channel is big enough to sponsor are her fans’ reactions when she does score a patron. Dunn’s and Raskin’s third branded video in more than two years resulted in viewer comments such as “Enough with the product placement” and “Gotta get that YouTube money, I guess.” And, as we’ve discussed in past blog posts, if a vlogger or other content producer is being paid to endorse a product or service, he or she is generally required to disclose this material connection to his or her followers.

In any event, Dunn is hardly the only online content creator feeling the pinch. Even writers who’ve enjoyed full-time positions at large journalism outlets are finding themselves out of a regular paycheck. The popular digital media website Mashable, for example, laid off 30 members of its staff—including several high-level editors. The current affairs website Salon recently cut back on the number of people on its payroll, too—20 percent of the publication’s editorial staff lost their jobs in April.

Things are equally discouraging in the music business; one revealing statistic from the RIAA is that, in 2015, record companies received more money from vinyl record sales than from ad-supported online streaming.

A real challenge for social media celebrities and other content creators is that online ad rates have been declining for years; despite the continued growth of online advertising, there are not enough ads to support the ever-expanding pool of Web content seeking advertiser support.

Another threat is the rise of freebooting—that is, the practice where a video specifically created for and posted to YouTube is, without the authorization of the video’s creator, copied and uploaded to Facebook, where it may generated millions of views without compensation to the creator.

And perhaps the greatest concern for content creators is the increasing popularity of ad-blocking technologies. The use of ad blockers has grown by 41 percent over the past 12 months; there are now nearly 200 million active users of such technologies worldwide. In the United States, an estimated 45 million Americans are surfing an ad-free version of the Internet, resulting in an estimated $22 billion in lost ad revenues in 2015.

All of this adds up to form a rather bleak picture for content creators seeking to make a living online; a million social media followers may result in fame, but not fortune. And fame without fortune doesn’t pay the bills.

 

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For more information on potential legal hurdles for social media celebrities, influencers, bloggers, vloggers and other content creators seeking to make a living online, please see these related Socially Aware blog posts:

Innovative Social Media Marketing Cannot Overlook Old-Fashioned Compliance

FTC Continues Enforcing Ad Disclosure Obligations in New Media and Issues a Warning to Advertisers

FTC Enforcement Action Confirms That Ad Disclosure Obligations Extend to Endorsements Made in Social Media\

Influencer Marketing: Tips for a Successful (and Legal) Advertising Campaign

An FTC Warning on Native Advertising

Social Media Competitions in the UK: Play Fair

Posted in Advertising, Compliance, UK

iStock_000086819927_SmallWith 1.65 billion users on Facebook, 332 million users on Twitter and 400 million on Instagram, it is unsurprising that many companies are seeking to increase brand awareness and customer engagement by running competitions via social media. If you want to avoid attracting the scrutiny of UK regulatory authorities, however, you will want to ensure that your social media competition complies with the Committee of Advertising Practice Code (CAP Code).

The CAP Code acts as the rulebook for non-broadcast advertisements in the UK and requires that promotions (including those on social media) be legal, decent, honest and truthful. The Cap Code is enforced by the Advertising Standards Authority, the independent regulator responsible for advertising content in the UK. Given the particular challenges posed by social media, CAP has some useful guidance on sales promotions: prize draws in social media (Guidance).

If you are running a prize promotion in the UK, it’s important to become familiar with the CAP Code and Guidance to ensure that your competition doesn’t run into legal problems. Here’s a quick overview of some of the key principles set out in the Guidance.

Key Principles Under the Guidance

 If you’re organising a promotion on social media, be sure that:

  • the promotion is run equitably, promptly and efficiently;
  • you deal fairly and honourably with participants;
  • you avoid causing unnecessary disappointment; and
  • any marketing communications connected with the promotion are not misleading.

In addition, the Guidance advises promoters to comply with the following practices:

  1. Include significant information in the initial advert.

Significant information includes the closing date, instructions on how to enter and any other restrictions on entry. Depending on the circumstances, other key information could include the start date, the number and nature of the gifts and/or prizes and the promoter’s name and address.

There is an exemption for platforms that severely restrict the space of the initial ad, such as Twitter, which limits posts to 140 characters. However, you are expected to include as much information as is practicable.

  1. Include a link to the full T&Cs.

All participants must be able to access the full terms and conditions (T&Cs) that apply to the promotion before entry. These T&Cs must provide certain information, which participants must be able to access easily during the promotion period.

  1. Include all eligible entrants when selecting winners.

You must be able to demonstrate that a reliable method was used to collect all eligible entries (particularly where the method of entering requires using some feature of the applicable social media platform, such as re-tweeting a post on Twitter).

