The Risks of Social Media: How Third Party Marketers Can Pose a Liability

by Emily Holbrook on December 18, 2012 · 1 comment

As social media becomes more important to brands, companies have learned to embrace the marketing tool as a necessity. But many organizations don’t have the time it takes to build an audience of followers on Facebook and Twitter. This is where third party marketing agencies come in. But, as evidenced in recent legal headlines, the liability is enormous.

A recent piece in the International Business Times cited the case of a nonprofit organization that used a third party marketing agency to establish and maintain the nonprofit’s social media presence. But when the nonprofit was late on one payment to the agency, it found that the passwords to the nonprofit’s Facebook and Twitter account had been changed. It was a simple message: if you don’t pay up, you lose your account. And there are several examples of third party marketing agencies not complying with laws and regulations regarding advertising.

A white paper on the inherent legal risks associated with marketing through social media, published by Venable LLP, a New York-based corporate law firm, states:

Companies that have relationships with third-party affiliate marketers should ensure that those affiliates comply with advertising and marketing laws in marketing the companies’ products or services through social media. Businesses should have agreements with affiliates requiring the affiliates to comply with all applicable federal, state, and local laws and regulations; it may be prudent to include specific representations and warranties by the affiliate with respect to compliance, with specific references to significant laws such as the FTC Act. The agreements should also have a provision whereby the affiliate agrees to indemnify the company (either though a mutual indemnification or otherwise) from liability arising out of the affiliate’s conduct – preferably with a provision requiring that the affiliate carry sufficient insurance to fund the indemnification should it be triggered.

On a related note, confidentiality provisions and related provisions ensuring data security have become increasingly important in the current legal environment, particularly in agreements involving cross-border activities where consumer personal information is collected online. Additionally, businesses should, to the extent it is feasible, monitor the advertising and marketing practices of affiliates and review their marketing materials before they are disseminated. A company should take similar measures with respect to third parties who market through social media outlets operated by the company.

But socia media marketing risks are found in-house, too. Take the case of blogger Noah Kravitz and tech blog PhoneDog. When Kravitz began work at PhoneDog, he created a Twitter handle, @Phonedog_Noah, which eventually amassed 17,000 followers. Kravitz left PhoneDog on good terms in 2010, changing his handle to @NoahKravitz but keeping the password and, hence, his followers.

Things turned ugly when he filed suit over back pay. PhoneDog then countersued, claiming the followers of @Phonedog_Noah make up, essentially, a corporate customer list — their corporate customer list. In a remarkable move, they also demanded $2.50 for each of the followers over an eight-month period, which adds up to $340,000.

The PhoneDog vs. Kravitz case ended in negotiation in early December. So, without a legal ruling on this modern matter, we are still left with the question of who actually owns certain Twitter accounts? That’s a question we will undoubtedly see more of in the future.

But for now, during this legla limbo of social media laws, there is a large amount of helpful information on the web that companies can use to analyze social media marketing and create their own social media policy, such as SocialMediaGovernance.com, which offers a section with 218 different social media policies. And this site lists six steps to creating a social media governance board. But the most important things to remember when putting your company’s social media marketing efforts in the hands of someone else, either in-house or outsourced, are:

  1. Will the third party/employee do a better job than your staff/yourself?
  2. Does the outsourcing company/employee understand your brand completely?
  3. Do you have a thorough and specific contract in place?

And please, feel free to share your thoughts. Does your company use third party social media marketing or do you keep this aspect of operations in-house? What are the risks your company has faced with either option?

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Emily Holbrook is the executive managing editor for National Underwriter Life & Health and the former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writings at EmilyHolbrook.com.

{ 1 comment… read it below or add one }

Pat December 18, 2012 at 3:37 pm

Tough way to learn a risk mgt lesson: plan properly.

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