It was bound to happen. The tremendous growth of digital
marketing and social media was an invitation for government
regulation. For instance, the Federal Trade Commission recently
updated its truth-in-advertising guidelines, which were last revised
in 1980, to address the commercialism of the Web.
Copyright© 2008-2011 Automotive Dealers Network. All rights reserved.
|Jim Radogna is the President of Dealer Compliance
Consultants, Inc., a San Diego, California training and
consulting firm. He has more than 20 years of
broad-based management, training and consulting
experience in the automotive industry.
Federal and state regulators are taking the position that social media is not
a loop-hole for deceptive marketing practices and are actively enforcing
and cracking down on social media deception. Proper social media
ethics are now a matter of law, not just personal preference.
The FTC’s updated Endorsement and Advertising Guidelines require
companies to ensure that their posts are completely accurate and not
misleading, and planting or allowing fake reviews is a violation. The
Guidelines are extremely broad and can apply to anyone writing reviews on
rating sites, web sites or promoting products through social media sites,
There are several companies out there that offer seemingly quick and easy
ways to improve your ratings on review sites. Be careful! A Dealership in
Texas suffered devastating reputation damage because of the review-
posting practices of a company they hired. A customer discovered that
suspicious “reviewers” were writing 5-star reviews about all kinds of
businesses and dealerships across the nation on the same day. This
debacle was uncovered in October of 2010, yet news stories continue to
show up on the dealer’s page one search results.
While the above case may be an example of a dealer who unfortunately hired the wrong vendor, an area of
real concern is the activity of a company’s own employees. The FTC recently charged a California
marketing company with deceptive advertising after it found that the company’s employees were posing as
ordinary consumers posting positive reviews online.
Dealers may face liability if employees use social media to comment on their employer’s services
or products without disclosing the employment relationship. The FTC requires the disclosure of all
“material connections” between a reviewer and the company that is being reviewed. These connections can
be any relationship between a reviewer and the company that could affect the credibility a consumer gives
to that reviewer’s statements, such as an employment or business relationship. So if employees, friends,
family or vendors post reviews to prop up a dealership’s online reputation, they must clearly disclose any
relationship they have with the company. In addition, all reviews must be an honest opinion based on a real
experience. Reviewers must never endorse a product or service that they have not used personally or
create any other form of false endorsement. It’s all about transparency and full disclosure.
Besides the obvious potential damage to a dealer’s reputation, failure to follow these regulations can result
in substantial penalties. In recent actions, the New York Attorney General fined a cosmetic surgery company
$300,000 for ordering its employees to write fake reviews of its face-lift procedure and the FTC ordered a
company marketing instructional DVDs to pay $250,000 for fake reviews posted by the company's affiliate
marketers. The FTC has indicated that companies are fully responsible and liable for all inappropriate
actions of their employees, their vendors, and any advocates they recruit. Reviewers may also be held
personally liable for statements made in the course of their endorsements.
Paying For Reviews
The practice of offering a free oil change or gas card to a customer in exchange for a good survey has long
been frowned upon by manufacturers. Because there are no factory gatekeepers when it comes to online
ratings, it may seem tempting to offer customers an incentive to post a positive review. The good news is
that you can if you want to; the not-so-good news is that the regulations require that any reviewer provided
with any form of compensation such as free services, rewards, incentives, promotional items, gifts,
samples, or review items, must fully disclose the source and nature of any compensation received.
So, if you pay for reviews and the reviewers fail to disclose their compensation, you may
face liability. This is an area where it’s easy to get caught and besides the legal danger, your
reputation will likely take a big hit.
Advertising on Social Media Sites
The wisdom of trying to “sell” on social media sites by posting inventory, prices, or payments is an ongoing
debate, but the fact remains that many dealers are engaged in this activity in some form. While I have no
opinion on the relative merits of whether to “sell or not to sell” on social media, it’s important to note the
potential implications of these types of activities.
Despite the fact that social media tends to be a low-keyed, casual type of communication, advertising
regulations don’t go away. In fact, The Federal Trade Commission recently announced that it was updating
its document Dot Com Disclosures: Information About Online Advertising. The primary focus of the
document, which was first issued in 2000, is to inform advertisers that consumer protection laws and the
requirement to provide clear and conspicuous disclosures applies to the online world in addition to the
So, in a nutshell, if inventory is posted or prices/payments are quoted on social media it’s
likely that the posts will be deemed to be advertisements and will be subject to state and
federal disclosure and truth in advertising regulations. Lack of space is no excuse either. Even
if you’re advertising on Twitter and limited to 140 characters, you must include a clear link to any
necessary disclosures. A good rule of thumb is to have any information that could possibly be
construed as advertising reviewed by upper management or a qualified professional before it is
Social Media Policy
Social media applications such as blogs, social networking, and video sharing have soared in popularity so
it’s important that dealers control the information that’s coming out of their business. Policies and
procedures should be put in place to spell out how employees are expected to conduct themselves within
social media. A social media policy can help take the guesswork out of what is appropriate for employees
to post about a company to their social networks.
There are a number of potential legal issues with employees’ use of social media that should be addressed
such as the danger of possible privacy, harassment, discrimination or defamation claims. Beyond legal
risks, employees can harm a company’s reputation by disseminating controversial or inappropriate
comments regarding the employer. However, employer restrictions on the use of social media can be
tricky. The National Labor Relations Board (NLRB) recently issued a complaint against an Illinois
dealership, alleging that the dealership unlawfully terminated an employee for making critical comments
about the dealership on Facebook. While some unprofessional and inappropriate conduct may not be
protected, the intersection of social media and the NLRA is an evolving area of the law.
The best way to protect your dealership from legal trouble is by establishing formal social
media policies for your staff. Companies often get in the most trouble when they fail to train their
employees about appropriate social media use and disclosure. To prevent this from happening, it’s a
good idea to create a written social media policy and training program for your company and carefully
monitor social media use.