Sweepstakes, contests, and giveaways have become increasingly popular among dealerships. These promotions can be a great way to get word out about your company, increase your social media presence and develop leads. However, entry into a poorly considered sweepstakes or contest can be a trap for the unwary dealer.  These promotions are governed by a variety of federal and state laws as well as social networking sites’ terms of service.  The FTC receives thousands of complaints from consumers each year regarding the abuse of contest promotions. Failure to follow pertinent statutes and regulations regarding promotions can lead to government inquiries, civil enforcement actions, adverse publicity, and even criminal penalties.

Following is a basic overview of the guidelines for running lawful promotions, but you should always consult knowledgeable legal counsel before starting a campaign. And remember, it’s dangerous to assume that outsourcing responsibility for the promotion to a marketing firm or other service provider will result in a legal compliance. Understanding the rules and running your promotions by your legal team can guard against potential problems and may help shield the dealership from liability.

So, what’s the difference between a contest, sweepstakes and lottery? A "contest" offers prospective participants the opportunity to receive or compete for gifts or prizes on the basis of skill or skill and chance, and which is conditioned wholly or partly on the payment of some value. A "sweepstakes" is any procedure for distributing anything of value by chance (e.g., a drawing). The main differences between a sweepstakes and a contest are that the contest participants must use at least some skill to win the prize and may pay some value to participate in the contest while sweepstakes participants win solely by chance and are not required to pay value.

To avoid classification as a lottery, which is generally illegal unless run by the state, a sweepstakes promotion must not require an entrant to pay or promise to pay value for the chance to win the prize. This is known as consideration. The most easily identified or typical form of consideration is a requirement of a purchase or payment to enter the sweepstakes. However, in some states consideration may also be found to exist when an entrant must exert substantial effort or time to participate in the promotion.  For example, completing a simple entry form or “liking” a page may not be considered steps that involve consideration, but requiring an entrant to fill out a lengthy marketing questionnaire might constitute substantial effort. These determinations vary from state to state, so it’s advisable to get a legal opinion.

The operator of the sweepstakes must treat entries that are not accompanied by orders the same as entries that are accompanied by orders. In other words, someone who purchased a car cannot be more likely to win a prize then someone who didn’t.

Each state has a different set of laws governing promotions, and some states require that sweepstakes offering prizes over a certain value to be registered. This amount can be as low as $500 (Rhode Island). Attention to the rules in all jurisdictions where the promotion will be available is essential.

Many states have passed specific laws or regulations that identify information that must be disclosed to potential entrants. Generally, such disclosures contain a “no purchase necessary” statement, an explanation of entry procedures, the identity of the company conducting the promotion, eligibility requirements, prizes and their estimated value, method of determining a winner, the odds of winning, the beginning and ending dates of the contest, and where a winners list may be obtained. These disclosures must be clear and conspicuous (and that doesn’t mean “see dealer for details”).

To conduct a promotion through a social networking site, a company should comply with the particular site’s terms. For example, Facebook has very specific criteria for running promotions: http://www.facebook.com/promotions_guidelines.php.

So, go ahead and give away that IPad - just be sure to dot your ‘I’s and cross your ‘T’s. 

Sweepstakes, contests, and giveaways have become increasingly popular among dealerships. These promotions can be a great way to get word out about your company, increase your social media presence and develop leads. However, entry into a poorly considered sweepstakes or contest can be a trap for the unwary dealer.  These promotions are governed by a variety of federal and state laws as well as social networking sites’ terms of service.  The FTC receives thousands of complaints from consumers each year regarding the abuse of contest promotions. Failure to follow pertinent statutes and regulations regarding promotions can lead to government inquiries, civil enforcement actions, adverse publicity, and even criminal penalties.

Following is a basic overview of the guidelines for running lawful promotions, but you should always consult knowledgeable legal counsel before starting a campaign. And remember, it’s dangerous to assume that outsourcing responsibility for the promotion to a marketing firm or other service provider will result in a legal compliance. Understanding the rules and running your promotions by your legal team can guard against potential problems and may help shield the dealership from liability.

So, what’s the difference between a contest, sweepstakes and lottery? A "contest" offers prospective participants the opportunity to receive or compete for gifts or prizes on the basis of skill or skill and chance, and which is conditioned wholly or partly on the payment of some value. A "sweepstakes" is any procedure for distributing anything of value by chance (e.g., a drawing). The main differences between a sweepstakes and a contest are that the contest participants must use at least some skill to win the prize and may pay some value to participate in the contest while sweepstakes participants win solely by chance and are not required to pay value.

