By Liisa Thomas and Jason Gordon, Winston & Strawn
The year 2012 was explosive for social media, and 2013 appears poised to have the same explosive growth. In April, Facebook bought Instagram for $1 billion. In May, Facebook went public on the NASDAQ, only to find its stock decline since its initial offering price. Facebook was not the only story this year. Pinterest overtook Tumblr in August with 25 million users.
The rapid growth in new social media platforms—both changes in existing platforms and the rapid rise of new platforms—will bring challenges to marketers and lawyers alike in 2013. Marketers are trying to figure out how to join the lively social media conversation with their consumers as social media platforms explode. Lawyers are trying to figure out how to keep their marketers out of the legal hot seat. Against this backdrop, we have more educated consumers, joined by class action lawyers and consumer advocacy groups, who are taking an in-depth look at what information is being gathered from consumers and how it is being used. As these issues converge in 2013, what are some of the types of cases we expect to see? It will likely be a busy year, so instead of a list of our top five … we have our top six.
1. Social media will become increasingly mobile .
Consumers crave the latest apps for games, news, and social interaction. But what information is being collected on these sites? What is a phone’s geo-location software tracking? Consumers are beginning to wonder: is Big Brother watching me? And, why, oh why, do I see the ads that I see on my phone? In 2012, we saw many lawsuits involving the crossover between mobile and advertising, and it seems unlikely that those lawsuits will end. For example, Path, Facebook, Twitter, and Apple were sued for allegedly harvesting, uploading, and illegally stealing a user’s address book data without the user’s knowledge or consent.1 Similar scrutiny seems likely in 2013.
With the ever-expanding base of consumers who use smartphones also comes the “appslosion.” Millions of apps have been downloaded at Apple’s App Store and the Android store. Companies that have apps should be thinking in 2013 about the privacy disclosures they make in and about these apps, especially in light of an agreement the app stores have with California.2 Under an agreement with the California Attorney General, apps must have a privacy policy, and that policy must be available to users before they download the app. The AG derived the authority for this directive from a California law that requires companies with websites or online services to conspicuously post their privacy policies. Months after the settlement was reached, the AG sued Delta Air Lines for failing to disclose its privacy policy on its mobile application.3 Because of the scrutiny from the California AG, as well as examination of apps by the Federal Trade Commission and the Department of Commerce, we have been working with many of our clients to put in place streamlined and simple policies that can be easily read on a mobile device.
2. Targeted advertising in social media will present new challenges to marketers.
Online behavioral advertising is currently governed by an industry self-regulatory regime,4 which was created in response to an FTC call for the industry to provide notice and choice when targeting ads to consumers online based on information gathered across multiple websites.5 The self-regulatory approach provides that companies engaged in online behavioral advertising should put a disclosure in behaviorally-targeted ads, as well as make other specific disclosures. The link should give people the ability to opt out (through a process managed by the industry group, located at www.aboutads.info/choices). The industry bodies have their own “watch dog” group, the Online Interest-Based Advertising Accountability Program, which brought 13 cases in 2011 and 2012 for failures to comply with the program. The FTC also has brought cases for failure to provide adequate notice and choice when engaging in online behavioral advertising, and there have been several class action cases in the space as well.
These kinds of cases are likely to continue in 2013. In addition, as the world moves to mobile, we will likely see increased scrutiny from the FTC, states, and class action attorneys about targeted advertising in the mobile space. Providing appropriate disclosures may be a struggle for companies as the technology catches up with the legal expectations.
3. Companies will closely watch how COPPA Rule revisions impacts social media.
On Dec. 19, 2012, the FTC issued an amended rule implementing the Children’s Online Privacy Protection Act. The law requires companies targeted to children under 13, or who knowingly collect personal information from children in that age group, to obtain verifiable parental consent. In its amended rule, the FTC takes into account the many technological changes that have occurred since the law was passed almost two full decades ago. While the basics have not changed, the scope of what should be viewed as personal information—such that parental consent is needed prior to collection—has expanded. Included in this, importantly, are persistent identifiers that collect information across time and across multiple websites. These kinds of identifiers are used to serve behavioral advertising, and, as a result, we will likely see increased scrutiny on child-focused sites to avoid that practice without parental consent. The impact on mainstream social media sites is less clear, however, as most already block children under 13 from participating in their forum.
The amended rule also includes requirements to get parental consent when screen names that “permit contact with the child” are collected. Again, the impact that this will have on mainstream social media websites is not clear, although certainly sites directed to children will be revisiting their practices in the beginning months of the year.
