United States: It's Blowing Up: Lessons from Two Recent Social Media Promotions

Last week, the apparel company Sunny Co Clothing launched an Instagram promotion promising to give away the red swimsuit below for free (except for shipping and handling costs) to each person who reposted the photo and tagged the company. Unfortunately, the company failed to cap the number of participants or make clear this was a "limited supply" offer, instead promising the free suit to "EVERYONE" who complied with the giveaway terms. When the promotion went viral, the company was overrun with participants and had to scramble to update its terms and cap the swimsuit giveaways. Ultimately, the company had to delete its Instagram account completely.

The media tarred the failed promotion as an "Instagram scam," and angry customers mocked it in social media responses that went viral themselves.

Sunny Co Clothing's problems came on the heels of the backlash over the recently cancelled Fyre Festival, which the organizers had promoted on Instagram and elsewhere as a luxury music festival experience in the Bahamas.

So, what should brands learn from these recent social media disasters?

1. Do Not Overpromise and Make Sure Appropriate Limitations are in Place.

Brands should consult with legal counsel at the planning stage to make sure appropriate "guardrails" are in place for structuring and advertising any promotion. The guardrails will differ depending on the type of promotion. For example, Sunny Co Clothing could have structured and advertised its promotion either (a) as a "limited supply" offer, in which case the brand would have had to ensure it had a sufficient supply of bathing suits to meet the reasonably anticipated demand during the offer window (a legal requirement), or (b) as a sweepstakes, in which the brand could have randomly selected a set number of people who would receive the free bathing suit from among the eligible entrants. For either option, the brand should have thought carefully about what terms and conditions needed to be in place to govern the promotion. Here, the fact that the offer was valid for 24 hours only and limited to the US were helpful limitations, but these restrictions did not sufficiently limit the demand to that which the brand could reasonably expect to fulfill.

Brands should impose terms and conditions to govern all limited supply offers, contests, sweepstakes, and surprise and delight promotions, and clearly address how participants can enter or participate, who is eligible, how winners/recipients will be determined, the prizes and values, and any other terms necessary to (i) meet the brand's goals and (ii) communicate all relevant information to participating consumers. Terms and conditions may or may not take the form of stand-alone Official Rules available via hyperlink.

Just as the guardrails differ based on the nature of the promotion, so too will the terms. For example, with a sweepstakes, brands cannot require participants to spend money or provide any other consideration to enter, and if they do, they need to provide an alternate method of entry.

In addition, the sweepstakes winners must be chosen at random. If the brand is running a contest, however, the brand can dispense with an alternate method of entry but will need to ensure the official rules set forth the criteria that will be used to judge the contest entries and select a winner. Finally, for any promotions run via social media, the terms should also incorporate any particular guidelines the social platforms have put in place, which will likely differ depending on the platform. In addition to pre-planning the legal terms, brands also need to build sufficient back-end functionality to carry out the promotion. For example, can the advertiser prevent bots from participating? Are fraud controls in place?

Given the various legal and logistical considerations that apply to promotions, it's important that brands discuss their promotion plans with legal counsel, so they know what precautions must be taken to comply with applicable laws and avoid potential execution and PR pitfalls like those encountered by Sunny Co Clothing.

2. Disclose, Disclose, Disclose.

As with traditional advertising, all material terms and conditions of any offer, and any key restrictions on a consumers' ability to take advantage of that offer or participate in a promotion, should be clearly and conspicuously disclosed in the advertising itself. Fine print disclosures may be legally insufficient. Sunny Co Clothing could likely have avoided a lot of the social media backlash if it had included in its initial post some version of abbreviated terms for the promotion.

3. Beware the Simultaneous Rewards and Pitfalls of Advertising on Social Media.

While the virality of social media is clearly one of the biggest boons to advertisers hoping to get brand recognition and views as quickly as possible, it can also quickly overwhelm a company that may not be equipped to deal with the increased demand and attention for a particular product or promotion. In addition, there is the potential for bad PR and mocking commentary that can go just as viral as the original promotion.

4. Social Media Promotions (Like all Advertising) Can Result in Legal Action.

Putting aside the potential for negative PR, which can be brutal but is typically short-lived, social media advertising can result in serious legal and financial consequences for a brand, which will long outlast the social media buzz. For example, a limited supply offer run by a quick service restaurant in 2009 to promote a new product landed the restaurant in court defending a class action lawsuit, after a segment on a popular day time show left the chain struggling to meet overwhelming demand for the free coupon offer. The restaurant settled the lawsuit two years later for over 1.5 million dollars. Social media promotions can result in the same types of consequences for brands.

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This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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