Social Media and Brand Engagement: Risks and Rewards

Brand engagement in today’s digital world is largely driven by a brand’s presence and activity on social media platforms such as Twitter, Instagram, Pinterest and Facebook. Social media has transformed and revolutionized the way individuals consume information and entertainment and interact with the world around them. Such interaction includes not only personal communication but also buying decisions and the way individuals interact with brands. For example, a 2014 survey found that 71 percent of consumers are more likely to make a purchase based on social media referrals, and 78 percent said a company’s social media posts impact their purchases. ¹Alison Stadd, How Social Media Influences Purchase Decisions, Mediabistro, Jan. 22, 2014, http://www.mediabistro.com/alltwitter/social-media-purchase-decisions_b54296.

Given how heavily a brand’s social media presence can influence engagement and sales, it is important for brands to “listen in” on consumer social media activity and appropriately curate such content (as well as their own) to drive engagement and remain relevant. But doing so presents a plethora of challenges, not least among them determining how consumer-generated content may be lawfully repurposed and shared and accurately gauging the risk level associated with each such tweet or post. Further, enforcement actions by regulators such as the Federal Trade Commission (FTC) and self-regulatory groups such as the Better Business Bureau underscore the importance of using consumer content in a legal and nonmisleading manner, as well as ensuring that product endorsements used in social media properly disclose material connections between the advertiser and consumer endorser. Finally, brands must be aware of and comply with the rules of the various social media platforms on which they engage.

Given the fleeting nature of digital ad campaigns and the speed at which they are conducted, all of these calculations demand quick answers, but the realm between what could be considered lawful or unlawful advertising activity on social media constitutes a wide gray area. In exploring these themes further, we address below the hot issues to watch and follow in 2015; how consumer-generated content may be curated and shared on social media platforms; and regulatory enforcement trends in these areas.

I. Conversing with Consumers

When conversing with consumers through social media, brands strive to do so in a manner that is authentic and nonintrusive. While consumer-to-consumer social media conversations are generally conducted freely, as there is no (or little) concern for legal or reputational risk, the rules and risks change for brands, given that such content is ultimately driven by a commercial purpose. This is perhaps most evident on Twitter, which has increasingly become a go-to tool for brands seeking to engage a wide audience. Twitter’s Terms of Service ²Twitter, Terms of Service, https://twitter.com/tos. (TOS) establish certain guidelines for acceptable conduct by brands, but how and when these guidelines are enforced remains relatively unknown, as Twitter’s enforcement activities (if any) are handled individually by Twitter without public reporting. Aside from one-off anecdotal reports of Twitter suspending an account, little is known about how the micro-blogging site addresses such matters. This lack of guidance also exists on other popular social media platforms, such as Instagram, Pinterest and Facebook, where many of the same issues arise with respect to communication and content sharing by brands.

Conversations that commonly take place among masses of people on Twitter include live tweets to accompany nationally televised sporting events, awards shows or popular television shows. These conversations often involve the freewheeling use of celebrity names, photos and videos, as well as trademarked terms and logos. With the large numbers of Twitter users participating in any given conversation and the fleeting nature of each tweet, it is tempting for brands to assume that it is harmless or low risk to tweet in the same manner as would an individual, without clearing the content from a legal perspective, as is the common practice for typical marketing campaigns. The reality is that the rules of social media engagement for brands differ from those applicable to individuals and each brand-originated tweet or post involves a risk calculation. In-house counsel and social media teams must be educated on the varying levels of risk attached to social media content and, ultimately, each brand must assess its level of risk tolerance and adopt a social media policy that provides guidance for those making real-time decisions.

Twitter actively encourages its users to broadly share content on its platform, but companies that share content must consider the scope of risks associated with using the platform for promotional purposes. In most instances content shared by individual Twitter users would likely be considered “expressive” content because it is not sent with any underlying commercial purpose. However, the same content being shared by an advertiser would likely be considered “commercial speech” because it is inherently commercial in nature, even if no transaction is introduced. While there is virtually no case law on commercial speech in the context of Twitter, courts have historically characterized commercial speech as truthful, nonmisleading speech that proposes a commercial transaction. ³See, e.g., Bolger v. Young Drug Products Corp., 463 U.S. 60 (1983). Commercial speech receives less protection under the First Amendment than other forms of speech and, generally, the possibility of a First Amendment defense does not bar plaintiffs from pursuing false association/false endorsement and right of publicity claims stemming from commercial speech.

An advertiser’s original tweet or retweet of commercial speech that includes the unauthorized use of third-party trademarks and copyrights, including the brand names and celebrity names and images that are so popular on Twitter, could thus give rise to a number of claims, including copyright infringement, trademark infringement, false association, false endorsement and a violation of right of publicity laws. Further, where an advertiser’s original tweet or retweet contains unsubstantiated claims related to a competitor’s products or services, such content could also give rise to an unfair advertising or unfair competition claim from a competitor.

