By Chris Lee

According to a report released in May this year, small businesses plan to spend almost a third (29 per cent) of their lead generation budgets on social media and blogs this year, compared to just nine per cent of medium and large enterprises.

With this in mind, why do larger brands seem less willing to engage online than smaller organisations? NMK spoke to Duncan Calow, partner and digital media specialist at legal practice DLA Piper.

What do organisations fear most from social media?

We recently undertook some in-depth research into attitudes towards social media amongst a group of business leaders. The findings showed that organisations in both the public and private sector are embracing social media as a way to engage with their audience. One respondent, an in-house lawyer at a major entertainment company commented, “Facebook provides a relatively easy, simple, inexpensive way for consumers to interact with our brand”. Bill McCluggage of the Cabinet Office agreed: “… the use of Facebook by our leaders, to enhance the democratic environment, is a very positive sign that we are moving towards much more interactive use of social media.”

However, the potential of the Internet is inextricably linked to the potential of consumer behaviour and while many business leaders recognise opportunities on the horizon, they are also aware that they can push the boundaries of consumer behaviour only so far. The Internet rebalances the power between a company and the consumer, and with power comes vulnerability.  Significant threats are sometimes unavoidable, particularly reputational damage enabled by social networks.   We recently surveyed the UK travel and hospitality sector on social media and discovered the significant influence that sites like TripAdvisor have and the steps those businesses take to respond. 

When consumers feel aggrieved, they tell their friends. One respondent from a multinational entertainment company pointed out: “I think that social media is going to cause a lot of scrutiny of a company’s practices”. Such scrutiny, in a multi-jurisdictional world, could be as wide as it is deep.  Companies need to be sincere, treat consumers with respect and ‘be good’. As Polo Ralph Lauren’s Marco Kerschen commented to us: “There is a fragile balance with social networks. If you start to abuse them for influence I think they will turn against you. At the end of the day they are a social platform and not a commercial one”.

What are the key legal challenges that organisations should get in place when dealing with social media? 

A multi-channel world is a multi-jurisdictional world. This adds a layer of complexity to the legal implications of conducting online business. The less tangible the service the more companies and consumers can stray into the unknown, particularly regarding privacy. Given the nature of the current legal framework, never has ‘think global, act local’ been more appropriate. As one of the interviewees pointed out “the world is not united”, therefore the multi-jurisdictional conundrum will not be resolved swiftly. Advice is crucial to ensure understanding of different geographical constraints and opportunities.

Realising the potential of online channels is mainly about consumer behaviour. The online profiling of individuals has become an essential aspect of many Web 2.0 services and business models. However, the legality of profiling activities is unclear. While it is not contested that some profiling data qualifies without any doubt as ‘personal data’ (because it can be directly linked to individuals), there is a debate as to whether this is also the case for data that cannot be linked to a natural person (so-called ‘abstract profiles’). If abstract profiling would also be subject to the European Data Protection legislation, the legal framework may hinder the development of such services and business models, even if the actual risk to individuals may be relatively low.

Is social media a minefield for litigation? For example, have any retailers taken anyone to court for defamation over comments made on Twitter, blogs etc?

Any business embracing social media has to understand the fundamental legal difference between the private and the commercial.  Courts and regulators treat the two very differently.  Most social media were originally founded as non-commercial platforms.  Many of the issues that they throw up - in copyright, data protection, defamation etc. - aren't an everyday problem because individuals have defences or quasi-legal protection when acting in a private capacity.  When commercial interests are involved the position changes. 

So, if as a car enthusiast I Tweet or blog that I love the latest mid-engined two seater, that's one thing, but if I'm paid by the manufacturer to do so it's quite another.  A few months ago the Office of Fair Trading (OFT) took action against a commercial blogging network because it was insufficiently clear where promotional activity was taking place within its content.  In line with earlier US law guidance the OFT stressed that even Tweets must comply too.  Since March 1st the UK advertising standards regime has been extended to social networks.  So there is a clear need to follow the rules.    

Of course these networks are designed for two-way communication.  So even if businesses are careful with their message, what they find posted about them may not be so measured.  We are regularly asked by commercial clients to help respond to defamatory or unlawful postings.  As a Facebook libel action and several blog and forum cases have shown it is certainly possible to trace and act against the hands behind even anonymous messages.  However, those cases have also shown that courts may not take chatroom banter so seriously as other publications.  Plus, as recent headlines have shown, using legal actions against online media can prove counter-productive.  Our advice is as often to work with marketing and social media experts as it to rush to court.