ReactS : Advertising Lawyers & Attorneys : Reed Smith Law Firm : Marketing Regulations, Product Placement

It comes as no surprise that the Office of Fair Trading, (OFT) has confirmed that on line marketing and PR practices that do not disclose the fact they include paid for promotions are deceptive and a breach of the Consumer Protection regulations, (CPRs). ReACTS has been advising marketers to beware for some time about such practices, and the issue is covered in our Ad Guide on Social Media.

The latest announcement comes as the OFT investigated a company called Handpicked Media and found that it had broken rules of disclosure by purchasing  blogposts and tweets for sponsored promotions without disclosing the fact clearly. While the OFT may not wish to instigate a clamp down on this sort of activity itself  but the ruling underlines clearly the law in this area and strengthens the hand of the ASA when it takes over self regulation of promotional messages on the Internet in March 2011.

In its press release The OFT's has now stated unequivocally that  " We expect on line advertising and marketing campaigns to be transparent so consumers can clearly tell when blogs, posts and microblogs have been published in return for payment or payment in kind. We expect this to include promotions for products and services as well as editorial content.'

There are hundreds of sponsored blogs, tweets, viral films, and use of brand ambassadors which hide the fact that these individuals are being paid to comment on products and services. Being transparent is crucial to protect the reputation of your brand and ensure compliance with the law.  

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Ordinary Joes, footballers and even members of the clergy have all got themselves in hot water when making comments on Social Media sites. Twitter is on course to have 200 million users by the end of 2010. There are currently over 50 million tweets of 140 characters or less each day. However, as multinational corporations, advertisers and members of the public embrace this service, a note of caution should be sounded. Paul Chambers’ lawyers are currently preparing an appeal following his conviction for “menace”, after he tweeted “Cr*p! Robin Hood airport is closed. You've got a week and a bit to get your sh*t together otherwise I'm blowing the airport sky high!!”. Paul has maintained this tweet was simply a joke but to date this ‘joke’ has led to a criminal conviction, with fines and costs of approximately £3,000 (or around £22 per character). Footballer Darren Bent landed himself with a fine of £80,000 from his then employer Tottenham Hotspur FC by posting a tweet directed at the club’s chairman to “stop f**king around” regarding his transfer to another club.

However, social media faux pas are not just confined to Twitter. A Church of England Bishop was suspended recently and forced to apologise for making disparaging remarks about the impending Royal nuptials on his Facebook account. The Rt Rev Pete Broadhurst posted comments chastising the “nauseating tosh” surrounding the announcement of Prince William and Kate Middleton’s forthcoming nuptials. He also referred to the couple as “shallow celebrities”, complained the Royal Family was surrounded by “broken marriages and philanderers” and compared the marriage between Prince Charles and the late Princess Diana as a “disaster in slow motion between Big Ears and the Porcelain Doll”. The Bishop has since issued an apology expressing his “sincere regrets for the distress caused” by his remarks and was suspended from his post.

These events demonstrate the risks for companies with a presence online. Companies simply must have a detailed social media policy in place and train their staff in order to prevent their employees making damaging comments about the brand. An applauded example of a Social Media policy can be found here, but beware, even this did not prevent one of the biggest online reputational scandals of recent years. 

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If you can't beat them, join them. News this week that Facebook and Myspace, two of the biggest rivals in the social media arena, are to form a rather unlikely alliance. Myspace has dubbed the move its "Mashup with Facebook". The partnership will allow Myspace users to create a "personalised stream of entertainment content" by matching their likes and interests on Facebook to relevant Myspace topic pages, profiles, videos and other content in various categories such as TV and film, music and celebrities. It also allows users to engage with other fans who share the same interests, further promoting the concept of sharing, which is at the heart of social media. And this is about to be made even easier, since Myspace will reportedly soon incorporate the Facebook "Like" button onto its site. The collaboration appears to be engineered by both companies to combat the potential threat created by the launch of Apple's music-orientated social network, Ping, in September this year. Ping allows the estimated 160 million iTunes users to follow their favourite artists and friends to find out what music people are talking about, listening to and downloading. They can find out about tour dates, and share views on new material. According to Apple, the number of users on its new social media service rocketed to 1 million within 48 hours of its launch, so the threat to other social networks is apparently very real, although as Josh Halliday points out in The Guardian, this threat may ultimately be limited, since Apple's social network is restricted to users of iTunes.