For example, an advertiser’s original tweet or retweet of an individual’s tweet that includes content that has not been cleared (such as a reference to a popular television show, the name or photograph of a celebrity or a hashtag that incorporates all or part of a third-party trademark) could all potentially give rise to a claim by the mark owner, copyright holder or celebrity.

Right of publicity laws vary by state but, generally, every state recognizes an individual’s right of publicity that prohibits the commercial use of his or her name or likeness. In the context of Twitter, standard actions such as following other users, replying to their tweets or “favoriting” other users’ tweets may also come with right of publicity risks when originating from an advertiser because they may implicate an individual’s name or likeness. For example, an advertiser’s reply to an individual, retweet of an individual’s tweet or “favoriting” of the tweet could result in the individual’s name, Twitter handle and/or photograph residing permanently on the advertiser’s timeline and Twitter profile page if those identifying features are incorporated in the advertiser’s reply, retweet or the content of the “favorited” message, respectively. This use by the advertiser of the individual’s name and/or likeness could be viewed as a promotional use and could arguably be deemed an advertisement in violation of a state’s right of publicity law.

That all said, the risk of an ordinary consumer bringing (or succeeding in) a legal action against a brand that retweets or otherwise uses the consumer’s content, name or likeness may be relatively low given the amount of time and cost involved in bringing such a suit. Further, unless a state law provides for statutory damages, the harm caused by such unauthorized use may be difficult, if not impossible, to ascertain, without actual proof that the consumer ordinarily receives compensation for such use.

However, when celebrities are involved in the tweets at issue, the stakes are raised, as the celebrity names/likenesses may carry tangible commercial value. For example, if an advertiser follows a celebrity or retweets or favorites a tweet posted by a celebrity that mentions the advertiser’s products or services, and, in each instance, the advertiser does not have a formal relationship with the celebrity, such activity could potentially lead to the celebrity bringing a false association, false endorsement and/or right of publicity claim because the use could be viewed as commercial in nature.

A real-world example of this type of activity formed the basis for a $6 million Lanham Act and state right of publicity and unfair competition lawsuit filed last year by actress Katherine Heigl against retailer Duane Reade ⁴See Heigl v. Duane Reade, Inc., No. 1:14-cv-02502 (S.D.N.Y. complaint filed Apr. 9, 2014) (19 ECLR 542, 4/30/14). in connection with Duane Reade’s posting of a photo depicting Heigl walking out of a Duane Reade store carrying two shopping bags, with a caption that read “Love a quick #DuaneReade run? Even @KatieHeigl can’t resist shopping #NYC’s favorite drugstore.” Duane Reade did not have a formal endorsement relationship with Heigl, nor did it have the actress’s consent to use her name or image in the tweet. The parties ultimately settled for an undisclosed amount, so there is no case law guidance on this specific issue. However, these types of scenarios are likely to continue to pose challenges for brands trying to determine what type of content posting/sharing is acceptable.

In contrast to the lawsuit brought by Heigl, a tweet sent by the official Arby’s Twitter handle to musician Pharrell Williams during last year’s GRAMMY Awards show presents an example of a potentially risky real-time tweet that ultimately resulted in a branding success. During the awards show, Williams took to the stage wearing a distinct, oversized hat with a silhouette that bore a humorous resemblance to the Arby’s logo. Noticing the resemblance, the sandwich chain’s Twitter handle publicly tweeted to Williams during the live telecast: “Hey @Pharrell, can we have our hat back? #GRAMMYs.” ⁵David Griner, Arby’s Slayed the Grammys With This Tweet About Pharrell Williams’ Hat, Adweek, Jan. 27, 2014, available at http://www.adweek.com/adfreak/arbys-slayed-grammys-tweet-about-pharrell-williams-hat-155237. The tweet not only used Williams’s name and likeness without his permission, but it also contained the protected “GRAMMY” word mark. In what amounted to the best response that the brand could have hoped for, the tweet went viral and received real-time praise on Twitter from a number of other global brands, including Pepsi and Hyundai. ⁶See id. The highest form of praise (and express approval) later came from Williams himself, who replied to the tweet by asking Arby’s: “Y’all tryna start a roast beef? .” ⁷See id.