  1. Select prize draw winners at random.

This must be done in a verifiably unbiased way, for example, through the use of a computer process or in the presence of an independent person.

  1. (You would think that it goes without saying but…) Actually award the prize.

In addition to awarding any advertised prizes, adequate steps must be taken to ensure that the winner is notified. Calling a winner once, or only announcing the winner once via social media, is not sufficient.

If you are running a prize promotion you will need to keep in mind legal issues that may affect the competition in addition to the ones addressed by the CAP Code, such as:

  • GamblingEnsure that the promotion does not constitute an unlawful lottery under the Gambling Act 2005. Prize draws that are free to enter (or offer at least one free method of entry), generally avoid being so classified under the Act.
  • Data Protection Your collection and use of participants’ personal data must comply with data protection law. Ensure that your data processing is compliant, and include a link to the applicable privacy policy in your T&Cs for the promotion.
Platform-Specific Rules

The social media platform that you are using to run your prize promotion likely has its own rules regarding prize promotions. Make sure that you check the platform’s rules before you run your promotion (the rules are regularly updated). If you breach the platform’s rules, then you risk having your account disabled.

Here are some of the rules governing prize promotions that you will find in Facebook’s, Twitter’s and Instagram’s terms of use.

Facebook

  • Promotions must include an acknowledgement that the promotion is not affiliated with or endorsed by Facebook.
  • Personal timelines or friend connections can’t be used to administer promotions. For example, you can’t require participants to share posts on their timelines, or their friends’ timelines, or tag their friends in posts in order to participate in the promotion.
  • Pages promoting the private sale of certain goods, such as alcohol, tobacco and adult products, must restrict access to those aged 18 and older.
  • Promotion of online gambling, casinos, lotteries and other related activities require prior authorisation from Facebook and are only permitted in certain countries.

Twitter

  • Discourage the creation of multiple Twitter accounts, for example, by including a rule stating that participants using multiple accounts will be ineligible to enter.
  • The Twitter rules prohibit the posting of duplicate, or near duplicate, Tweets, links or updates, so don’t encourage participants to duplicate tweets. Play it safe by having your competition’s rules state that multiple entries submitted in a single day will not be accepted.
  • To help ensure that all entries are counted, ask participants to include an @reply in their updates. This will help ensure that all tweeted entries show up in public searches.

Instagram

  • Don’t inaccurately tag, or encourage users to inaccurately tag, any content. This includes requesting users tag themselves in photos when they are not in the photo.
  • Promotions must include an acknowledgement that the promotion is not affiliated with or endorsed by Instagram.
Conclusion

Running a social media competition can be an effective way to generate attention for your brand. By following the rules, you can help ensure that your brand is trending on Twitter, Facebook or other social media platform for all of the right reasons.

Social Links—Instagram’s logo change causes a stir; stats on social media use at work; lessons from a YouTube star.

Posted in First Amendment, Livestreaming, Marketing, Privacy, Protected Speech, Statistics

The Great Instagram Logo Freakout of 2016.

A UK council policy reportedly grants its members power to spy on residents by setting up fake Facebook profiles.

Guess who spends more of their workday on social media, women or men?

Lessons from one of YouTube’s first (and most successful) stars.

Should sharing tragic images on social media be against the law?

A team of Google employees proposed adding new emojis to represent women in professional situations.

Has social media forced everyone to brand themselves?

Nearly 500 startup companies offer tech solutions for the legal industry.

Using social media to speed up organ donation.

Suicide on Periscope prompts France to open inquiry.

Now an online service helps people to prepare their “digital legacy.” Will the “social media assets after death” issue never die? (Sorry, we couldn’t resist.)

Study finds social media manipulation is the most common form of sextortion.

Social Links—The most disliked movie trailer ever; using social media to plan trips and land job interviews; and more.

Posted in Digital Content, Privacy, Wearable Computers

Facebook users spend more time on the platform than they spend pursuing any other leisure activity, except TV. Indeed, 1/16th of the average user’s waking time is spent on the platform.

The most disliked movie trailer in history, according to YouTube.

New California law would determine what happens to your Facebook and email when you die. This article explains what’s likely to happen to your social media assets if you die anywhere else.

Guess what percentage of U.S. households own a wearable?

According to the messaging platform’s own CEO, Snapchat is not social media.

Twitter filed a lawsuit arguing it should be allowed to publicly disclose more details about requests for information from the government.

Fail! Another NYPD social media campaign gone bad makes headlines.

How your social media profiles make you vulnerable to identity theft, and what you can do about it.

Tips for using social media to plan your vacations and land a job.