The benefits for advertisers with the Myspace-Facebook alliance remain to be seen, but it goes without saying that with a potential combined audience of upwards of 600 million users worldwide, and growing, brand engagement opportunities seem endless. Lady Gaga currently has 32.6 million people "liking" her on Facebook, and 1.4 million friends on Myspace, not to mention her 7 million followers on Twitter. The major international brand Starbucks, has over one million followers on Twitter, and over 18 million "likes" on Facebook. In a week which saw the announcement of a new royal engagement, it is pertinent to note that even the Queen of England now maintains a vast presence on social media sites, running an official profile on Facebook, tweeting on her official Twitter page, and operating an official YouTube channel. It is essential these days for any and all brands to actively participate in the social media environment. But social media marketing is littered with legal and reputational pit-falls and advertisers need to tread carefully. Please see our AdGuide for further information on how to navigate this minefield and protect your brand online.

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Governments across the world are increasingly under pressure from privacy advocates and some consumers to better regulate the use of personal data on line. Under Ed Vaizey's proposed plan announced last week, Google and Facebook and other social media networks and search engines would be required to sign up to a new code under which consumers would be able to get redress if they feel their privacy has been invaded.

The UK government is in discussions with the ICO, Information Commissioners Office, about how to develop such a code. What this will mean for advertisers using social media is as yet unclear though Ed Vaizey likened this idea to the mediation service offered by the Press Complaints Commission, which is both worrying and perhaps reassuring since the PCC is not renowned as particularly effective means of redress for consumers but is totally self regulated by the newspaper industry. Thus we might be led to assume that the search engines are being asked to run their own such self regulatory body. Given the lack of funds in the public purse one can assume this to be the case. No doubt Google will argue that it already has means for consumers to complain and seek redress. The cost of establishing and maintaining an independent body offering a complaints and mediation service would be colossal and without funding it seems unlikely this idea will take off in the immediate future.

What would it mean though for website owners and major brands?

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The Advertising Standards Authority, ASA, announced on the 1st September 2010 an extension of its regulatory remit, from March 2011, which will give the Regulator jurisdiction over all marketing communications on the Internet including those on corporate websites and social media networks such as Twitter and Facebook, as well as over advergames and user generated content.

This controversial move has been introduced without any public consultation, and includes new serious sanctions for advertisers. Exemptions to the new regulation include "heritage advertising", 'investor relations', and marketing communications promoting "causes and ideas". Nearly all other marketing promotions on-line will need to comply with the CAP Code. Some areas of concern include how the ASA will deal with the fine line between editorial and promotional material; how the extended remit will be adequately funded; how sanctions can be effectively enforced against companies with sites based overseas or indeed against those thousands of smaller on line advertisers who are blissfully unaware and ignorant of the CAP Code and whose advertising can change in seconds in this fast paced media environment.

All this comes into effect on the 1^st March 2011, which does not give businesses long to review their on line promotions and marketing plans. The changes to the CAP Code ironically comes literally days after printed versions of the revised CAP and BCAP Codes were sent out to purchasers, and only a few months after a public consultation, which excluded these latest provisions.

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Google is celebrating yet another significant litigation victory today, after a federal judge in New York ruled in favour of Google in the $1 billion claim made against them by Viacom. This follows Google's recent victory in March this year in the case brought by Louis Vuitton about AdWords (see our Ad Guide).

Viacom sued Google in 2006, after its purchase of YouTube, on the basis that Google knowingly allowed copyright protected material, such as Viacom's programmes, to be used on the YouTube website without permission and was thus infringing Viacom's copyright. Viacom claimed Google was liable for "massive intentional copyright infringement" but the judge ruled that Google could not be held liable for having a general awareness that infringing material may be uploaded onto the site. In his decision, he stated that YouTube's "notify and take down" policy allowed Google safe harbour protection under the Digital Millennium Copyright Act 1998, and therefore dismissed Viacom's suit in summary judgment.

These two victories are certainly very useful to Google. The victory against Louis Vuitton allows them to retain their very lucrative AdWords search advertising policy, and this latest success seems to confirm YouTube as the world's pre-eminent video-sharing site, with all the revenue raising possibilities that this entails.

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Social media marketing surges ahead as marketers recognise the value of targeted advertising and real engagement with consumers. In a survey of more than 1,000 marketers from around the world, Alterian found that 66% of respondents will be investing in social media marketing activity over the next year and as many as 40% said they would be using the DM budget to do so.

Commenting on the survey results Alterian CEO, David Eldridge, said, "2010 marks the start of the digital decade for marketing. Untargeted and irrelevant marketing techniques are now redundant and the results of this survey show many in the industry recognise this."

However advertisers need to be aware of the potential risks to brand reputation if things go wrong. Do you know your flog from your blog and what happened to Walmart when its fake blog was discovered? Read our guide to understanding and minimising risks of social media marketing.

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This post was written by Douglas J. Wood and Gregor J. Pryor.

We're pleased to make available our new edition of our Social Media White Paper with expanded chapters and new coverage of Social Media issues in Europe. Our first edition fast became one of the most downloaded documents on Reed Smith's website. Click here for the new edition and bookmark the entry to be sure to get ongoing revisions. You can also read the individual chapters on our sister blog, Legal Bytes.

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