Celebrity Endorsements and Social Media

If you follow any celebrities or sports stars on social media, you may have seen one of them endorsing or promoting a product. Just the other day, Katy Perry posted a photo of herself on Instagram, wearing a Prada outfit with the hashtag “#Prada.”

The fact that I follow Katy on Instagram may shock you, but here’s something even more shocking: did you know that Federal Trade Commission rules require celebrities and influencers to disclose their relationships with brands on social media? You may not be the only one to just learn that. The FTC recently sent out more than 90 letters to various celebrities, athletes, and other social media influencers, reminding them of their obligation to clearly disclose their relationships to brands when promoting or endorsing products on social media. When I look at that picture posted by Katy, I wonder whether Prada paid her to promote their products? Or did they give her the outfit for free? Is she just posting in Prada spontaneously? You can’t tell from her post.

The FTC has endorsement guidelines that apply to these situations. If there is a “material connection” between an endorser and an advertiser, they have to clearly and conspicuously disclose that connection, unless it is already clear from the context. A material connection is a connection that might affect the credibility that consumers give the endorsement. It can be a business or family relationship, a monetary payment, or a gift of free product. These guidelines don’t just apply to the celebrities like Katy Perry or Donald Trump; they also apply to the marketers like Prada. So if Katy wore that Prada outfit just because she loves how she looks and feels in Prada (and who doesn’t?), that’s one thing. But if Prada pays her to wear their outfits and post pictures on Instagram, then it’s not quite as compelling an endorsement. The same applies if Donald Trump tweets about how wonderful Ivanka’s fashion line is. She’s his daughter, so there’s a material connection that affects the amount of credibility we give to Trump’s tweet. On the other hand, in the specific case of Donald and Ivanka Trump, the family relationship is well known, so there may not be a need for an explicit disclosure.

In the letters, the FTC noted that in the case of Instagram posts, consumers may only see the first three lines of longer posts, unless they click the “more” button. According to the FTC, when making endorsements on Instagram, celebrities should disclose the material connection about the “more” button. The same general concept applies to other social media – Facebook, Snapchat, Twitter, etc.

It is common in these posts to provide multiple hashtags, generally at the end of a post. Putting a disclosure in such a location is not conspicuous enough. Also, some techniques influencers may use to disclose material connections may not be sufficient. For example, the FTC noted that consumers may not understand disclosures such as “#sp” or “Thanks [brand name].”

Consequently, brands and marketers should develop an “influencer policy” that provides guidelines to the various celebrities and other influencers that endorse their products on social media. The brands should try to agree in advance as to the disclosure that the influencer will make, rather than leave it up to the influencer’s discretion. Using a hashtag such as #ad or #advertisement is appropriate in cases where the brand has had input in the content. A hashtag such as #sponsor (rather than #sp) is appropriate in other cases. Also, the policy should require that disclosures be made at the top of a post, and be separate from long hashtag strings.

By taking a more proactive approach to how celebrities and influencers endorse products on social media, brands can minimize their liability for misleading endorsements. Are you paying attention, Katy?

New Federal Law Prohibits “Anti-Yelp” Contract Terms

Congress recently passed a new law that restricts a company’s ability to include an “anti-Yelp” type of non-disparagement provision in a standardized contract. The new law, called the Consumer Review Fairness Act of 2016,” is designed to protect individuals who post negative online reviews. The CRFA applies to reviews of goods and services made by an individual who is a party to a “form contract.” The CRFA defines a form contract as a contract with standardized terms used in the course of selling or leasing goods or services, and imposed on an individual without meaningful opportunity for that individual to negotiate the standardized terms. Because the act repeatedly refers to “individuals,” it seems directed more at the B2C arena, and will likely not apply to business-to-business contracts. In addition, the act specifically exempts employment agreements and independent contractor agreements.

A covered non-disparagement provision in a form contract will be void from the start if it prohibits or restricts the ability of an individual who is a party to engage in a review of the goods or services. The CRFA also voids any provision in a form contract that would impose a penalty or fee against an individual for engaging in a review of the goods or services.

The CRFA does not affect the right to pursue a claim for defamation, libel, or slander, however. Nor does the CRFA prevent any party’s right to remove or refuse to display on a website owned by such party any content in a review that:

  • Contains the personal information or likeness of another person, or which is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or inappropriate with respect to race, gender, sexuality, ethnicity, or some other intrinsic characteristic;
  • Is unrelated to the goods or services offered by or available at the website; or
  • Is clearly false or misleading.

The CRFA doesn’t just void these provisions, however. It makes it a violation of law to offer a form contract containing a provision that would be void under the law. Such a violation also will be considered an unfair or deceptive act or practice, The CRFA gives the Federal Trade Commission the power to enforce the act, and also grants individual states the power to pursue violations.

Consequently, we recommend that companies that sell goods or services to individuals review all of their standard contracts, including their website terms of service, to ensure compliance with the CRFA.

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Website Protection from Copyright Infringement Claims

shortcuttingIf you operate a website, you may have to worry about copyright infringement claims. This is particularly true if you have a blog, or if you allow visitors to post photographs, music clips, videos, or written content. The visitors may be posting content that infringes on someone’s copyright, and you don’t want to be responsible.

Fortunately, the Digital Millenium Copyright Act (DMCA) helps website owners insulate themselves from copyright infringement claims. There are two steps to this process, and both are equally important and essential. Unfortunately, too many website owners focus on the first step, and overlook the second. Without both, the website owner has no protection under the DMCA from copyright infringement claims.

