Being Social, Staying Legal: Policies for Social Networking

August 16th, 2011 9:27am - Posted By: Fern O'Brien

In just the last few years social media has transitioned from being a purely social activity to being an integral part of most companies’ annual marketing plans. And for good reason: social media has enabled companies to build and expand the reach of their brands in a targeted, cost-effective manner.   

Because of their social roots, it is sometimes easy to forget that when businesses use Facebook, Twitter, LinkedIn and the like, they still must comply with the same laws that govern businesses generally, including employment law, defamation and slander, copyright infringement and the Federal Trade Commission (FTC) rules and regulations concerning advertising.

Franchisors must not only remain in compliance themselves but they need to ensure that their franchisees follow the laws as well. Creating a social media policy as part of the franchise’s operations manual is a good way to ensure compliance and to protect itself from any unlawful acts of its franchisees.

Social media falls squarely within the purview of the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising that was promulgated in December 2009. These guidelines specifically apply to endorsements and testimonials about products and services.  Under the guidelines, endorsers or people giving testimonials must disclose any financial relationship that may exist with the company they are promoting. Moreover, companies can be held liable for the statements of the endorsers under this FTC regulatory framework and it is likely that franchisors could be held liable for the actions of their franchisees’ endorsers on their social network sites.  

Failure to comply with the FTC can result in significant fines and additional reporting requirements, both of which can be damaging to a growing franchise system.

A social media policy is a form of brand management that will create uniformity among your franchisees with respect to a company’s branding message which will protect and even enhance the value of the brand. It will also provide clear rules so that franchisees don’t inadvertently divulge confidential information or make statements that could be construed as “earnings claims” that are prohibited under the federal Franchise Rules. 

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