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February 12, 2013

Experts Explore How to Adjust Social and Mobile Media Regulations to Benefit Consumers

When Instagram — a popular photo-sharing mobile application — updated its terms of service, a viral backlash immediately emerged. Several users rejected the premise that Instagram could use their photos in advertisements and for other purposes without their consent or compensation. Instagram was forced to revise its terms of service and removed the controversial language.

Consumer protection for users can be compromised by a lack of an industry standard, bad actors and ineffective legislation, experts said at an _ panel on effective regulation of social and mobile media. As more online services are both social and mobile, questions remain as to how companies like Instagram use consumers’ information and what protections should be put in place.

Eric Goldman, professor at Santa Clara University School of Law, set the stage by saying simply, “If you can’t define it, you can’t legislate it.” Goldman claims there have been numerous legislative failures when lawmakers tried to properly define social or mobile media.  By explaining mobile as “small devices,” Goldman pointed out that in 1982 a “small device” was considered a luggable computer, which could weigh around 22 pounds. The concept of small in 10 years might be radically different from today.

Lee Peeler of the Advertising Self-Regulatory Council agreed with Goldman on the definition conundrum. “There’s a mix of commerce and speech in these media, which make them hard to analogize to previous media,” Peeler said. “If you are trying to define something very granularly, you are bound for failure.”

Peeler leads the advertising industry’s system of self-regulation, oversees the operation of its investigative and appeals units, and briefs elected officials on self-regulatory initiatives. He encouraged companies using social and mobile media to experiment with different forms of disclosure, similar to how many in the blogging community got creative to disclose payments made, free products received or free meals in their posts. “You just have to figure out the limits of what you can do,” Peeler said.

Julie Brill, commissioner of the Federal Trade Commission, added that it “isn’t just about scam artists and rogue players” but rather “something about the way that the ecosystem is constructed that comes into play.” She said that the FTC can provide best practices so companies are aware of the industry standards. She pointed out that regulators like the FTC do not want to prevent companies from innovating in the social or mobile space, but they do want to explain the existing laws and ensure these emerging companies understand they are subject to those laws like everyone else.

“If you are going to sell an app and claim it cures acne, it better be substantiated,” Brill said. “It is not a free-for-all space where the laws don’t apply. The laws do apply.”

She emphasized that companies be technologically neutral and have a level playing field in regards to data security and privacy. From her perspective as commissioner, it is important that the FTC “educate industries on how they collect certain information and the claims they make.”

Jim Dudukovich, marketing counsel for a leading beverage brand, said companies must identify the harms and mitigate them rather than try to define social and mobile media. In his view, there will always be bad actors abusing social media channels and mobile app abilities, but it is important for the major brands to be good corporate citizens to avoid extensive damage to their status with consumers.

“Industry groups and big companies have an interest, a reputation, credibility that we don’t want to lose,” Dudukovich said. He went on to say that there is pressure on marketers to implement “customary practices that don’t alienate the consumers.” From his vantage point, the “specter” of regulation — the idea that groups like the Ad Council or FTC are watching — is pressure for most major companies to act appropriately in order to avoid harsher regulations in the future.

If brands on social and mobile media choose to ignore the issue guidelines, reports and industry studies that the FTC provides, those decisions could impact their regulatory future.  As Brill warned, “Ultimately if these voluntary actions don’t take place, we’re going to have to talk to policymakers about whether or not laws need to be changed.”

The panel “The ‘New Social and Mobile Media’: Evolving Too Rapidly for Effective Regulation?” was held at the ABA Consumer Protection Conference at George Washington University in Washington, D.C.  The program was sponsored by the ABA Section of Antitrust Law.

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