The explosive growth of social media has clients facing legal questions that didn’t even exist a few short years ago. Helping your clients navigate this muddled legal landscape will have them clicking “like” in no time.
What’s in a Like?
Not long ago, the word “like” was primarily a verb (and an interjection used by “valley girls”). You could have likes and dislikes in the sense of preferences, but you couldn’t give someone a like, claim to own a like or assert legal rights in likes. Today, however, a company’s social media pages and profiles, and the associated likes, followers and connections, are often considered valuable business assets. Courts have come to various conclusions regarding whether likes and similar social media constructs constitute property, but one thing is clear: Every company that uses social media should have in place clear policies regarding employee social media use and ownership of business-related social media accounts.
Employees who manage a company’s social media accounts often insert themselves as the “voice” of the brand and establish a rapport with the company’s fans and followers. Without clear policies that address ownership of social media accounts, and clearly distinguish between the company’s accounts and employees’ personal accounts, your client may find itself in a dispute when these employees leave the company and try to take the company’s fans and followers with them.
Read a more detailed description of “likes” as assets here.
Dirty Laundry
It comes as no surprise that employees frequently use social media to complain about managers and coworkers, pay, work conditions and other aspects of their employment. Companies often would prefer not to air these issues publicly, so they establish policies and impose discipline when employees’ social media activity becomes problematic. Companies need to be careful, however, that their policies and disciplinary actions comply with applicable law.
A number of National Labor Relations Board decisions have examined whether employees’ statements on social media constitute “concerted activity”—activity by two or more employees that provides mutual aid or protection regarding terms or conditions of employment—for purposes of the National Labor Relations Act (which, notably, applies regardless of whether the employees are unionized or not). Companies also need to be careful to comply with state statutes limiting employer access to employees’ personal social media accounts, such as California Labor Code Section 980, which prohibits an employer from asking an employee or applicant to disclose personal social media usernames or passwords, access personal social media in the presence of the employer, or divulge personal social media.
Read more about the intersection of social media policies and labor law here and here.
Terms of (Ab)use
Companies often consider their social media pages and profiles to be even more important than are the companies’ own websites for marketing and maintaining customer engagement. But a company’s own website has one advantage over a third party social media platform: The company sets its own terms for use of its website, while the third party social media platform is subject to terms of use imposed by the platform operator. And, in many cases, the terms imposed on users of social media platforms are onerous and make little distinction between individual users using the platform just for recreation and corporate users who depend on the platform for their businesses.
Social media terms of use often grant platform operators broad licenses to content posted on the platform, impose one-sided indemnification obligations on users, and permit platform operators to terminate users’ access with or without cause. You may have little luck negotiating modifications to such online contracts for your clients, but you can at least inform your clients of the terms that govern their use of social media, so that they can weigh the costs and benefits.
Read more about social media platforms’ terms of use here, here, and here.
Same as It Ever Was
When it comes to using social media for advertising, the media may be new but the rules are the same as ever. Companies that advertise through social media—especially by leveraging user endorsements—need to comply with Section 5 of the FTC Act, which bars “unfair or deceptive acts or practices.” Bloggers and others who endorse products must actually use the product and must disclose any “material connections” they have with the product providers (for example, a tech blogger reviewing a mobile phone that she received for free from the manufacturer should disclose that fact). Because this information is likely to affect consumers’ assessment of an endorsement, failure to disclose may be deemed deceptive. So if you have a client that uses endorsements to promote its products, make sure to brush up on the FTC “Dot Com Disclosures” and other relevant FTC guidance.
Read more about endorsement disclosure obligations here.
Good Rep
As noted, a company’s social media pages, followers, etc., may constitute valuable business assets. But buyers in M&A transactions often neglect such assets when formulating the seller’s reps and warranties. Buyers should consider asking the seller to disclose all social media accounts that the target company uses and to represent and warrant that none of the target’s social media account names infringe any third party trademark or other IP rights, that all use of the accounts complies with applicable terms of service, and that the target has implemented policies providing that the company (and not any employee) owns all business-related social media accounts and imposing appropriate guidelines regarding employee use of social media.
Finally, if you have clients that use social media, it’s important to be familiar with the popular social media platforms and their (ever-changing) rules and features. Learning to spot these issues isn’t going to turn you into the next Shakira—as of this writing, the most liked person on Facebook with well over 100 million likes—but your clients will surely appreciate your help as they traverse the social media maze.
Read more about social media assets in M&A transactions here.