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 At a recent industry event I attended, retailers and manufacturers were told their companies must engage their customers through social media. Even companies without fan pages or their own social networking campaigns were talking about the inevitability of their participation. But many executives expressed concerns about legal risks and the conservative advice they receive from lawyers.
This hypothetical post to an online gear forum will illustrate why retailers and manufacturers might need to exercise care.
Tentboy: Brand X’s camp stove is a joke. Did Brand X hire chipmunks to design it? The rep said it works at altitude, but the manual says not to use it above 7,000 feet. The rep lied! It blew up in my tent at 10,000 feet. Brand Y’s stove works like a charm at altitude.
My communications friends would call this post actionable information, meaning that the manufacturer or retailer should review it and consider a responsive post. But “actionable” has another meaning. Brand X lawyers would assess “causes of action” readers could make against it and causes of action Brand X could assert against the forum owner or Tentboy’s employer.
Let’s assume you are an executive at Brand Y, an online retailer devoted exclusively to camping equipment, including Brand X’s product. You realize Tentboy is your employee.
What legal headaches did Tentboy just cause? The list is long and includes defamation (if the post is not true), trademark infringement, copyright infringement, breach of contract (if Brand Y’s contract with Brand X contains a non-disparagement clause), and product liability (notice of product defect).
A full legal analysis is beyond the scope of this article, but three general legal observations flow from this hypothetical and help illustrate the retailer’s and manufacturer’s dilemma.
Don’t get too involved
A pure social media platform has legal protections that may not be available to the retailer or manufacturer that hosts the same content and actively participates in that content.
In the 1990s, the US enacted two key laws relating to user-generated content. The Digital Millennium Copyright Act (DMCA) provides that a host site is not liable when a user posts materials (videos, songs, books, articles, and product manuals) that infringe another’s copyright, so long as the host site does not have notice of the infringement.
The Communications Decency Act (CDA) provides that the host site is not the speaker of the user’s content. In other words, the site owner didn’t say it (defamation, slander, etc.); the user did. There are exceptions to these laws, but those simple summaries should suffice for this hypothetical.
DMCA and CDA were enacted to protect ISPs, Web-hosting companies, and other sites that enabled users to generate Internet content. Social networking platforms fit neatly, too. Retailers and manufactures now want to host user content, and many want to go further by becoming active participants in the user content.
The protections of both the CDA and DMCA can be lost if the host site gets too involved with the content. The exact point at which protections are lost is not yet clear, but the more a site host participates in the development and control of the content, the more likely the protections no longer apply. In other words, if Tentboy posted to a third-party site, that site has low risk for his bad judgment. If Tentboy posted to Brand Y’s site, better call the legal department.
Define authority
The retailer and manufacturer should clearly define an employee’s authority to speak for it.
Is Brand Y responsible for everything Tentboy posts, whether on Brand Y’s site, or another site? The answer comes down to Tentboy’s authority, but that is not always clear in social media.
If Tentboy is authorized to speak for the company, then the company is liable for his post. If Tentboy appears to have that authority, even if he does not, the company can still be liable, if the apparent authority is a reasonable expectation of the other users.
Tentboy might mistakenly create that expectation based on his user name (Brand Y Tentboy), profile (“I run Brand Y’s stove division”), lack of disclaimer (“I work for Brand Y, but my posts are my opinions, not Brand Y’s”), or the content of the posts.
You might conclude that Tentboy’s anonymity reduces the risk that anyone thinks he is authorized to speak for Brand Y, but the Federal Trade Commission says an employer has a duty to require its employees to disclose their affiliation to the company if relevant to the post.
Invest in infrastructure
If your company is going to participate in social media, it should invest in legal infrastructure. To mitigate risks, companies need to carefully consider the risks of participating in user discussions and put in place practices and policies to mitigate those risks. Just as it is critical to keep a social forum fresh, legal compliance must be kept current.
As to its site, Brand Y should draw lines beyond which it will not go, so it can continue to take advantage of DMCA and CDA protections. A company social media policy will help guide Tentboy and others as they participate in company and third-party forums. Some companies post that policy publicly on their Web sites, and this might help define when an employee has authority to speak for the company.
Even though they face different risks than social media Web sites, the careful retailer and manufacturer should be able to participate in social media on third-party sites, so long as they establish clear authority and practices for their employees. User-generated content can create more risk when hosted on the retailer’s or manufacturer’s own site, but careful policies and practices can mitigate those risks.
Tom Bell, a partner at Perkins Coie, co-chairs the firm’s Internet and e-commerce group, chairs the e-commerce section of the firm’s retail group, and leads its social media team. He focuses his practice on the Internet, wireless, and IT. He has significant experience with legal issues in e-commerce, e-business, social media, and online content. He can be reached at
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