FTC Beat
Posts Tagged ‘Facebook’
Mar 10
2016

Latest German Sausage? Privacy-Wurst by Facebook

iStock_000036218268_Medium

Despite not being explicitly mentioned in the Constitution, the Supreme Court has firmly held that a right to privacy for all Americans is found in several amendments to the Constitution, with almost 100 years of case law providing precedent for many personal privacy rights that have become a cornerstone of American culture. However, in this new digital age of rapid technology change, with real-time access to information and the global exchange of information at the push of a button, new privacy protection questions arise almost daily. The extent to which an individual’s private information shared online is subject to privacy protection varies depending on which side of the pond you stand.

European nations generally take a more restrictive approach than the U.S. as to how companies can use personal data.  EU nations often go head-to-head with U.S. digital companies over differing interpretations of privacy rights.  Both Google and Microsoft have faced multiple investigations outside the United States.

Facebook seems to be a particularly popular target. As the world’s largest social network with 1.6 billion monthly users, Facebook earns its revenues from advertising aimed at users, after gathering information from the users’ social connections and activities in their posts.  Late last month, a German court fined Facebook 100,000 Euros for failing to follow an order issued by a German court four years ago that required the social media site to revise a clause in its terms regarding any intellectual property content posted by users on or in connection with Facebook.  The German court had found that the clause in the terms violated consumer rights. While Facebook modified the wording slightly for German users, the German court found that the revised wording still maintains the same underlying message as the original wording.  Europe’s highest court also recently successfully challenged Facebook as to the way that data was transferred between the European Union and the United States.  And just yesterday, a German court ruled that domestic websites could not transfer user data to Facebook via its “like” button without the specific consent of the user.

In a novel link between privacy protection and antitrust, the German competition authority known as the Federal Cartel Office (BKA) opened an investigation on March 2 into whether Facebook abused its dominant position in social networking in order to collect its users’ digital information, including placing unfair constraints on the users, who were forced to sign complicated terms and conditions in order to use the network.  The investigation seeks to discover whether Facebook users were properly informed about how their personal data would be obtained through the site, including the type of data collected, as well as the extent of the data collected.

One might ask why the BKA would get involved with this novel approach to linking privacy protection to antitrust law. First, under antitrust law, the maximum fines are much greater than those under privacy law.  For a company tech giant like Facebook, the fines imposed by data protection authorities can seem negligible, even for the most egregious cases, while antitrust fines pose a much more significant deterrent.  Second, Facebook has claimed that it falls only within the jurisdiction of the data protection authority in Ireland, where its international headquarters are situated. By bringing the investigation under the auspice of the antitrust authority, this argument is avoided. The President of the BKA, Andreas Mundt, remarked that, “[d]ominant companies are subject to special obligations,” and he went on to say that such obligations include adequate terms of service, as far as they are relevant to the market.  He also noted the importance of user data where Internet services are financed by advertising.  The BKA noted, “. . . if there is a connection between infringement and market dominance, it could constitute an abusive practice under competition law.”

While some question the BKA’s position as ambitious and vague, others fear that this case could open the door to other investigations and cases using data protection violations to claim antitrust violations.  Whether the BKA is successful or not, this should be a forewarning to other big U.S. technology companies: it is probably not enough to rely on U.S. privacy rules when playing in a global arena.

Dec 23
2015

Will The Floodgates Open As Consumer Backlash To Spam Unleashes?

Anti spam filter vector concept in flat style

Every e-mail user receives them, some days in numbers hitting the triple digit mark – those targeted, often annoying and unsolicited e-mails that clog our inboxes, originating from any of a multitude of establishments, including retailers, service establishments, and even our own social media.  Regulation over unwanted e-mails has been limited mostly to the federal Can Spam Act of 2003, which doesn’t prohibit the deluge of e-mails, but rather protects against misleading and deceptive ones and requires the sender to comply with certain requirements, including offering a clear opt-out. A private consumer has limited retribution to enforce the Act, however, and must rely on the FTC, as well as other government entities and Internet service providers, to bring suit to stop the unwanted e-mails. It seems that consumers in recent years are ever more fed up and frustrated with “spam” messages and desire change.  However, as evidenced by a recent class action lawsuit by certain LinkedIn members against the social media giant, consumers may utilize other legal maneuvers to get relief from new marketing tactics employing spam.

