This post is part of a series of posts entitled A Legal Guide To The Use Of Social Media In The Workplace. For a comprehensive list of articles contained in this series, click here.

Pitfalls of Advertising by Email, Text Messaging and Online

The regulation of advertising generally falls under the Federal Trade Commission’s (FTC’s) ability to prohibit “unfair and deceptive practices.” This prohibition has been interpreted as covering all consumer advertising, but this section covers the additional federal and state laws that prohibit or regulate advertising through the more “social” outlets of email, text messaging and online. And with the increasing popularity of advertising and customer feedback through text messaging, the Federal Communications Commission (FCC) also has jurisdiction over some advertising, providing an even wider swath of consumer remedies when companies have not followed advertising laws.

Email Advertising and CAN-SPAM ACT

The Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act regulates the sending of commercial email messages. Most companies that send customer emails are aware of the general requirements of the CAN-SPAM Act, but basically, unless a company is emailing about a transaction initiated by the consumer, there are requirements that marketers include certain disclosures and “opt-out” functions in every email sent to consumers.

First, all email messages must use accurate header and routing information, including the originating domain name and email address. The message must also include a valid physical postal address where recipients can send mail to the sender. The message must use accurate subject lines, and identify itself as an advertisement. Finally, the message must provide an opportunity for the recipient to opt out of future communications, and the sender must honor opt-out requests within 10 business days’ receipt of the request. For companies using outlet offices or franchise systems, it is important to coordinate sending emails to consumers, as the FTC will consider a brand as one “company” for the purposes of the law and if consumers opt out of one type of email, they should be removed from all emails from that company.

More importantly, violations of the CAN-SPAM Act can be steep – resulting in civil penalties of up to $16,000 for each message that violates the Act. In addition, criminal penalties can apply for certain actions, such as routing messages through other computers to disguise the origin of the message, or generating email messages through a dictionary attack.

Although CAN-SPAM falls under the jurisdiction of the FTC, as will be discussed under the “text messaging” section, the FCC has applied the CAN-SPAM Act to emails sent directly to wireless devices, if sent through a telephone network, rather than through a computer network. This means a company sending emails through telephone networks could wind up facing enforcement actions from both the FTC and FCC.

In addition to the federal anti-spam act,  states have enacted laws regulating unsolicited email advertising. Most of the state laws target commercial or fraudulent email, although some laws apply to unsolicited bulk emails. Like the CAN-SPAM Act, most state anti-spam laws prohibit misrepresenting the origin of the message or the routing information of the sender. State laws generally also prohibit including misleading information in the subject line of an email. Many states restrict the use of third-party computers, and some states prohibit the sale or distribution of software that is designed solely to forge the origin of email messages.

The Telephone Consumer Protection Act (TCPA) and Text Messaging

All marketing through telephonic devices, including mobile phones, is controlled by the Telephone Consumer Protection Act (TCPA), which falls under the FCC’s jurisdiction to regulate. Although email may still be the bread and butter of consumer communication by companies, text messaging is gaining in popularity, in large part because texting has proven to be one of the more effective and targeted forms of marketing. The TCPA requires that a caller provide their name and the entity from which they are calling, the phone number at which the entity can be reached, and that a caller not call before 8 a.m. or after 9 p.m. The TCPA also established the National Do Not Call Registry. Once a consumer has put his or her personal number on the list, telemarketers cannot call (or text) them without express prior permission unless the parties have an established business relationship.

Most applicable to text messaging, the TCPA also restricts the use of autodialers and prohibits any autodialed calls to a wireless device that charges for usage, unless the consumer has specifically consented to the communication. Short message service (SMS) messages and text messages sent to a number of consumers at once almost always use an “autodial” function and therefore, companies are prohibited from sending texts without consent. And although not as steep as penalties for violating the CAN-SPAM Act, the TCPA allows for a private right of action (meaning consumers can sue a company directly claiming violation of TCPA) for $500 per infringing call or text message, or $1,500 per violation if the company willfully or intentionally violated the law.

Because of this private right of action, the prohibition against autodialed text messages in the TCPA has gotten a number of large— and smaller—companies in trouble over the past decade, as mobile communication continues to grow. Notably, in 2011, a class action lawsuit was brought against Domino’s Pizza for a text message campaign that the plaintiffs claimed was directed to consumers who had not previously consented to the communication. A similar case was brought against Papa John’s in 2012. Domino’s settled its TCPA class action suit in 2013 for just under $10 million. In 2013, Huffington Post was sued for sending out “news alerts” by text messaging at all times of the day and night, but not taking readers off their list when receiving requests to “UNSUBSCRIBE.”

With violations from $500 to $1,500 per text message, these lawsuits could be damaging enough to put companies out of business. Larger and franchised companies need to be sure to have a pulse on what satellite or franchised offices are sending through mobile devices, as the FCC also treats the brand as a single company and requires that companies track their customer data very carefully to prevent misuse of text messaging as a marketing tool. Companies should generally make sure to create and maintain a tracking database for customers’ consent to be texted and follow up immediately when receiving a request to “unsubscribe” or “opt out” of future text or phone calls.

Online and Behavioral Advertising

Akin to regulating targeted email communication, the FTC is pushing hard to regulate companies’ use of “behavioral advertising” or advertising that tracks online activity and then targets a consumer with pop-up ads related to past searches or Internet activity. In 2010, the FTC proposed a regulatory framework—dubbed “do not track” legislation—that would give consumers the same sort of control and “opt out” authority online as has been applied to email and phone communications. Although a number of bills have been proposed in the U.S. Congress since the FTC’s framework was published, there has not yet been federal law passed to control companies’ use of marketing data or limit businesses’ ability to use online behavioral marketing. If passed, most suspect that unlike the “do not call” registry, the “do not track” registry would not be a national registry. Rather, it may encompass restrictions on browsers to give consumers the ability to control what advertisements reach them and to control the data provided to businesses about their online activities.

In the meantime, although not required, businesses should start to think through their ability to accurately describe their use of customer data and make sure privacy policies include any behavioral advertising activities. Some larger companies already using behavioral advertising, like Zappos® and Amazon®, provide links for consumers to click when they see various advertising that detail why consumers are seeing particular ads and how they can stop seeing certain ads. It is one thing if a consumer sees a shoe it was just browsing show up another site, but may be very different if sensitive prescription drug research done on one site shows up as advertising for aliment cures on another site.

Advertising through Group Coupons

Another popular social media marketing forum is the use of “group coupons”, offering discounts to a certain number of individuals signed up for couponing websites like Groupon® and Living Social®. Although these companies have come under fire in recent years for taking large portions of the amount consumers pay for the services, there is also some risk of violation of state laws when limiting the redemption period or the amount of the coupon.

A number of states, including Minnesota, have state gift card or gift certificate laws that apply to any electronic or written agreement for goods or services provided at the value shown on the certificate or card. Most of those state laws forbid any “fee” for dormancy when the gift certificate or gift card is not used in a certain period of time. Since most group coupons must be used within several months of the purchase date, retailers should be aware that in states with gift card laws, they may have to honor the group coupon long after the expiration date. They may be able, however, to only honor it for the amount it was purchased, rather than the face value of the deal paid for by the consumer. For example, if a company uses Groupon® and offers the ability for customers to pay $15 for $30 of goods by a certain expiration date, the customer could come in long after the expiration date and it must still be honored by the company, but only for the amount purchased of $15.