When Social Media Becomes Unsociable

Remember the Federal Trade Commission, a/k/a, the FTC? No, not the FCC which governs the words that are deemed too “dirty”; rather the FTC, which works on behalf of the consumer, often at the expense of small business, to prosecute claims of unfair or deceptive advertising. The proliferation of social media is likely to keep the FTC very busy.

So what role does the FTC play in social media? Let’s take a look at two recent examples involving the real estate industry. A Pennsylvania homebuilder offered home financing, using the catch phrase “Zip, Zero, Nada,” claimed in ads on websites, that consumers could finance their homes without a down payment or closing costs. The ads also touted specific monthly payment amounts without disclosing that such a payment could only be obtained through the USDA Rural Development Loan Program, which requires borrowers to meet specific credit and income criteria.

Pursuant to a settlement reached with the FTC, the builder was assessed a $650,000 civil penalty, which was suspended because of the builder’s poor financial condition.

Perhaps another example is in order. Green-washing” is a term used to describe the deceptive use of green marketing to promote a perception that a company’s policies, products, goods and/or services are environmentally friendly. To deal with green-washing specifically, the FTC issued Guides for the Use of Environmental Marketing Claims (also known as the Green Guides), which outline general principles that apply to all environmental marketing claims. The Green Guides state in part that “…it is deceptive to misrepresent, directly or by implication, that a product, package or service offers a general environmental benefit.”

The FTC recently fined a home insulation marketer $350,000 for making unsubstantiated claims in social media about the products he and his companies had made to consumers. Products were sold promising a reduction in roof temperatures by as much as 95 degrees and savings of up to 60% on energy bills. According to the FTC, the Company lacked any “reasonable basis” for such cost-saving claims and sold products to customers without including accurate fact sheets about such products’ performance.

There are great benefits to the use of social media, but as recent litigation highlights, a legal professional should be a part of your review team when it comes to vetting social media and green advertising. The difference between mere green “puffing” and actionable fraud is often as gray as it is green.

By: Neil A. Stein, Esquire