Social Media and Its Effect on Compliance Issues

Social Media Coming to (Legal) Terms
West Virginia Executive
Justin Seibert
Fall 2009

Twitter, facebook, MySpace, LinkedIn.  Seemingly everyone uses some social network these days.  What first started out as something strictly for personal use – after all, it is called “social” media” – now plays a role in nearly every business, whether positive or negative and whether the businesses are actively involved or not.

Consumers recommend or complain about their experiences, directly affecting sales.  HR departments often background screen potential employees through their facebook accounts.  Twitter and LinkedIn can be used to find both potential employees and clients, as well as expand reach for branding purposes.  Firewalls are set up specifically to keep employees off of sites like MySpace in the hopes of keeping them more productive.

What Is Social Media?

Since many of these terms are still confusing for many business owners and marketing officers, let’s take a step back and define social media.  Social media encompasses a range of interactive Web- or mobile-based technologies that include items such as social networking, social bookmarking, blogs, and online video sharing.

For purposes of this article, we are going to focus on social networking as it is most relevant to businesses today.  Social networks are sites that enable members to share personal information and interact with fellow site users.

The most popular networks include, in an order of more social to more professional: MySpace, facebook, and LinkedIn. Persons will create profiles with personal information, add contacts to their network, and make announcements (status updates) about their lives.  Services like ning also allow individuals or groups to create their own social networks for people aligned around similar interests, groups, or professions.  Plus, there’s the now-ubiquitous twitter, a service that allows you to follow what other people are typing, 140 characters per update in real time.

Corporate and Legal Takes

What can be both exciting and frustrating about social media is just how fast the technology is evolving and how widely adopted many of the networks are.  Organizations and their legal counsel often feel like they’re just playing catch up…and losing.

Jose Mallabo serves as Director of Corporate Communications for LinkedIn, the largest business-focused social media organization in the world.  Prior to joining LinkedIn, he worked on the opposite side of the social media aisle, as Director of Financial Communications for eBay Inc., where among other achievements he played a major role in the creation of eBay Ink, the company’s first corporate blog.  The blog enjoyed so much success that it paved the way for the company to enter new social media spaces like twitter in an official capacity.

According to Mallabo, “Most companies are still trying to figure out their official positions on the use of social media sites.  But I think they have really blurred the lines [between what activities are social or professional in nature].  Unlike ecommerce sites, social media sites can provide direct benefits to someone at work.”

Reinforcing Mallabo’s statement is the fact that as recently as September, the U.S. Defense Department did not have any policy on social media.  On September 22, Price Floyd of the Defense Department told National Public Radio, “I think there are two issues that need to be balanced.  No. 1, you need to recognize the benefits taking part in social networking sites and social networking media give you, as well as the risks involved. And I don’t want in any way to shortchange the risks.”

The Defense Department has since formalized its policies.  One such protocol worth review when setting your own policies and procedures is New Media and the Air Force, available online.

Recent FTC Ruling

The risks Floyd mentions are not limited to the private sector and dangers like consumer backlash.  The FTC recently released some well-intentioned regulations – punishable by $11,000 per infraction – about how advertisers may use blogging and other forms of social media.  Unfortunately, the rules allow for many gray areas about what advertisers may or may not do.  For example, should each tweet – the updates on twitter limited to 140 characters – contain full disclosures?

Until advertisers and their counsel alike feel confident of the answers, many corporations may choose to get out or stay out of social media.  Such was the backlash recently when the FDA issued warnings to pharmaceutical companies for using paid search marketing.  Similar to twitter message restrictions, paid search ads allow for a maximum of 95 characters of text.  According to an article in Advertising Age, paid search advertising spend then dropped 84% within the pharmaceutical industry.

Next Steps – Practical Advice

First make sure that if you’re involved in social media – or considering it – you have a reason to be involved and set out a strategic plan to reach your goals.  The biggest mistake most organizations make is setting up accounts simply because competitors – or news anchors – are doing it.  While social media offers many potential benefits, sometimes the best strategy is not to get involved.

Assuming the goals are defined and the overall strategy is in place, now’s the time to involve counsel?  Is your industry heavy regulated?  Does your advertising require specific disclosures?  How many – and which – employees do you want speaking on behalf of the company either officially or unofficially (although ultimately you can’t fully control the latter)?  How will this affect important stakeholders?  Discuss, listen, and incorporate the advice into your planning.

Once you’ve done this, keep counsel away.  One of the worst mistakes you can make is running individual blog posts, updates, and tweets through legal.  It’s costly and will dilute your message to the point where none of the people you’re trying to reach will care.  The one exception is that you should set up an online monitoring service to alert counsel of any potential issues and also to be able to respond to praise and criticism alike.

Final Takeaway

Gone are the days where an organization can bury its head in the sand until a problem disappears.  Consumers – and employees – have more reach and power than ever before.  If you’re of the mindset that you need to fully control the situation, the loss of this ability can be frightening.

If you can, however, embrace social media – while still being mindful of potential pitfalls – you can connect with clients like never before and turn them into advocates.  Conversations will happen whether you like it or not.  The question is not how to shut them down; rather, will you respond?

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