To avoid classification as a lottery, which is generally illegal unless run by the state, a sweepstakes promotion must not require an entrant to pay or promise to pay value for the chance to win the prize. This is known as consideration. The most easily identified or typical form of consideration is a requirement of a purchase or payment to enter the sweepstakes. However, in some states consideration may also be found to exist when an entrant must exert substantial effort or time to participate in the promotion.  For example, completing a simple entry form or “liking” a page may not be considered steps that involve consideration, but requiring an entrant to fill out a lengthy marketing questionnaire might constitute substantial effort. These determinations vary from state to state, so it’s advisable to get a legal opinion.

The operator of the sweepstakes must treat entries that are not accompanied by orders the same as entries that are accompanied by orders. In other words, someone who purchased a car cannot be more likely to win a prize then someone who didn’t.

Each state has a different set of laws governing promotions, and some states require that sweepstakes offering prizes over a certain value to be registered. This amount can be as low as $500 (Rhode Island). Attention to the rules in all jurisdictions where the promotion will be available is essential.

Many states have passed specific laws or regulations that identify information that must be disclosed to potential entrants. Generally, such disclosures contain a “no purchase necessary” statement, an explanation of entry procedures, the identity of the company conducting the promotion, eligibility requirements, prizes and their estimated value, method of determining a winner, the odds of winning, the beginning and ending dates of the contest, and where a winners list may be obtained. These disclosures must be clear and conspicuous (and that doesn’t mean “see dealer for details”).

To conduct a promotion through a social networking site, a company should comply with the particular site’s terms. For example, Facebook has very specific criteria for running promotions: http://www.facebook.com/promotions_guidelines.php.

So, go ahead and give away that IPad - just be sure to dot your ‘I’s and cross your ‘T’s. 

It’s no secret that auto dealerships have frequently been forced to defend themselves against discrimination claims by employees and agencies such as the Equal Employment Opportunity Commission. As a result, many dealers have instituted comprehensive human resources programs to avoid potential problems. However, new technology brings new challenges.

As the use of social media grows, more and more dealerships are using the internet to screen potential employees. Many managers tasked with hiring find these sites to be particularly helpful because they perceive that this information reflects a more accurate representation of the applicant beyond the interview. This influx of information regarding applicants would seem to be a great way to vet their ability to "fit in" with a company.

While social media may allow employers to learn vast amounts of information about job applicants, hiring managers who even casually use these tools to gather information about a prospective employee could expose the dealership to legal risks.  Given the real possibility for inappropriate and illegal uses in the hiring context, organizations need to carefully consider how, if at all, they utilize the sites when screening candidates.

Discrimination Claims - When a job candidate is the subject of a social media search there’s a possibility that the search will reveal information that would be off limits in an interview, such as age or marital status. Hiring managers should be very careful in using private information people are posting publicly to make hiring decisions. An employer's availing themselves of such information could pave the way for allegations of discrimination if the employee or applicant believes that the employer used such information to make an adverse employment decision. A risk may be created that that this protected class information actually is being considered or, even if it is not, putting your organization in the position of having to defend a claim knowing that this information existed on the sites you visited. Risk factors include:

1. Information regarding age, race, religion, sex, disability, or other protected characteristics, such as pregnancy, illness or disability. For example, a person’s Facebook page may disclose their religion.  Once an employer knows that information, the fact that the employer knew the potential employee’s religion can be used in an employment discrimination suit.
2. Checking social media or the Internet only on applicants of a certain race or gender.
3. Searching on all applicants, but using the same information differently against one particular type of applicants.  For example, if all of your applicants had pictures of themselves of drinking alcohol in public, but you viewed that fact more negatively against females, that could be considered discrimination.
4. Rejecting an applicant based on conduct protected by lawful off-duty conduct laws.
5. Rejecting an applicant because of his or her political activities may violate state constitutional law.

To avoid these legal obstacles, you may decide that it's better to not even collect that information, so you can say that you didn't have access to it. Another procedure would be to have someone other than a hiring manager or decision maker in human resources conduct an online background check of job applicants. The individual who does the online check should avoid sharing with decision makers any personal information about a job candidate that’s not relevant to the hiring decision. This individual should be properly trained to avoid improper access and to screen out information that can’t be lawfully considered in the decision-making process. Having a firewall between the hiring manager and social media information about job applicants makes it difficult for a plaintiff subsequently to contend that the hiring manager discriminated against him or her based on a legally protected characteristic.

