Risks of social media – misleading and deceptive statements

With the growing popularity of social networking sites like Facebook and Twitter, it is no wonder that business owners are increasingly using social media to reach out to customers.

Most franchisors and franchisees recognise that the use of social media may result in significant benefits for brand awareness. However, there are many potential pitfalls surrounding the use of social media by franchisors or franchisees, including:

• damage to a business’ brand and reputation;
• exposure to legal action.

For example, the Federal Court decision in ACCC v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74, showed that businesses may be held liable for misleading and deceptive comments posted by third party users on their Facebook and Twitter pages. In that case, Allergy Pathway had Facebook and Twitter pages that contained testimonials posted by third parties. The Court ultimately found that Allergy Pathway was the publisher of the testimonials and was liable for the misleading statements made by the third parties because Allergy Pathway knew of the posts and decided not to remove them.

Steps to reduce risks

Normally, the use of social media is not expressly referred to in the terms, conditions or policies of franchise documents. However, the growing popularity and use of social media demonstrates the need for specific conditions and guidelines that govern the use of social media for any franchising system.

For example, the use of social media by franchisors or franchisees should be properly governed through:

• social media obligations in the franchise agreements;
• social media policies in the franchising operation manual;
• terms and conditions on social media pages;
• training for the managers of social media pages; and
• monitoring social media pages for incorrect, misleading or offensive content or comments.