Innovative Social Media Marketing Cannot Overlook Old-Fashioned Compliance

Posted in Compliance, FTC

 

Social media is all about innovation, so it is no surprise that social media marketers are always looking for innovative ways—such as courting social media “influencers” and using native advertising—to promote products and services to customers and potential customers. But, as the retailer Lord & Taylor recently learned, the legal rules that govern traditional marketing also apply to social media marketing.

 

Earlier this year, the Federal Trade Commission (FTC) reached a settlement with Lord & Taylor in a dispute involving its online advertising practices. According to the FTC’s Complaint, Lord & Taylor allegedly:

  • gifted a dress to 50 “fashion influencers” and paid them to post on their Instagram accounts photos of themselves in the dress during a specified timeframe; and
  • paid for, reviewed and preapproved Instagram posts and an article in an online magazine, Nylon.

In neither case, according to the FTC, was Lord & Taylor’s role in the promotional effort appropriately disclosed.

On these alleged facts, the FTC brought three counts alleging the following violations of Section 5 of the FTC Act’s prohibition on deceptive practices:

  • the failure to disclose that the influencers’ Instagram posts did not reflect their independent and impartial statements, but rather were specifically created as part of an advertising campaign;
  • the failure to disclose or adequately disclose that the influencers were paid endorsers; and
  • the failure to disclose that the Nylon materials were not independent statements and opinions of the magazine, but rather “paid commercial advertising.”

As has been widely remarked, this is not the first time the FTC has brought a case relating to social media advertising. The settlement, however, is noteworthy because it brings together issues relating to both native advertisements and endorsements. The FTC has been focusing on these issues since late 2014; its activities have included:

  • Settling with the advertising firm Deutsch LA, Inc. in late 2014 in connection with its allegedly deceptive activities relating to the promotion, on behalf of its client Sony, of the PlayStation Vita handheld gaming console through Twitter (we wrote about the Deutsch LA case on Socially Aware).
  • Settling in September 2015 with Machinima, Inc., an online entertainment network that allegedly paid video bloggers to promote the Microsoft Xbox One system (we also wrote about the Xbox One settlement on Socially Aware).
  • Issuing a closing letter, at the same time as the Machinima settlement, indicating that the FTC had investigated Microsoft and Microsoft’s advertising agency, Starcom, in relation to the influencer videos at issue in Machinima. The closing letter was significant because it suggested that the FTC was primed to take the position that a company whose products are promoted bears responsibility for the actions of its ad agencies—as well as the actions of those engaged by its ad agencies.
  • Releasing a policy statement and guidance on native advertising in late 2015, which warned companies—again—that it is deceptive, in violation of Section 5, if reasonable consumers are misled as to the true nature or source of an advertisement. (Our Client Alert on these materials can be read here.)

The compliance issue with native advertising is that content that does not appear to be advertising—such as an advertisement or promotional article in an online or print publication formatted to look like the non-advertising materials in the same publication—must be clearly and conspicuously disclosed as advertising. The relevant compliance issue with endorsements is that any payment or other compensation received by the endorser from the promoter must be appropriately disclosed.

The concept underlying native advertisements and endorsements is the same: Consumers must be aware that they are reviewing promotional material, not “native” or “organic” content, whether it is on a social media platform, a website or in a print publication.

The Lord & Taylor settlement is yet another clear signal that paid promotions of any kind, in any medium, must be disclosed. Given the FTC’s focus on these issues and the repeated enforcement actions, especially with respect to social media endorsements, it is likely that the FTC will continue to enforce in this area until it is convinced that the market understands the disclosure rules.

In light of the risk in this area, the Lord & Taylor Consent Order is noteworthy, as it provides valuable insight into how the FTC expects companies to avoid running afoul of the endorsement and native advertising rules.

For example, the Order requires Lord & Taylor to provide any endorser “with a clear statement of his or her responsibility to disclose, clearly and conspicuously,” the material connection between the retailer and the endorser in any advertisement and communication, and to obtain a signed and dated acknowledgment of receipt of this statement from the endorser. In addition, the Order requires Lord & Taylor to maintain a system to monitor and review its endorsers’ representations and disclosures. Taken together, these requirements essentially lay out components of a compliance program that any company using social media for advertising should consider.

Of course, any such program requires time and resources, and no company has those in infinite supply. But, moving beyond the FTC’s Complaint and Order, there are other noteworthy aspects of the social media endorsement issue that appear to have been overlooked.