Invasion of privacy claims by potential employees.  Generally, a potential employee will have a tough time asserting this claim because you need a “reasonable expectation of privacy” and a lot of people keep their social media profiles open to the public.  However, it’s clear that if the applicant is using the highest privacy settings and the employer somehow gets past all these barriers, the claim is stronger.

A point to consider is how the hiring manager will obtain access to the candidate's page. Many social media users have some degree of privacy established in their settings. As a result, access to the candidate's page may require "friending" the applicant and the applicant accepting the request. Not a good idea.

Using an outside agency to screen applicants – If an employer uses a third party to conduct searches on job candidates the federal Fair Credit Reporting Act and applicable state law on background checks likely will apply. The Fair Credit Reporting Act governs "employment background checks for the purposes of hiring" and applies if "an employer uses a third-party screening company to prepare the check." Thus, if an employer is using an outside resource to view social networking sites and provide information, the applicant must be informed of the investigation, given an opportunity to consent, and notified if the report is used to make an adverse decision. It’s important to ensure that any company you use to perform background checks follows the correct procedures, and that your employment applications contain the proper notifications.

Best practices for the use of social media in hiring decisions:

1. Develop a policy on whether or not the hiring manager will search the internet or social media sites in hiring.
2. If you decide to use social media in hiring, do the searches on applicants consistently and in a uniform manner.
3. Make sure candidates are notified, in writing, about the companies use of social media to gather information, e.g., on job applications.
4. Ensure that employment decisions are made based on lawful, verified information. Don’t allow factors to be considered that have no relevancy to job performance, such as race, age, or sexual orientation. They’re all protected statuses by law and using them as criteria for hiring is discriminatory.
5. Follow best practices in identifying a legitimate, nondiscriminatory reason for the hiring decision with the documentation supporting the decision.
6. Prohibit “friending” a potential employee to learn things about them that the general public doesn’t have access to.
7. Discourage supervisors from being social media friends with their direct reports.

It’s no secret that auto dealerships have frequently been forced to defend themselves against discrimination claims by employees and agencies such as the Equal Employment Opportunity Commission. As a result, many dealers have instituted comprehensive human resources programs to avoid potential problems. However, new technology brings new challenges.

As the use of social media grows, more and more dealerships are using the internet to screen potential employees. Many managers tasked with hiring find these sites to be particularly helpful because they perceive that this information reflects a more accurate representation of the applicant beyond the interview. This influx of information regarding applicants would seem to be a great way to vet their ability to "fit in" with a company.

While social media may allow employers to learn vast amounts of information about job applicants, hiring managers who even casually use these tools to gather information about a prospective employee could expose the dealership to legal risks.  Given the real possibility for inappropriate and illegal uses in the hiring context, organizations need to carefully consider how, if at all, they utilize the sites when screening candidates.

Discrimination Claims - When a job candidate is the subject of a social media search there’s a possibility that the search will reveal information that would be off limits in an interview, such as age or marital status. Hiring managers should be very careful in using private information people are posting publicly to make hiring decisions. An employer's availing themselves of such information could pave the way for allegations of discrimination if the employee or applicant believes that the employer used such information to make an adverse employment decision. A risk may be created that that this protected class information actually is being considered or, even if it is not, putting your organization in the position of having to defend a claim knowing that this information existed on the sites you visited. Risk factors include:

1. Information regarding age, race, religion, sex, disability, or other protected characteristics, such as pregnancy, illness or disability. For example, a person’s Facebook page may disclose their religion.  Once an employer knows that information, the fact that the employer knew the potential employee’s religion can be used in an employment discrimination suit.
2. Checking social media or the Internet only on applicants of a certain race or gender.
3. Searching on all applicants, but using the same information differently against one particular type of applicants.  For example, if all of your applicants had pictures of themselves of drinking alcohol in public, but you viewed that fact more negatively against females, that could be considered discrimination.
4. Rejecting an applicant based on conduct protected by lawful off-duty conduct laws.
5. Rejecting an applicant because of his or her political activities may violate state constitutional law.