The original Arby’s tweet received over 83,000 retweets and 48,000 favorites, and earned 384 times Arby’s normal reach on Twitter. ⁸Amy Gesenhues, Arby’s Social Media Manager Gives Inside Scoop On Tweet To Pharrell That Rocked The Grammys, Jan. 29, 2014, Marketing Land, available at http://marketingland.com/guy-behind-arbys-tweet-pharrell-williams-rocked-grammys-72222. Although Arby’s took a risk by using a celebrity’s name and likeness and a protected trademark without permission on Twitter in a highly visible way, the risk resulted in a best-case scenario outcome, given that Williams approved and positively engaged with the brand. The exchange was widely lauded as a huge social media win and a prime example of how a strategic social media presence can catapult a brand’s reputation. ⁹See id. However, the differing outcomes in the Heigl and Williams examples highlight how these types of scenarios are likely to continue to pose challenges for brands trying to determine what type of content posting and sharing is acceptable.

To complicate matters further, Twitter’s TOS do not purport to grant any express rights to advertisers for commercial uses of content on Twitter. The TOS detail the grant of rights from each user to Twitter, but advertisers are not specifically mentioned as rights holders. ¹⁰See supra note 2. Reading Twitter’s TOS as a whole reveals that users are responsible for the content of their tweets, they retain ownership of any intellectual property rights included therein and they grant a broad license and sublicense to Twitter and its “partners” to reuse user content without any compensation to the original author. The TOS state that each user is responsible for its use of the Twitter service, for any content it provides to Twitter and for any consequences that result. ¹¹Id. All posted content is the sole responsibility of the person who originated it and, by posting or displaying content on Twitter, users grant Twitter “a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such [c]ontent in any and all media or distribution methods (now known or later developed).” ¹²Id.

Further, the TOS prominently highlight a “tip” that states that the license authorizes Twitter to “make your Tweets available to the rest of the world and to let others do the same.” ¹³Id. The license from users to Twitter includes the right for Twitter to make content “available to other companies, organizations or individuals who partner with Twitter for the syndication, broadcast, distribution or publication of such [c]ontent on other media and services, subject to [Twitter’s] terms and conditions for such [c]ontent use,” and that any such use by Twitter’s partners may be made with no compensation to the user. ¹⁴Id. Despite this seemingly broad and sweeping license, Twitter’s rules nonetheless generally prohibit copyright and trademark infringement, privacy violations, spam, pornography and other unlawful activity through tweets. ¹⁵Twitter, The Twitter Rules, https://support.twitter.com/articles/18311-the-twitter-rules#. Additional guidance for developers using the Twitter platform can be found in Twitter’s Developer Agreement, which states that users’ express consent must be obtained before using “a user’s [c]ontent to promote a commercial product or service, either on a commercial durable good or as part of an advertisement.” ¹⁶See Twitter, Developer Policy, https://dev.twitter.com/overview/terms/policy.

The only instance of a court’s review of Twitter’s TOS was in Agence France Presse v. Morel, which unfortunately provides no further clarity. ¹⁷934 F.Supp. 2d 547 (S.D.N.Y. 2013). In Morel, a photographer was awarded a judgment of $1.2 million in statutory damages as a result of the Agence France Presse (AFP) and Getty using the photographer’s images of the Haitian earthquake, which were posted without permission by a third-party Twitter user, falsely attributing the photos to the third party and then commercially licensing the photos without the photographer’s permission. In its review of the argument offered by the AFP that it derived a license to commercially license the photos from Twitter’s TOS as a third-party beneficiary, the court found that the TOS granted an express license only to Twitter and its partners to use content posted on Twitter, and that such license would not extend to the AFP and Getty. ¹⁸Id. Without additional case law or other guidance from Twitter, advertisers are left to rely solely on the TOS, which appear to grant only certain rights to Twitter and its partners.

While the safest approach would be to clear all third-party rights implicated in brand content posted or shared on social media, that would likely be unrealistic because of the fast-paced nature of the social media environment, which requires advertisers to employ spontaneity and precise timing to participate in a way that would be viewed as authentic and relevant. Ultimately, advertisers need to develop content and approval process compliance guidelines for their internal marketing department and external agencies that must balance the need for compliance and legal risk with the realities of “at the moment” engagement. This approach must also take into consideration the advertiser’s tolerance for risk. While a large and well-established brand may be more cautious given its prominence in the marketplace (as well as its deep pockets), a smaller, more disruptive company may have a higher tolerance level as it attempts to establish its name and reputation. Interestingly, and perhaps somewhat ironically, adopting a more aggressive approach by a start-up may actually result in greater press coverage and possibly a celebrity wanting to be associated with the cutting-edge firm.

Obviously, this policy would apply not only to Twitter, which was used only as a primary example in this section, but on all other popular social media platforms that allow for the posting and sharing of brand content, such as Instagram, Pinterest, Facebook and Vine. Recent analytics data that show that Instagram now has more users than Twitter and that posts from the biggest brands on Instagram receive almost 50 times more engagement than on Twitter ¹⁹Lara O’Reilly, Now Instagram is Dominating Twitter in Another Hugely Important Way, Business Insider, Dec. 16, 2014, http://www.businessinsider.com/instagram-engagement-rates-up-to-50-times-higher-than-twitter-socialbakers-finds-2014-12. indicate that social media posting and sharing by advertisers is likely to grow significantly in 2015, as will the legal issues that involve social media engagement and the posting and sharing of content.