The first requirement is that your website terms of service should have a process for people to notify you of potential copyright infringement claims. This is typically called a “takedown notice.” The notice informs you that there is material on your website that may infringe a copyright, and has to conform to specific requirements outlined in the DMCA. Your process must cover taking down or disabling access to the potentially infringing material, and giving the person who posted it an opportunity to challenge the takedown notice. That’s the first part of insulating yourself from copyright infringement claims.

The second part, which is often overlooked, is registering an “online agent” with the US Copyright Office. The online agent is a person designated to receive notices of potential copyright infringement. You go to this page at the Copyright.gov website, where you can download, print out and mail in what’s called an “Interim Designation of Agent to Receive Notification of Claimed Infringement” form. On the form, you list the full legal name of your company. There is a base fee of $105 that covers that one name. Then you can list additional names under which you are doing business. For example, here you would list your website address, or if you operate more than one website, all your website addresses. For each group of 10 or fewer, there’s an additional fee of $35. So if you have a corporation, and you run one website, you would list your corporate name, and the website address, and pay a fee of $140. When choosing your designated agent to list on the form, you want to pick someone who you know is going to be in that role for an extended period of time, because you must pay additional fees to change your designated agent.

By following both of those two steps, website operators can take advantage of the protections from copyright infringement claims provided by the DMCA.
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ArgumentAn increasing concern for employers is their employees’ use of social media. For some time now, employers have been devoting resources to monitoring their employees on social media. I’m not talking about someone taking a couple of minutes to check her Facebook page during the workday. This is about employers monitoring the use of social media in general, outside the workplace.

In response to this trend, the National Labor Relations Board has gotten involved. A common misperception is that the NLRB only regulates employers with unionized workforces. In fact, the NLRB has authority to regulate most private employers, even if they don’t have a unionized workforce. The NLRB has been weighing in on employers’ social media policies when it believes that those policies infringe upon employees’ rights to engage in “concerted activities” for “mutual aid or protection.”

In particular, the NLRB has ruled that some very common employment policies violate the National Labor Relations Act:

  • Prohibitions against sharing confidential information on social media, when the employer’s definition of “confidential information” is overly broad;
  • Prohibiting employees from speaking to the media, or commenting on social media, about the employer or co-workers;
  • Restricting employees from posting “inappropriate,” “disparaging,” or “negative” statements about the employer or co-workers;
  • Prohibitions against employees using the company logo;
  • Requiring employees to include a disclaimer stating that their comments do not reflect the views of the employer, when posting on social media.

The reason that the NLRB claims these prohibitions violate the NLRA is because they can be interpreted as prohibiting employees from discussing the terms and conditions of employment. For example, suppose an employer considers wages to be confidential information, and prohibits employees from posting confidential information on social media. The NLRA protects the rights of employees to discuss their wages with their co-workers, so the prohibition and the definition of “confidential information” could be a violation of the NLRA.

Another example is where an employer prohibits employees from making “negative” comments about the employer. The NLRA protects the rights of employees to complain about workplace policies, so a prohibition on making negative comments could be viewed as a violation.

In light of the NLRB’s greater involvement in reviewing these social media policies, it is a good idea for employers to review their employee handbooks and other workplace policies.

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Online Privacy Rights for Minors

In a previous post, I wrote about a new California law addressing online privacy rights of minors. That law (California Business & Professions Code Section 22580 to 22582), which took effect on January 1, 2015, does a couple of things. As I wrote in the previous post, the law restricts the kinds of products that can be marketed online to minors under the age of 18. The second thing the new law does is impose content-removal obligations on these website and mobile app operators. That is the subject of this post. The law protects minors who live in California, but it broadly applies to websites and mobile apps located anywhere, if they have users located in California. Since California has more than 9 million residents under the age of 18, out-of-state website and mobile app operators cannot afford to assume that the law doesn’t reach them.

These new content-removal obligations apply to websites and mobile apps that are directed at minors, and also at any websites or mobile apps where the operator has actual knowledge that minors are using it. The operators of these websites and apps must permit minors who are registered users to remove or, if the operator prefers, request and obtain removal of, content or information posted by that registered user. The operator also must notify minors who are registered users that they have these content-removal rights, and provide clear instructions on how to go about getting content or information removed. The operator also has to notify the minors who are registered users that the removal does not ensure complete or comprehensive removal of the content or information.

The operator (or a third party) does not have to erase or eliminate the content or information in any of the following circumstances:

  1. If any other provision of state or federal law requires keeping that content or information.
  2. If the content or information was stored on or posted to the website or mobile app by a third party other than the minor, including content or information that was posted by the minor that the third party has republished or reposted.
  3. If the operator anonymizes the information posted by the minor, so that the minor cannot be individually identified.
  4. If the minor does not follow the instructions on how to obtain the removal of the content.
  5. If the minor has received some kind of compensation for posting the content.

An operator will be considered in compliance with its obligations if it makes the content no longer visible to registered users or the public, even if the content still remains on the operator’s servers. Also, the operator will be in compliance if it removes the content, and then the content remains visible because a third party has reposted it.

If you are operating a website or mobile app directed at minors, or if you know that minors are using your website or app, now is a good time to start implementing procedures to comply with this new law. You will need to set up a mechanism for minors to remove content themselves, or you will need a mechanism for minors to request that you remove the content. You will also need notice provisions. While you might try to implement these changes only with respect to minors who are in California, it may be easier to grant the same rights to minors no matter where they live. Finally, this new law will also require changes to your website’s (or app’s) terms of use and privacy policy.

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