To avoid these legal obstacles, you may decide that it's better to not even collect that information, so you can say that you didn't have access to it. Another procedure would be to have someone other than a hiring manager or decision maker in human resources conduct an online background check of job applicants. The individual who does the online check should avoid sharing with decision makers any personal information about a job candidate that’s not relevant to the hiring decision. This individual should be properly trained to avoid improper access and to screen out information that can’t be lawfully considered in the decision-making process. Having a firewall between the hiring manager and social media information about job applicants makes it difficult for a plaintiff subsequently to contend that the hiring manager discriminated against him or her based on a legally protected characteristic.

Invasion of privacy claims by potential employees.  Generally, a potential employee will have a tough time asserting this claim because you need a “reasonable expectation of privacy” and a lot of people keep their social media profiles open to the public.  However, it’s clear that if the applicant is using the highest privacy settings and the employer somehow gets past all these barriers, the claim is stronger.

A point to consider is how the hiring manager will obtain access to the candidate's page. Many social media users have some degree of privacy established in their settings. As a result, access to the candidate's page may require "friending" the applicant and the applicant accepting the request. Not a good idea.

Using an outside agency to screen applicants – If an employer uses a third party to conduct searches on job candidates the federal Fair Credit Reporting Act and applicable state law on background checks likely will apply. The Fair Credit Reporting Act governs "employment background checks for the purposes of hiring" and applies if "an employer uses a third-party screening company to prepare the check." Thus, if an employer is using an outside resource to view social networking sites and provide information, the applicant must be informed of the investigation, given an opportunity to consent, and notified if the report is used to make an adverse decision. It’s important to ensure that any company you use to perform background checks follows the correct procedures, and that your employment applications contain the proper notifications.

Best practices for the use of social media in hiring decisions:

1. Develop a policy on whether or not the hiring manager will search the internet or social media sites in hiring.
2. If you decide to use social media in hiring, do the searches on applicants consistently and in a uniform manner.
3. Make sure candidates are notified, in writing, about the companies use of social media to gather information, e.g., on job applications.
4. Ensure that employment decisions are made based on lawful, verified information. Don’t allow factors to be considered that have no relevancy to job performance, such as race, age, or sexual orientation. They’re all protected statuses by law and using them as criteria for hiring is discriminatory.
5. Follow best practices in identifying a legitimate, nondiscriminatory reason for the hiring decision with the documentation supporting the decision.
6. Prohibit “friending” a potential employee to learn things about them that the general public doesn’t have access to.
7. Discourage supervisors from being social media friends with their direct reports.

Chances are, since you’re reading this post, your dealership or company is involved in social media. That’s good - it’s hard to imagine how difficult it will be moving forward for organizations that have not embraced social networking. Although Social Media is relatively new (and certainly exciting), its meteoric growth has unfortunately caught the early attention of the legal powers-that-be.

Despite the widespread use and misuse of social networking at work, 45 percent of all businesses still do not have a social media policy. Many of the policies that companies are using do not adequately address potential legal issues. Regulators have been bringing complaints against companies arising from their social media activity, thus, highlighting the need for companies to demonstrate that they are exercising due diligence to promote legal and ethical conduct in the context of social media activity.

Not surprisingly, plaintiff’s attorneys have also jumped on the bandwagon. Companies are being sued regularly by employees and others based on social media use. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer or its business activities.

There are a number of legal considerations that every company should be aware of when establishing their social media policies and procedures, such as social media use in employment decisions; posting of online reviews, testimonials and endorsements; ‘fake’ and paid-for reviews; advertising on social media; potential overtime claims; harassment, discrimination and defamation claims; copyright and privacy issues.

It's more important than ever to craft a policy that's both practical and legally defensible. You can protect yourself by insisting that participants in your social media programs comply with the law and training them how to do it. The Federal Trade Commission specifically says these steps may limit potential liability and will be considered in any prosecution. According to FTC guidelines, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

So, if you have a social media policy in place, it may be time to dust it off and re-evaluate it. If you don’t have a policy, it’s time to get started.

Chances are, since you’re reading this post, your dealership or company is involved in social media. That’s good - it’s hard to imagine how difficult it will be moving forward for organizations that have not embraced social networking. Although Social Media is relatively new (and certainly exciting), its meteoric growth has unfortunately caught the early attention of the legal powers-that-be.