According to news reports and comments from Lord & Taylor, it appears that the company (and commentators) recognized the potential FTC compliance issue right after the ad campaign launched. The company reportedly stated, after the settlement, that “it came to our attention [a year ago] that there were potential issues with how the influencers posted about a dress in this campaign, [and] we took immediate action with the social media agencies that were supporting us on it to ensure that clear disclosures were made.” And, indeed, articles from the time of the advertising campaign noted, for example, that “the [endorsing] bloggers left out an important piece of information in their Instagram posts: a disclosure that they had been paid to post by Lord & Taylor.” Another website commented at the time that the bloggers “failed to mention they were paid,” and suggested that the company was getting away with violating the FTC Act (though it did note that many bloggers had gone back to add “#sponsored or #ad to their posts).” The immediate aftermath of the Lord & Taylor campaign that ultimately formed the FTC’s case suggests that awareness of the issues is rising among the public, and that even a quick fix can be too late.

In light of this awareness, the failure to disclose obvious ties between the endorser and the promoter can undermine a campaign. And, even though the FTC does not have the authority to impose civil money penalties for these types of violations of the FTC Act, state Attorneys General appear to be getting in on the act. Machinima, Inc., for example, settled allegations with the FTC regarding its use of influencers in promoting the Xbox One (as we noted above). A few months later, however, the company entered into a settlement with the New York Attorney General that included a penalty of $50,000 for its alleged failure to disclose payments to the influencers.

These events strongly suggest that ensuring appropriate disclosures is more than just an FTC compliance issue. While the FTC is actively enforcing in this space, the margin of error is shrinking not only because of the FTC, but also because of the increasing awareness of the public, and the new risk of enforcement (including financial penalties) by state Attorneys General.

 

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For more information on potential legal hurdles for companies engaged in social media marketing, please see these related blog posts:

An FTC Warning on Native Advertising

FTC Continues Enforcing Ad Disclosure Obligations in New Media and Issues a Warning to Advertisers

FTC Enforcement Action Confirms That Ad Disclosure Obligations Extend to Endorsements Made in Social Media

Do Not Go Gentle Into That Jurisdiction: No “Situs of Injury” Merely Because Copyrighted Material Is Accessible

Posted in Copyright

Because content posted online can be accessed nearly anywhere, courts regularly face the issue of whether they have personal jurisdiction over a defendant who posted material to the web or a social media site. Recently, one New York federal court held that the mere fact, standing alone, that copyrighted material posted online was accessible in New York did not create a “situs of injury” sufficient to support personal jurisdiction under New York’s long-arm statute.

In Pablo Star Ltd., et al. v. The Welsh Government, et al., the Ireland and UK-based owners of the copyright in two photographs of poet Dylan Thomas sued the Welsh government and its “Visit Wales” tourism bureau, as well as a number of content publishers, including the Tribute Content Agency, LLC, the Pittsburgh Post-Gazette, and the Miami Herald Media Co. While the Welsh government defendants were dismissed on sovereign immunity grounds, the court was left to consider whether it had personal jurisdiction over the publisher defendants, none of which were based in New York.

The court quickly rejected any arguments regarding general personal jurisdiction, which renders a defendant amenable to suit on all claims that could be asserted in a jurisdiction. The court recognized that establishing general jurisdiction is exceedingly difficult under prevailing Supreme Court precedent. Thus, the court turned to New York’s long-arm statute, which among other bases for obtaining jurisdiction over a defendant, would require “a tortious act [outside] the state causing injury to person or property within the state.”

The court found that, because intellectual property is intangible, the injury in copyright or trademark infringement is generally in the state where the intellectual property is held—that is, the domicile of the owner of the intellectual property at issue. The court held that because the plaintiffs are foreign corporations, the situs of the injury cannot be New York.

Plaintiffs argued that they were injured in New York “specifically due to lost or threatened business” as they were “deprived [of] the potential opportunity to license and publish their copyrighted photos here.” The court rejected this argument on two grounds.

First, as a matter of principle, such a “market harm” theory could justify jurisdiction “anywhere that the internet is accessible,” opening up a defendant to being sued anywhere and everywhere. Moreover, unlike most tort cases, where the location of plaintiff’s injury is often singular and identifiable, the injury in online copyright infringement cases is “difficult, if not impossible” to pinpoint to a particular geographic region.

Second, the court reasoned that, to the extent identifiable, the injuries in this case are the fees that should have been paid by the publisher defendants—none of which are based in New York.  Therefore, the simple fact that “New Yorkers can access the infringing content online” is insufficient to establish personal jurisdiction in New York.

The Pablo Star case teaches that copyright owners cannot simply point to the fact that material has been posted online and sue anywhere in the United States. Copyright owners must still establish personal jurisdiction over each defendant they sue for infringement. In case like this—in which a foreign copyright owner named as defendants seven separate publishers that are located in various jurisdictions—a copyright owner may need to bring separate actions in different jurisdictions against each defendant. While onerous for foreign copyright owners, the outcome protects against hauling a defendant into a jurisdiction with which it may have few connections.

For other Socially Aware posts on Internet-related copyright law issues, please click here.