II. FTC Guidance on Endorsements

Since clarifying its endorsement and testimonial guidelines in 2009, the FTC has indicated its intention to apply the guidelines to consumer statements made in social media. ²⁰Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. pt. 255 (Endorsement Guides), available at http://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-publishes-final-guides-governing-endorsements-testimonials/091005revisedendorsementguides.pdf. These guidelines require that any material connection between an advertiser and an endorser must be disclosed, so that consumers are not misled as to the motivation of the speaker or consumer. For example, a consumer who is paid or given a free product by an advertiser may be more inclined to post a positive review of the product or the company, and the FTC believes that not disclosing the “connection” might mislead consumers viewing the post into believing that the post was objective and without influence. Since 2009, the FTC has brought several cases against national advertisers and public relations firms in this area, resulting in injunctive settlements, ²¹See, e.g., In re Legacy Learning Systems, Inc., No. 102-3055, (FTC June 10, 2011), available at http://www.ftc.gov/sites/default/files/documents/cases/2011/06/110610legacylearningdo.pdf; In re Reverb Communications, Inc., No. 092-3199, (FTC Nov. 26, 2010), available at http://www.ftc.gov/sites/default/files/documents/cases/2010/11/101126reverbdo.pdf. but has also closed other matters as not warranting formal action. ²²See, e.g., Ann Taylor Stores Corp., No. 102-3147 (FTC closing letter Apr. 20, 2010), available at http://www.ftc.gov/sites/default/files/documents/closing_letters/anntaylor-stores-corporation/100420anntaylorclosingletter.pdf; Hyundai Motor America, No. 112-3110 (FTC closing letter Nov. 16, 2011), available at http://www.ftc.gov/sites/default/files/documents/closing_letters/hyundai-motor-america/111116hyundaimotorletter.pdf.

In March 2014, the FTC announced that it had concluded an investigation of shoemaker Cole Haan’s conducting a sweepstakes on Pinterest in which it asked entrants to pin images of Cole Haan shoes onto a Pinterest board to enter. ²³See Cole Haan, No. 142-3041 (FTC closing letter Mar. 20, 2014), available at http://www.ftc.gov/system/files/documents/closing_letters/cole-haan-inc./140320colehaanclosingletter.pdf. The FTC determined that the act of pinning an image of an advertiser’s product constitutes an endorsement, and the sweepstakes entry received in exchange for the pin was a material connection that needed to be disclosed. ²⁴See id. While Cole Haan required entrants to use its promotion hashtag #WanderingSole in all pins, the FTC stated that the promotion hashtag alone did not adequately communicate the material connection (an entry in the sweepstakes). ²⁵See id. The FTC ultimately did not pursue enforcement action partly because it acknowledged that it had not previously publicly addressed whether an entry into a contest could be a material connection or whether a pin on Pinterest could constitute an endorsement. ²⁶See id. The guidance has wide-reaching implications for brands when conducting promotions on social media platforms or asking consumers to post on social media about their products or services in exchange for some value, however small. While it chose not to take action against Cole Haan, the FTC effectively threw down the gauntlet and put industry on notice that even the most seemingly innocuous of connections—a sweepstakes entry—will be scrutinized.

Later in 2014, the FTC did not exercise such forgiveness when announcing a settlement with advertising agency Deutsch LA concerning its role in client Sony Entertainment’s advertising campaign for a new mobile gaming console. The FTC alleged that Deutsch failed to comply with the Endorsement Guidelines when it solicited employees to tweet about its client’s product, and the tweets did not disclose that they were written by employees of the client’s agency. ²⁷In re Deutsch LA, Inc., No. 122-3252 (FTC proposed consent order Nov. 25, 2014), available at http://www.ftc.gov/system/files/documents/cases/141125deutschagree.pdf. According to the FTC, the fact that the tweets were written by employees of the client’s agency would have been material to consumers in making a decision whether to purchase the console, and thus the tweeters’ failure to disclose was allegedly deceptive. ²⁸See id. Under the terms of the settlement, Deutsch LA will be barred from misrepresenting that an endorser of a game console or video game product is an ordinary user, and it will be required to disclose any material connection between any endorser of a game console product or video game product and Deutsch LA or other entity involved in the manufacture of marketing of the product. ²⁹See id.

Brands should be mindful that any solicitation for consumer endorsements on social media in exchange for incentives could trigger the Endorsement Guides. The two cases highlighted above evidence the FTC’s continued interest in this area, and with social media activity exploding at an unprecedented rate, there is no doubt that more enforcement actions will be forthcoming in 2015.