Despite the widespread use and misuse of social networking at work, 45 percent of all businesses still do not have a social media policy. Many of the policies that companies are using do not adequately address potential legal issues. Regulators have been bringing complaints against companies arising from their social media activity, thus, highlighting the need for companies to demonstrate that they are exercising due diligence to promote legal and ethical conduct in the context of social media activity.

Not surprisingly, plaintiff’s attorneys have also jumped on the bandwagon. Companies are being sued regularly by employees and others based on social media use. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer or its business activities.

There are a number of legal considerations that every company should be aware of when establishing their social media policies and procedures, such as social media use in employment decisions; posting of online reviews, testimonials and endorsements; ‘fake’ and paid-for reviews; advertising on social media; potential overtime claims; harassment, discrimination and defamation claims; copyright and privacy issues.

It's more important than ever to craft a policy that's both practical and legally defensible. You can protect yourself by insisting that participants in your social media programs comply with the law and training them how to do it. The Federal Trade Commission specifically says these steps may limit potential liability and will be considered in any prosecution. According to FTC guidelines, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

So, if you have a social media policy in place, it may be time to dust it off and re-evaluate it. If you don’t have a policy, it’s time to get started.

It was bound to happen. The tremendous growth of digital marketing and social media was an invitation for government regulation. For instance, the Federal Trade Commission recently updated its truth-in-advertising guidelines, which were last revised in 1980, to address the commercialism of the Web. Federal and state regulators are taking the position that social media is not a loophole for deceptive marketing practices and are actively enforcing and cracking down on social media deception. Proper social media ethics are now a matter of law, not just personal preference.

Faking Reviews

The FTC’s updated Endorsement and Advertising Guidelines require companies to ensure that their posts are completely accurate and not misleading, and planting or allowing fake reviews is a violation. The Guidelines are extremely broad and can apply to anyone writing reviews on rating sites, web sites or promoting products through social media sites, including blogs.

There are several companies out there that offer seemingly quick and easy ways to improve your ratings on review sites. Be careful! A Dealership in Texas suffered devastating reputation damage because of the review-posting practices of a company they hired. A customer discovered that suspicious “reviewers” were writing 5-star reviews about all kinds of businesses and dealerships across the nation on the same day. This debacle was uncovered in October of 2010, yet news stories continue to show up on the dealer’s page one search results.

While the above case may be an example of a dealer who unfortunately hired the wrong vendor, an area of real concern is the activity of a company’s own employees. The FTC recently charged a California marketing company with deceptive advertising after it found that the company’s employees were posing as ordinary consumers posting positive reviews online.

Dealers may face liability if employees use social media to comment on their employer’s services or products without disclosing the employment relationship. The FTC requires the disclosure of all “material connections” between a reviewer and the company that is being reviewed. These connections can be any relationship between a reviewer and the company that could affect the credibility a consumer gives to that reviewer’s statements, such as an employment or business relationship. So if employees, friends, family or vendors post reviews to prop up a dealership’s online reputation, they must clearly disclose any relationship they have with the company. In addition, all reviews must be an honest opinion based on a real experience. Reviewers must never endorse a product or service that they have not used personally or create any other form of false endorsement. It’s all about transparency and full disclosure.

Besides the obvious potential damage to a dealer’s reputation, failure to follow these regulations can result in substantial penalties. In recent actions, the New York Attorney General fined a cosmetic surgery company $300,000 for ordering its employees to write fake reviews of its face-lift procedure and the FTC ordered a company marketing instructional DVDs to pay $250,000 for fake reviews posted by the company's affiliate marketers. The FTC has indicated that companies are fully responsible and liable for all inappropriate actions of their employees, their vendors, and any advocates they recruit. Reviewers may also be held personally liable for statements made in the course of their endorsements.

Paying For Reviews

The practice of offering a free oil change or gas card to a customer in exchange for a good survey has long been frowned upon by manufacturers. Because there are no factory gatekeepers when it comes to online ratings, it may seem tempting to offer customers an incentive to post a positive review.  The good news is that you can if you want to; the not-so-good news is that the regulations require that any reviewer provided with any form of compensation such as free services, rewards, incentives, promotional items, gifts, samples, or review items, must fully disclose the source and nature of any compensation received.

So, if you pay for reviews and the reviewers fail to disclose their compensation, you may face liability. This is an area where it’s easy to get caught and besides the legal danger, your reputation will likely take a big hit.

