Friday, August 22, 2014

Corporate Counsel: Agencies Target Business Use Of Social Media

By James B. Lake

Businesses, be careful when using social media in your marketing activities.  A single mouse click intended to appreciate a customer’s kind words could prompt a federal investigation.

This summer a maker of natural cough syrups and sleep aids learned the Food and Drug Administration has been reviewing the company’s website and social media pages.  In a “warning letter,” the FDA scolded the company, Zarbee’s Inc., for a number of online statements.  The FDA also faulted the company for “liking” its customers’ Facebook posts.  One post said a Zarbee’s product gave a child with cerebral palsy the “best sleep she has had in years.”  A Zarbee’s employee “liked” that comment and responded, “Thank you for writing this!!!  We love to hear that we have helped people.” Another customer posted that, after taking a Zarbee’s product, a two-year-old’s colds and congestion cleared up in two days.  Zarbee’s “liked” that post, too.

The company’s politeness, the FDA found, amounted to endorsing or promoting “personal testimonials” about its products “for the cure, mitigation, treatment or prevention of disease.”  To the FDA, that meant the products were being marketed as “drugs,” as defined and regulated by the agency.  This was a problem because the Zarbee’s products were not FDA-approved.  Although the company website acknowledges the lack of FDA approval, the agency demanded that Zarbee’s identify “specific steps you have taken to correct the violations noted” in the FDA’s letter.

The FDA is not the only federal agency monitoring businesses on social media.  The Federal Trade Commission investigated shoemaker Cole Haan’s activities on Pinterest, a social media site used to share and view images.  According to the FTC, Cole Haan encouraged Pinterest users to display images of Cole Haan shoes and the users’ “favorite places to wander.”  Cole Haan promised a $1,000 shopping spree for the user with the most creative entry.  The FTC alleged that the displays amounted to product endorsements without adequate disclosures that the displays were part of a contest.  In a letter this spring to a Cole Haan lawyer, the FTC said federal law “requires the disclosure of a material connection between a marketer and an endorser when their relationship is not otherwise apparent from the context of the communication.” Entering the contest, the FTC wrote, “constitutes a material connection that would not reasonably be expected by viewers of the endorsement.”

Although the FTC decided not to bring an enforcement action against Cole Haan, the letter marked the FTC’s first public indication that a consumer’s entry into a contest amounts to a “material connection” that must be disclosed.  The letter was also the FTC’s first explicit determination that a display on Pinterest is an endorsement.  Therefore, the FTC letter – like the FDA’s letter to Zarbee’s – is a warning to businesses to consider federal law when encouraging or responding to social media posts about their products.