A recent Federal Court decision serves as a reminder that individuals and businesses should exercise caution when making comments on social media, as the same standards apply to social media as to other forms of advertising and marketing (Seafolly Pty Ltd v Madden  FCA 1346).
The Facebook question – misleading and deceptive conduct?
In September 2010, Seafolly Pty Ltd initiated proceedings against Leah Madden in the Federal Court of Australia, alleging that that Ms Madden, the designer of White Sands Swimwear, had engaged in misleading or deceptive conduct. The allegations concerned a number of statements made by Ms Madden on Facebook and by email, including:
posting a Facebook photo album on her personal Facebook page, under the heading “The most sincere form of flattery?” The album contained photographs of Seafolly swimwear, each captioned with the name of a White Sands Swimwear design;
commenting on the photographs, including stating that there had been “almost an entire line-line ripoff” of White Sands’ designs, and alleging that Seafolly had sent a dummy buyer to get photographs of White Sands’ collection;
sending an email to several media outlets, including the same photographs as those published on Facebook of her designs alongside allegedly similar Seafolly designs with captions beneath each photo “White Sands as seen at RAFW in May – Seafolly September 2010” or “White Sands 2009 – Seafolly 2010”.
Ms Madden claimed that she was simply expressing an honestly held opinion, and had taken down the photos from her Facebook page within about 30 hours of them being posted. She also cross-claimed for defamation and misleading or deceptive conduct by Seafolly, based on statements in Seafolly's press releases that she had made her allegations against Seafolly with the malicious intent of damaging Seafolly.
Why the Court found for Seafolly
The Court found that the various statements made by Ms Madden on Facebook and via email:
falsely represented that that Seafolly had copied Ms Madden's designs;
falsely represented that Seafolly was not the creator of the Seafolly designs; and
falsely represented that Seafolly had used underhanded means to obtain photographs of the White Sands garments in order to copy them.
Although Ms Madden did not explicitly accuse Seafolly of copying, the statements made on her Facebook page and the email to media representatives were understood by her audience to be assertions that Seafolly had engaged in unethical practices. That understanding was evidenced by the tone of the early media articles and comments on the issue. The Court also found that Ms Madden's intentions in making the representations were not relevant, as the key factor was the understanding of the audience to whom the statements were directed.
Even if the representations made could be seen to be expressions of Ms Madden’s opinions, the Court found that Ms Madden was reckless in forming them. She took none of the steps that she should have taken to ascertain the truthfulness of her suspicions.
She posted the photos within hours of seeing the Seafolly designs in a magazine, she made no attempt to ascertain when the Seafolly designs became publicly available, and did not contact Seafolly. It transpired that six of the eight Seafolly garments had been on the market prior to the time that Ms Madden suggested the copying occurred, and Ms Madden 's captions below the Seafolly designs were merely the date she became aware of them, not the date they actually entered the marketplace.
The Court also found that, despite some of the postings being on Ms Madden's personal Facebook page, her statements did occur “in trade or commerce” (being one of the requirements for an action for misleading or deceptive conduct). This was because she was the principal of White Sands, a trade competitor of Seafolly. Her statements related to the manner in which Seafolly conducted its business. She alleged that Seafolly had engaged in conduct which was improper to the detriment of her own business. She thereby sought to influence the attitudes of customers and potential customers of Seafolly.
Despite the lack of evidence that Seafolly had lost any sales or that any other business losses had resulted from Ms Madden’s statements, the Court awarded $25,000 for damage to Seafolly’s reputation, describing the allegations made by Ms Madden as a “serious assault on Seafolly's business integrity”. The Court also ordered that Ms Madden pay Seafolly’s costs of the proceeding.
Social media is the same as other forms of marketing and or sales channels
The result in this case is consistent with guidance from the ACCC that businesses should understand that “consumer protection laws… apply to social media in the same way they apply to any other marketing or sales channel”.
It is also consistent with the “Social Media Code of Conduct” launched by the Communications Council in August this year, which the Advertising Standards Bureau has suggested can help businesses in determining their responsibilities when using social media. The Code suggests that companies using social media should ensure their posts are accurate, by checking facts and ensuring that statements can be substantiated.
Although the Code and the determinations of the ASB are not legally binding, and the Code does not apply to companies who do not participate in self-regulation under ASB standards, it provides good guidance to individuals and companies who use social media to promote their businesses.
Social media is a valuable marketing tool, but this decision serves as yet another reminder that it should be treated with a high degree of caution. Statements made in Facebook posts or comments are made instantly and, even if they are only online for a short amount of time (in this case less than 30 hours), can result in serious consequences for individuals and businesses, including payment of damages and legal costs and adverse media attention. Before posting comments on Facebook, check your facts, check them again.
Thanks to Kate Grutzner for her help in writing this article.
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