Advertising on Social Media Sites

The wisdom of trying to “sell” on social media sites by posting inventory, prices, or payments is an ongoing debate, but the fact remains that many dealers are engaged in this activity in some form. While I have no opinion on the relative merits of whether to “sell or not to sell” on social media, it’s important to note the potential implications of these types of activities.

Despite the fact that social media tends to be a low-keyed, casual type of communication, advertising regulations don’t go away. In fact, The Federal Trade Commission recently announced that it was updating its document Dot Com Disclosures: Information About Online Advertising. The primary focus of the document, which was first issued in 2000, is to inform advertisers that consumer protection laws and the requirement to provide clear and conspicuous disclosures applies to the online world in addition to the offline world.

So, in a nutshell, if inventory is posted or prices/payments are quoted on social media it’s likely that the posts will be deemed to be advertisements and will be subject to state and federal disclosure and truth in advertising regulations. Lack of space is no excuse either. Even if you’re advertising on Twitter and limited to 140 characters, you must include a clear link to any necessary disclosures. A good rule of thumb is to have any information that could possibly be construed as advertising reviewed by upper management or a qualified professional before it is posted.

Social Media Policy

Social media applications such as blogs, social networking, and video sharing have soared in popularity so it’s important that dealers control the information that’s coming out of their business. Policies and procedures should be put in place to spell out how employees are expected to conduct themselves within social media.  A social media policy can help take the guesswork out of what is appropriate for employees to post about a company to their social networks.

There are a number of potential legal issues with employees’ use of social media that should be addressed such as the danger of possible privacy, harassment, discrimination or defamation claims. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer. However, employer restrictions on the use of social media can be tricky. The National Labor Relations Board (NLRB) recently issued a complaint against an Illinois dealership, alleging that the dealership unlawfully terminated an employee for making critical comments about the dealership on Facebook. While some unprofessional and inappropriate conduct may not be protected, the intersection of social media and the NLRA is an evolving area of the law.

The best way to protect your dealership from legal trouble is by establishing formal social media policies for your staff. Companies often get in the most trouble when they fail to train their employees about appropriate social media use and disclosure. To prevent this from happening, it’s a good idea to create a written social media policy and training program for your company and carefully monitor social media use.

It was bound to happen. The tremendous growth of digital marketing and social media was an invitation for government regulation. For instance, the Federal Trade Commission recently updated its truth-in-advertising guidelines, which were last revised in 1980, to address the commercialism of the Web. Federal and state regulators are taking the position that social media is not a loophole for deceptive marketing practices and are actively enforcing and cracking down on social media deception. Proper social media ethics are now a matter of law, not just personal preference.

Faking Reviews

The FTC’s updated Endorsement and Advertising Guidelines require companies to ensure that their posts are completely accurate and not misleading, and planting or allowing fake reviews is a violation. The Guidelines are extremely broad and can apply to anyone writing reviews on rating sites, web sites or promoting products through social media sites, including blogs.

There are several companies out there that offer seemingly quick and easy ways to improve your ratings on review sites. Be careful! A Dealership in Texas suffered devastating reputation damage because of the review-posting practices of a company they hired. A customer discovered that suspicious “reviewers” were writing 5-star reviews about all kinds of businesses and dealerships across the nation on the same day. This debacle was uncovered in October of 2010, yet news stories continue to show up on the dealer’s page one search results.

While the above case may be an example of a dealer who unfortunately hired the wrong vendor, an area of real concern is the activity of a company’s own employees. The FTC recently charged a California marketing company with deceptive advertising after it found that the company’s employees were posing as ordinary consumers posting positive reviews online.

Dealers may face liability if employees use social media to comment on their employer’s services or products without disclosing the employment relationship. The FTC requires the disclosure of all “material connections” between a reviewer and the company that is being reviewed. These connections can be any relationship between a reviewer and the company that could affect the credibility a consumer gives to that reviewer’s statements, such as an employment or business relationship. So if employees, friends, family or vendors post reviews to prop up a dealership’s online reputation, they must clearly disclose any relationship they have with the company. In addition, all reviews must be an honest opinion based on a real experience. Reviewers must never endorse a product or service that they have not used personally or create any other form of false endorsement. It’s all about transparency and full disclosure.

