Canada: Social Media: An Advertising Minefield?

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Intellectual Property – Social Media Series, January 2011

Social media sites such as FACEBOOK and TWITTER are all about individuals connecting with other individuals. That does not intuitively sound like advertising. However, social media are used extensively for promotional purposes in a variety, and ever evolving number, of ways and advertisers cannot ignore the social media phenomenon.

Social media are used to provide customer service, updates, announcements (by social media releases, the equivalent of a press release), promotions, sweepstakes, contests and product development. On one level, social media advertising is the same as conventional advertising. Where it differs is that social media allow organizations an increased ability to target recipients with advertising based on the recipients expressed interests.

Crowdsourcing and Word of Mouth

Crowdsourcing and word of mouth are two activities that demonstrate in particular how advertising via social media is a new phenomenon but at the same time an extension of long-existing practices.

Crowdsourcing is the outsourcing of an activity to a group of people (the "crowd") via an open call for mass collaboration to achieve a business goal. While crowdsourcing may be achieved more quickly and easily through social media, the approach has existed for centuries. For example, in 1714, the British Parliament enacted the Longitude Act, which offered a £20,000 prize for the person who could invent an accurate means of finding longitude, resulting in the invention of a chronometer that responded to the need.

Major companies have instituted crowdsourcing initiatives through social media where consumers and others are invited to submit innovative ideas, sometimes in return for a prize or an award for the best innovation or idea. These innovative ideas may be extremely specific, such as a promotion by a major electronics company which offered a prize to the winner who submitted a widget application that allows certain social media sites to operate on the home screen of one of the company's products.

Word of mouth has, of course, existed forever but is particularly important in social media. The objective is to create content that attracts positive attention and then spreads voluntarily and at no expense to the advertiser. When a commercial or other advertisement goes viral because it is highly creative and people like it, the advertiser wins. An advertiser is less enthusiastic when an advertisement goes viral by virtue of the furore and negative comments it receives.

Risks

Risks inherent in social media are not hard to find. By way of example, there was the "secret" blogger who posted disparaging comments on message boards about a particular organization. It turned out that the blogger was the CEO of a company trying to buy the target of his blog posts.

Another example involves coupons posted online and appearing to be, but not in fact, authorized by a brand owner. Such activity places retailers or the manufacturer whose coupons have been counterfeited in a catch-22 situation because, by not honouring the coupons, consumers are inconvenienced and possibly annoyed at the "innocent" retailer or manufacturer.

Social media have been used by consumers to target products, advertisements and actions they do not like, such as shifting coupons from a newspaper to a website. Posts by consumers on social media sites have an inherent believability which makes it difficult for organizations to react or respond.

While some organizations have reacted by taking their positions to social media sites, others have found it more expedient to change the product, advertising or activity based on the comments made public via social media sites.

The Fine Print

The relatively low cost of social media, and the ability to see a return quickly, make social media sites an attractive proposition for advertisers. However, social media sites themselves often have detailed policies applicable to organizations that use their sites for commercial purposes. These terms should be carefully reviewed and they are not all the same. As an example, Facebook policies include Promotion Guidelines, Advertising Guidelines, a Statement of Rights and Responsibilities, Platform Policies and a Privacy Policy.

Until recently, Facebook, Inc. had to consent in writing to contests run on its site. While that requirement no longer applies, many others still do. For example, contests run through FACEBOOK may not be open to persons under 18 and may not be used to promote certain products and services such as tobacco, gasoline or gambling.

As well, specific language, including the following text, must appear in a clear and conspicuous manner adjacent to any promotion entry field: "This promotion is in no way sponsored, endorsed or administered by, or associated with, Facebook. You understand that you are providing your information to [recipient(s) of information] and not to Facebook. The information you provide will only be used for [disclose any way that you plan to use the user's information]".

Another FACEBOOK requirement is that the contest rules must contain an acknowledgement that the contest is in no way sponsored, endorsed or administered by, or associated with, Facebook, Inc.

Social media websites are enforcing their policies more vigorously. For example, it has been reported that YouTube, LLC has required companies to amend contest rules to remove language relating to the transfer of ownership of copyright in the content to the advertiser on the basis that the You Tube Terms of Service provide that all user submissions remain the property of the poster.

The specific capabilities, restrictions and defaults of any applications or other software that may be used in association with any promotion should also be carefully considered. This is especially important when running a contest to ensure that the contest will actually run as intended and described in the contest rules and advertising.

Applicable Canadian Advertising Law

As when the Internet first appeared on the advertising horizon, a preliminary question is whether social media would be subject to legal standards applicable to conventional advertising. The answer then, as now, is that Canada's federal misleading advertising statute, the Competition Act, applies to "representations" that promote directly or indirectly any business interest by any means whatever.

No doubt, going forward, there will be specialized laws such as the antispam legislation recently enacted by the federal government, but it is important to keep in mind that laws of general application, particularly the Competition Act, apply regardless of the media. For example, individuals under the age of majority are still minors when they are on a social media website and may not be legally bound to the website's contractual terms.

Other sources of quasi-regulation, including selfregulatory bodies such as Advertising Standards Canada (ASC), are also relevant. ASC's consumer complaint procedure can be triggered by one consumer and can effectively result in material having to be withdrawn. Complaints to ASC made by competitors, known as "trade complaints", are very common but, because they are handled by ASC on a confidential basis, may not be as well known unless an organization has been involved in one.

What to do Now

  • An organization should be strategic in determining its goals in social media. Strategy should not relate to any one particular site and must be kept distinct from tactics adopted with respect to the activity on a particular site. It is important to keep in mind how those individual sites relate to an overall goal.
  • A social media policy can be helpful in clarifying an organization's strategic goals and tactics for implementing them.
  • An organization should educate its employees to stress that the organization takes social media seriously. Policies regarding what employees may or may not post should also be clear (see our October 2010 Blakes Bulletin on Intellectual Property – Social Media Series).
  • An organization should have appropriate clearance procedures in place. Given the immediacy of the media, however, existing procedures may have to be adapted in order to establish how the organization will monitor and clear activity in this area.
  • Finally, an organization should consider whether its insurance covers its social media activities and, if not, whether such insurance is required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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