Wednesday, June 17, 2009

Crisis Prevention - Are Corporate Blogs a Potential Legal Landmine?

It is a growing trend. Company employees and even senior executives are contributing to corporate blogs. A recent survey showed that seventy-six of the Fortune 500 companies now publish blogs. Thousands of other smaller firms do the same. Blogging is a good way of humanizing a major corporation by building a closer relationship with the customers and marketing new products. Blogs also, however, pose a hidden danger that may not be fully recognized at this early stage.

Recently, I attended a program in which corporate bloggers were discussing their roles in corporate marketing and communications. The one thing that raised immediate concern was that the bloggers seemed to have little supervision as they placed thousands of words on the Internet on a company website.

In one instance, a blogger at a major corporation said that she was expected to know what was appropriate for the company blog. None of the bloggers indicated that their organizations had any written policy about blogging or that they had been briefed by the company's legal counsel on the potential liability issues involving a blog.

Some of the issues should be obvious. At a public company, bloggers should not be making forward- looking statements concerning products, product development, earnings, or the price of the company's stock. Some areas may be less clear. What if a blogger's enthusiastic comments about a company's product prove to be misleading or inaccurate? Can stockholders sue the company based on those comments if the highly touted product turns out to be a dud? What if bloggers disparage another company's product or use the blog to promote their own social or political agendas? There is no question that most bloggers will use good common sense. But there are plenty of well meaning individuals whose actions leave their employers shaking their heads and plaintiff's counsel jumping for joy.

Among the legal issues outlined in a recent article by the law firm of Howard, Rice, Nemerovski, Canady, Falk & Rabkin ( include:

· Defamation and Privacy Torts
· Intellectual Property Infringement
· Trade Libel
· Trade Secrets
· Securities Fraud
· Gun-Jumping
· Selective Disclosure
· Forward-looking Statements
· Employment Issues
· User Privacy
· Discovery

Robert Sprague, an assistant professor in the Department of Management and Marketing at the University of Wyoming, published an article* in the American Business Law Journal which provides an excellent discussion of whether bloggers' work falls under the First Amendment or is more tightly regulated commercial speech. We have seen instances where aggressive state regulators have sued companies based on claims made in blogs and on the Internet, even in instances where employees were not directly making the product claims.

A prominent plaintiff's attorney was recently quoted as saying that he loves to use company websites as a basis to undermine the credibility of corporate officials during depositions. We have found that it is not uncommon for websites to contain information and claims that have not been vetted by legal counsel and can be misleading or taken out of context.

It seems ironic that organizations that spend hours reviewing every word in a press release would allow bloggers to produce material that appears on a company website with little or no review and only informal guidelines.

Blogging isn't going away. However, like any form of corporate communications, it needs to be controlled and monitored.

*Robert Sprague (2007). Business Blogs and Commercial Speech: A New Analytical Framework for the 21st Century. American Business Law Journal 44 (1)

David Margulies is president and founder of the Margulies Communications Group a firm that specializes in crisis prevention and crisis management for major corporate, government and non-profit clients. Margulies was a pioneer in the use of the Internet in high profile litigation. The firm handled worldwide media coverage when Oprah Winfrey was sued by Texas cattlemen and has handled high profile cases for clients throughout the U.S. (214) 368-0909

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