Besides the obvious potential damage to a dealer’s reputation, failure to follow these regulations can result in substantial penalties. In recent actions, the New York Attorney General fined a cosmetic surgery company $300,000 for ordering its employees to write fake reviews of its face-lift procedure and the FTC ordered a company marketing instructional DVDs to pay $250,000 for fake reviews posted by the company's affiliate marketers. The FTC has indicated that companies are fully responsible and liable for all inappropriate actions of their employees, their vendors, and any advocates they recruit. Reviewers may also be held personally liable for statements made in the course of their endorsements.

Paying For Reviews

The practice of offering a free oil change or gas card to a customer in exchange for a good survey has long been frowned upon by manufacturers. Because there are no factory gatekeepers when it comes to online ratings, it may seem tempting to offer customers an incentive to post a positive review.  The good news is that you can if you want to; the not-so-good news is that the regulations require that any reviewer provided with any form of compensation such as free services, rewards, incentives, promotional items, gifts, samples, or review items, must fully disclose the source and nature of any compensation received.

So, if you pay for reviews and the reviewers fail to disclose their compensation, you may face liability. This is an area where it’s easy to get caught and besides the legal danger, your reputation will likely take a big hit.

Advertising on Social Media Sites

The wisdom of trying to “sell” on social media sites by posting inventory, prices, or payments is an ongoing debate, but the fact remains that many dealers are engaged in this activity in some form. While I have no opinion on the relative merits of whether to “sell or not to sell” on social media, it’s important to note the potential implications of these types of activities.

Despite the fact that social media tends to be a low-keyed, casual type of communication, advertising regulations don’t go away. In fact, The Federal Trade Commission recently announced that it was updating its document Dot Com Disclosures: Information About Online Advertising. The primary focus of the document, which was first issued in 2000, is to inform advertisers that consumer protection laws and the requirement to provide clear and conspicuous disclosures applies to the online world in addition to the offline world.

So, in a nutshell, if inventory is posted or prices/payments are quoted on social media it’s likely that the posts will be deemed to be advertisements and will be subject to state and federal disclosure and truth in advertising regulations. Lack of space is no excuse either. Even if you’re advertising on Twitter and limited to 140 characters, you must include a clear link to any necessary disclosures. A good rule of thumb is to have any information that could possibly be construed as advertising reviewed by upper management or a qualified professional before it is posted.

Social Media Policy

Social media applications such as blogs, social networking, and video sharing have soared in popularity so it’s important that dealers control the information that’s coming out of their business. Policies and procedures should be put in place to spell out how employees are expected to conduct themselves within social media.  A social media policy can help take the guesswork out of what is appropriate for employees to post about a company to their social networks.

There are a number of potential legal issues with employees’ use of social media that should be addressed such as the danger of possible privacy, harassment, discrimination or defamation claims. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer. However, employer restrictions on the use of social media can be tricky. The National Labor Relations Board (NLRB) recently issued a complaint against an Illinois dealership, alleging that the dealership unlawfully terminated an employee for making critical comments about the dealership on Facebook. While some unprofessional and inappropriate conduct may not be protected, the intersection of social media and the NLRA is an evolving area of the law.

The best way to protect your dealership from legal trouble is by establishing formal social media policies for your staff. Companies often get in the most trouble when they fail to train their employees about appropriate social media use and disclosure. To prevent this from happening, it’s a good idea to create a written social media policy and training program for your company and carefully monitor social media use.

I recently saw a vehicle advertised on a dealer website that caught my attention. This pre-owned car was advertised as a “CarFax One Owner”.  Upon further investigation, I discovered that the “one owner” was a rental car company.

Even though the “one owner” statement may have been technically true, the description of the vehicle blew my mind: “With just one previous owner, who treated this vehicle like a member of the family, you'll really hit the jackpot when you drive home with this terrific car”.  (Now I know that Enterprise has been advertising lately that they are a “family company”, but I’m not sure that this is what they had in mind…).

I was intrigued by this statement, so I kept sniffing around. It turns out that the dealership is part of a large dealer group and I noticed that similar statements were advertised on prior rental vehicles in some of their other stores as well. For example:

“This 2010 Elantra is for Hyundai fans that are searching for that babied, one-owner creampuff.”

“From the looks of it, I'd say this car has been garage kept and babied regularly. If only my wife treated me as nice!!!”

So, are these statements just harmless puffery that is intended to make the vehicles stand out?  Perhaps, but I can’t help but speculate that representing that a rental car has been treated like a “member of the family”, “babied”, and “garage-kept” might not go over too well with an attorney general, judge or a customer who understandably thinks that “one owner” means one private owner.