LinkedIn is often referred to as the “Facebook of the Professional World.”  With over 300 million+ users, LinkedIn has become the world’s largest professional network since it launched in 2003.  One feature of the network allows a member to import his or her e-mail contacts list and send invitations to connect with others on LinkedIn.  A user is prompted by LinkedIn to click an “Add Connections” link, which then allows LinkedIn to import the list from external e-mail accounts.  LinkedIn uses this feature to grow its number of members.

According to the class action lawsuit filed against LinkedIn, if a connection invitation was not accepted within a certain period of time, up to two “reminder’ spam e-mail messages would be sent to the prospects, without the LinkedIn member’s consent to do so. In Perkins v. LinkedIn Corp., the federal district court in the Northern District of California determined that the motion to dismiss filed by LinkedIn would be granted in part and denied in part, thereby allowing the suit to move forward.  In its partial denial of the motion to dismiss, the court reasoned that although the members consented to importing their contacts and sending the invitation to connect, they did not consent to sending the reminder messages on their behalf.  In her Order, Judge Lucy Koh explains,

“Nothing in LinkedIn’s disclosures alerts users to the possibility that their contacts will receive not just one invitation, but three. In fact, by stating a mere three screens before the disclosure regarding the first invitation that ‘We will not . . . email anyone without your permission,’ LinkedIn may have actively led users astray.”

(Order Granting in Part and Denying in Part Defendant’s Motion to Dismiss with Leave to Amend *30).  The plaintiffs also contended that LinkedIn members did not consent to the use of their names and likenesses in the reminder e-mails and were embarrassed and felt that the unwanted e-mails sent to personal contacts affected their professional reputations.

Following the court’s Order, the parties agreed to settle the suit.  The settlement requires the social media giant to pay at least $13 million, as well as  $2.25 million in legal fees, to LinkedIn members who had accounts between Sept. 17, 2011 and Oct. 31, 2014 and sent e-mails through the Add Connections feature. Although LinkedIn did not admit any wrongdoing in the settlement, it agreed to revise its disclosures and clarify that the reminder e-mails would be sent as part of the “Add Connections” service. LinkedIn also indicated its intent to provide an option to cancel the connection invitation, and thereby the reminders, by the end of the calendar year.

Interestingly, with perhaps the fear of a lawsuit on the horizon, Mark Zuckerberg preemptively announced at a recent town hall meeting held in Delhi, India, that Facebook will be reducing the number of invitations it sends to outside contacts of players of the game Candy Crush Saga. Facebook often sends the invitations to contacts who have never used a game and never played games on Facebook, suggesting that they join their friends in a Candy Crush Saga game.  Zuckerberg noted that reducing the number of invitations received was the most upvoted question in an online thread, and he has promised to reduce the number of these unwanted requests.  After the recent LinkedIn settlement, we advise Mr. Zuckerberg to take action swiftly or we may see other unhappy consumers following suit. . . .  with their own suit!

These developments should offer welcomed relief for consumers and our busy delete buttons. However, this may be the tip of the iceberg with regard to the use of the courts and unwanted e-mails. Is the broad Can-Spam Act sufficient to deter spammers? Does the Can-Spam Act do enough to filter out unwanted e-mails? New scenarios have arisen since the enactment of the Act in 2003 and consumers seem to desire more regulation to deter the deluge of e-mails. If swift action isn’t taken by Congress and other regulators, it seems that consumers may take to the courts to set precedent in this ever-changing arena.

posted in:
Internet Law
Dec 15
2014

Will New Facebook Rules Hurt or Help Small Businesses?

Social media communication

Health cleanses to lose unwanted weight in a matter of weeks!  Images of beautiful jewelry to be purchased at great prices that you can even resell! Personalized handbags made to order! If you have a Facebook account, it is more than likely you have seen many of these and similar posts by “friends” in your news feeds or through sharing or commenting by your friends on others’ posts.  Facebook has announced that it will filter out unpaid promotional materials in user news feeds starting in January 2015.

If you run a business that uses social media as an advertising platform, you will need to be aware of these changes. Alternatively, if you have ever wondered how to curb these marketing posts, which seem to increase daily, your wishes may have been heard.

Specifically, Facebook will utilize a new algorithm to filter out posts that advertise products, such as repurposing paid advertisements and promoting sweepstakes or special deals. At first glance, it would appear that this will make it more difficult for entrepreneurs and small businesses to attain new contacts and customers, promote their brand names, and pitch products.  However, while this initial fear is legitimate, it may be unwarranted in the long term, as much of the benefit that this free advertising once provided has already started to dissipate.