4. Celebrities will encourage consumers to make donations through social media.
Forget “Black Friday” or “Cyber Monday.” This year, charities and celebrities promoted #GivingTuesday. The idea was simple. Instead of starting the giving season with shopping, people were encouraged to start with philanthropy on #GivingTuesday. The program was promoted heavily on Twitter, and online donations on the day increased significantly. Throughout the year, celebrities also participated in promotions where they made donations to charities for every tweet they received by their Twitter followers. But celebrities using Twitter were not the only groups involved in philanthropic giving. Brands like Ticketmaster made a donation to a charity for every ticket sold, and Durex donated a condom for every tweet containing the hashstag #1share1condom on World AIDS Day.
These waves of philanthropy are bound to catch regulatory attention, and could potentially give rise to legal claims, as they are regulated under many state laws. 2012 saw increased scrutiny as well as guidance from the New York Attorney General, who issued best practices for companies.6 These best practices call for clear and conspicuous disclosure of any material terms before the consumer makes a purchase, including the name of the charity, the amount of the donation per purchase that will go to charity, the maximum donation, whether any consumer action is required to trigger a donation, and the start and end dates of the promotion. The New York AG suggests use of a “donation information” label that sets forth this information in a table format. In addition, the New York AG’s best practices state that advertisers should be able to track donations in real-time and discontinue such promotion or clearly disclose to consumers that the consumers’ actions will no longer trigger donations to a charity. Finally, the New York AG recommends that advertisers disclose how much money was raised or donated due to the promotion and display such information on their website at the conclusion of the promotion.
Charitable programs are likely to continue in 2013. With guidelines like the ones from New York, how companies disclose important and material terms may get increased scrutiny, and we may see more actions in this area.
5. Consumers may continue to be concerned with how companies use content they create.
Individuals post more and more personal information online and interact with each other freely. Companies have “joined the conversation” and also interact regularly with consumers. As more content and information is available, it becomes harder and harder to discern what is worth looking at. A good way to encourage people to view social media content is to show what other users—users you might know—have also viewed. Facebook ran into issues with this in 2012, which resulted in a preliminary settlement in response to a class action lawsuit over Facebook’s “Sponsored Stories” product.7 The case—brought under right of publicity arguments—alleged that users’ names and photos were used in Sponsored Stories without permission. With Sponsored Stories, advertisers pay to include users’ images in their online Facebook ads. As part of the settlement, Facebook will amend its website terms and online process to make it clear that users names and photos may be used in Sponsored Stories. Facebook has also agreed to pay $10 million into a fund that will distribute the money to nonprofit organizations that focus on privacy advocacy. We may see similar cases in 2013 where consumers object to uses of their content and information under right of publicity laws.
6. Marketers will need to develop creative ways to advertise green claims in social media.
Green is the new black, and no marketer wants to be left behind. Companies are creating new and more environmentally-friendly products and packaging. Next year, and in many years to come, we will likely see more green advertising. A critical issue for green advertising from a legal perspective is how companies should disclose environmental benefits in a non-misleading or deceptive manner. This is all the trickier in the social media context. Can companies simply tout the environmental benefit and drop a link to explanations and disclosures on another page? Can a story of environmental benefits be explained in a 140-character world?
We expect to see cases in this area in 2013, especially in light of the FTC’s recent updates to its Green Guides.8 The focus of the Guides was on reining in broad, unqualified general environmental benefit claims such as “green” or “eco-friendly.” Companies that make these kinds of unqualified claims may expect scrutiny, as the FTC indicated in its Guides that these claims are not capable of being substantiated, because they typically communicate a wide range of specific environmental benefit claims which are not supported. Cases may also involve some of the specifics from the Guides, including advertisements for carbon offsets, “free-of” and “non-toxic” claims, and claims regarding renewable energy and recyclability.
Conclusion.
What will be the next challenges that make companies go further and work harder? Five years ago we never would have thought that checks could be deposited into an account by photograph or lattes could be paid for on an iPhone. Social media will advance, and marketers will be sure to have a presence in the new platforms and will use the newest technologies to connect with users. As they do, lawyers will need to keep up.
Our best guess is that the first areas of concern for lawyers in 2013 will be increased use of mobile apps, behavioral advertising in a mobile space, children in social media, celebrities and charitable programs, the use of user content, and green claims. In December 2013, we will see if we were right, and what other new challenges have come to light as social media has evolved.
Liisa Thomas is a partner in the Advertising, Marketing and Privacy Group at Winston & Strawn, where she heads the privacy law practice. Thomas can be reached at lmthomas@winston.com. Jason Gordon is an associate in the same group, and a former high-school debate competitor against Ben Silbermann, founder of Pinterest.
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