When are you liable for third party postings about your business on a social networking site?
In brief – Companies can be held responsible for statements by third parties
On 10 February 2011, the Federal Court of Australia handed down judgment in contempt proceedings that may have significant implications for businesses which use social media to market themselves. The Court held that a company and its sole director were responsible for statements made by third parties on the company’s Facebook site.
Allergy Pathway and the ACCC
Allergy Pathway Pty Ltd operates clinics that it asserts diagnose and treat allergies. The techniques that it uses have not been medically validated. In 2009, the Australian Competition & Consumer Commission took action against the company, alleging that it was engaging in misleading and deceptive conduct, in contravention of what was then section 52 of the Commonwealth Trade Practices Act 1974 (now dealt with under section 18 of the Australian Consumer Law).
Allergy Pathway did not defend the matter and, on the basis of expert medical evidence, the Court found that the company was engaging in misleading and deceptive conduct. The company and its sole director gave certain undertakings to the Court that they would not make the same or similar representations for three years.
Continued representations on Facebook and Twitter
Following the decision, the ACCC become concerned that Allergy Pathway was continuing to make representations through its website and its presence on Facebook and Twitter. There were four categories of representations of concern, namely:
- Statements and links to statements posted by the company on its website and Facebook and Twitter pages and in a video posted on Youtube and on its Facebook and Twitter pages
- Testimonials written by clients of the company and posted by the company on its website and Facebook and Twitter pages
- The company’s responses to queries posted by the public on its Facebook “wall”
- Testimonials written by clients and posted by those clients of the company on Allergy Pathway’s wall on Facebook
Representations by third parties on the Facebook wall
The company, and its director, conceded that the first three categories breached the undertakings that they had given in the previous proceedings. No concession was made in relation to testimonials written by third parties, and it is this matter which the Court had to decide.
The Court found that the testimonials were similar to the representations that were the subject of the earlier proceedings and that the company knew that these testimonials (which were misleading) had been posted on its wall. The Court accepted that the company was not responsible for the initial publication of the third party testimonials. However, it took no steps to have them removed. The Court made an inference that the company did not take the steps to remove the testimonials because it wanted the benefit of the praise for its services or the legitimacy of third party testimonials may have added to its business.
The company acquired responsibility for the material posted on the wall at the point when it knew of those postings and decided not or took no steps to remove them. Once the company was aware of the postings on the Facebook wall, it had the necessary means of control to remove the content and stop the testimonials from being communicated to other members of the public.
Implications for business
The decision makes it clear that any business that is using social networking, including promotions through Facebook fan pages or other means, must have processes in place to monitor the content of those sites, including material posted by third parties, and exercise appropriate control over content that is misleading or otherwise in contravention of any undertaking or code of advertising practice or law.
For further information about this topic, please contact Swaab Attorneys?.
Authored by M Hall.