Unpaid as well as paid promotional posts in social media have been widely and increasingly utilized for well over a decade. The Wall Street Journal recently stated that Facebook was used as the top promotional tool by more than 80% of small businesses utilizing social media. Small businesses have lost much of the glory and benefit that unpaid advertising once provided, as news feeds have been flooded by a plethora of entrepreneurial pitches. The unpaid posts have become less effective at building a marketing channel, as users have become desensitized to the promotional pitches. Increasingly, users scroll quickly through the incessant free marketing to read more personal feeds.

Additionally, the reach of unpaid posts on Facebook has fallen in recent years. Research supports the notion that simply racking up “likes” or posting ads repeatedly does not produce the sales that were initially anticipated. In a Forrester Research Report released in November, it was suggested that on average, fewer than .1% of people interact with each post. Rather than simply acquiring numbers of user “likes”, companies should look at the value of each fan and how to more fully connect with and engage the loyal fan base. Many also believe that there is still some value to having a direct Facebook page where users can access and like the page, take advantage of special promotions, and invite friends to like and partake in the offers.

While unpaid marketing posts will be filtered, Facebook will still offer “promoted posts,” that allows businesses to pay a certain amount, starting at $5 and reaching to several thousand dollars, in order to have posts on their pages viewed by a wider pool of users. Facebook is not the only platform to seek payment for wider distribution.  For a fee, Google likewise offers businesses the opportunity to “boost their ranking” in search results. It is likely that if entities have to pay a small fee for advertising, they may take a longer look at the content of the business post or material being promoted to be sure it is interesting and grabs a user’s attention.

Although start-up companies with very little initial cash may take a hit as these rules begin to take effect, small business may not see a big difference in the long term. As the saying goes, nothing of value comes for free, and it seems that the value of unpaid advertising has already fallen dramatically. Social media paid advertising is still rather cost effective when compared to other methods of advertising. Although the quantity of posts by businesses may fall, one can also anticipate that small businesses will value the content in each post.  In other words, if people are paying to advertise, the quality of each post will likely improve.  Small businesses will also look to other social media platforms such as LinkedIn and Twitter or perhaps the next “hot” social media outlet that offers the benefit of unpaid marketing, at least until those platforms likewise become ineffective.  Small businesses may still want to use Facebook for advertising, but in a more creative, targeted way and by means of engaging with their fan base. One thing is for certain, the world of social media is ever changing and evolving, and still offers entrepreneurs and small businesses tremendous benefits, which were not present two decades ago.  Social media platforms will, however, continue to review and modify the types of advertisements and promotions permitted on their sites.

posted in:
Uncategorized
Nov 07
2013

New Job? Think Twice Before Announcing it via Social Media

A lawsuit filed in Massachusetts state court recently raised the issue of whether a former employee’s LinkedIn post announcing a new job could violate an anti-solicitation clause of a non-compete contract with the former employer.

In KNF&T Inc. v. Muller, staffing company KNF&T filed suit against its former vice president, Charlotte Muller, for violating a non-compete contract in a number of ways, one of which was a LinkedIn update which notified Ms. Muller’s 500+ contacts of her new job.  Among those contacts were Ms. Muller’s former clients at KNF&T.  KNF&T filed suit alleging that the update notification violated her one year non-compete contract by soliciting business from current KNF&T clients.

The court issued a narrow ruling stating that the posting did not violate the non-compete agreement because Ms. Muller’s new position in information technology recruiting did not directly compete with KNF&T’s work in recruiting administrative support specialists.

Since the court was able to resolve the case based on a differentiation in practice areas, it did not have to resolve the issue of whether a LinkedIn notification could violate the terms of a non-competition agreement.  Such a determination will always depend of the particular facts of the case, such as whether the new position directly competes with the former employer, whether the individual is connected with former clients on LinkedIn, and the content of the notification.

Employees subject to a non-competition agreement should exercise caution when using social media to announce a new position.  If they do make an announcement, they should consult the terms of their non-compete agreement to determine what could constitute a violation.  For instance, if the non-compete only prohibits solicitation of the former employer’s current clients, the employee should be sure to exclude any such clients from the notification by selecting which groups receive the message.  The time spent paring down the list of recipients is well worth avoiding a potential lawsuit.

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About Ifrah Law

FTC Beat is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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