Depending on the dealership, online advertising may be handled by any number of people such as a used car manager, internet manager, or perhaps an outside vendor. I realize that whoever wrote these ads may not have knowingly tried to deceive anyone. Perhaps they weren’t aware that the cars were rentals and just relied on the fact that CarFax identified the vehicles as “One Owner”. However, if an ad is deemed to be deceptive or misleading, an advertiser will likely have liability regardless of whether there was intent to deceive.  A dealer has the legal duty to investigate the accuracy of any statements made in advertising; therefore it is vital that anyone who is responsible for writing advertisements be well aware of advertising regulations.

Bear in mind that even though the dealerships will likely disclose the vehicles’ previous histories at some point, the dealer may still not be off the hook. Some advertising regulations indicate that if the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he enters into the contract of purchase or lease.

It’s important to keep these concepts in mind when preparing an advertisement:

• Advertising is considered deceptive or misleading if “members of the public are likely to be deceived” or the advertisement has a “tendency or capacity to mislead the public”.

• Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers may need to occur for there to be a violation.

• The fact that others were, are, or will be engaged in like practices will not be considered a defense.

• Statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

• Puffery is defined as an advertising or sales presentation relying on exaggerations, opinions, and superlatives, with little or no credible evidence to support its vague claims. Puffery may be tolerated to an extent so long as it does not amount to misrepresentation (false claim of possessing certain positive attributes or of not possessing certain negative attributes).

The rules for good advertising are mostly common sense. Make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations. It’s not just about staying within legal guidelines either. Show your customers that you play by the rules – chances are they’ll thank you for it.

I recently saw a vehicle advertised on a dealer website that caught my attention. This pre-owned car was advertised as a “CarFax One Owner”.  Upon further investigation, I discovered that the “one owner” was a rental car company.

Even though the “one owner” statement may have been technically true, the description of the vehicle blew my mind: “With just one previous owner, who treated this vehicle like a member of the family, you'll really hit the jackpot when you drive home with this terrific car”.  (Now I know that Enterprise has been advertising lately that they are a “family company”, but I’m not sure that this is what they had in mind…).

I was intrigued by this statement, so I kept sniffing around. It turns out that the dealership is part of a large dealer group and I noticed that similar statements were advertised on prior rental vehicles in some of their other stores as well. For example:

“This 2010 Elantra is for Hyundai fans that are searching for that babied, one-owner creampuff.”

“From the looks of it, I'd say this car has been garage kept and babied regularly. If only my wife treated me as nice!!!”

So, are these statements just harmless puffery that is intended to make the vehicles stand out?  Perhaps, but I can’t help but speculate that representing that a rental car has been treated like a “member of the family”, “babied”, and “garage-kept” might not go over too well with an attorney general, judge or a customer who understandably thinks that “one owner” means one private owner.

Depending on the dealership, online advertising may be handled by any number of people such as a used car manager, internet manager, or perhaps an outside vendor. I realize that whoever wrote these ads may not have knowingly tried to deceive anyone. Perhaps they weren’t aware that the cars were rentals and just relied on the fact that CarFax identified the vehicles as “One Owner”. However, if an ad is deemed to be deceptive or misleading, an advertiser will likely have liability regardless of whether there was intent to deceive.  A dealer has the legal duty to investigate the accuracy of any statements made in advertising; therefore it is vital that anyone who is responsible for writing advertisements be well aware of advertising regulations.

Bear in mind that even though the dealerships will likely disclose the vehicles’ previous histories at some point, the dealer may still not be off the hook. Some advertising regulations indicate that if the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he enters into the contract of purchase or lease.

It’s important to keep these concepts in mind when preparing an advertisement:

• Advertising is considered deceptive or misleading if “members of the public are likely to be deceived” or the advertisement has a “tendency or capacity to mislead the public”.

• Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers may need to occur for there to be a violation.

• The fact that others were, are, or will be engaged in like practices will not be considered a defense.

• Statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

• Puffery is defined as an advertising or sales presentation relying on exaggerations, opinions, and superlatives, with little or no credible evidence to support its vague claims. Puffery may be tolerated to an extent so long as it does not amount to misrepresentation (false claim of possessing certain positive attributes or of not possessing certain negative attributes).

The rules for good advertising are mostly common sense. Make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations. It’s not just about staying within legal guidelines either. Show your customers that you play by the rules – chances are they’ll thank you for it.