Facebook “Likes” – Endorsements or Not?

Posted: June 7, 2012

As we recently discussed, your right to “Like” whatever you want on Facebook may not be unlimited.  But what options do others have when it comes to your Likes?  As soon as the Like button appeared, Facebook and its advertisers recognized the value of a Facebook user’s Likes in advertising.  A well-known advertiser can tout the number of Likes as a measure of its popularity.  A less well-known advertiser can rely on an impressive number of Likes to give it legitimacy in the marketplace.  But even more valuable are the peer-to-peer endorsements of having Facebook users share their Likes with their Friends. But, not everyone thinks the use of Likes in advertising is so simple.

There are a few recent cases in which Likes have been examined from the prism of the laws relating to endorsements.  The Federal Trade Commission, through its authority under Section 5 of the Federal Trade Commission Act barring unfair and deceptive trade practices, requires that endorsements must be truthful and not misleading.  Also, if there is a connection between the endorser and the marketer of the advertised product that would affect how consumers evaluate the endorsement, that connection should be disclosed.  Further, under common law and by statute in certain states, such as California and New York (not coincidentally states with many celebrity residents), an individual’s publicity rights are protected against the unauthorized use of one’s name and likeness by an advertiser.

Late last month, Facebook agreed to settle a federal class action  pending in the Northern District of California relating to its “Sponsored Stories” advertising program.  In the case, Fraley v. Facebook, the plaintiffs alleged that Facebook, without their consent and without providing any compensation, used their Likes to create advertisements displayed to their Facebook Friends.  For example, one of the lead plaintiffs alleged that she Liked Rosetta Stone so that she could try a free demonstration of language training software.  She claimed that her Friends were soon shown an advertisement with her name and likeness saying that she “Likes Rosetta Stone.”  The suit alleged that Facebook violated California’s right-to-publicity law, which provides for a $750 penalty per each violation and charges that Facebook had unfairly and deceptively sought to enlist “153 million free marketers.”  Almost humorously, the complaint further described Facebook as “an advertising company that owns and operates a social networking site” rather than as a social networking site that runs advertisements.
But, for Facebook, this was no laughing matter.  It moved to dismiss the suit, but last December the district court ruled that the plaintiffs could go forward with their claims that their publicity rights were violated and that Facebook had deceptively obtained and used their Likes to generate the advertisements containing the endorsements.  Significantly, the court recognized that the Facebook users’ endorsements could have economic value.  This finding was supported by past public statements by Facebook executives that Friend endorsements are two to three times more valuable than traditional advertisements and that Facebook’s goal was to turn its “customers into marketers” because a friend’s endorsement is much more likely to influence someone to purchase a product.  Accordingly, the court found that Facebook users, just like the celebrities who usually benefit from right-to publicity laws, can be desirable endorsers.

The parties advised the court in May that they had agreed in principle to settle the case.  The exact terms of the proposed settlement have yet to be announced. One key issue that the court had not yet weighed in on was whether, in fact, the plaintiffs had not consented to have their names and likenesses used in advertisements.  Facebook took the position that its terms of service allowed for their commercial use.  Nevertheless, the Fraley case supports the view that a Like can be considered an endorsement under the law, and that’s pretty important.
Another company advertising on Facebook also recently faced scrutiny over its handling of Likes.  A case decided last November by the National Advertising Division (NAD) of the Council of Better Business Bureaus concerned a challenge brought by 1-800 Contacts against Coastal Contacts relating to a “like-gated” promotion Coastal Contacts was running on Facebook.  In a “like-gated” promotion, the Facebook user must Like a page in order to gain access to content such as sweepstakes, contests, and special offers.  In this case, Liking Coastal Contacts helped qualify you for a “free” pair of glasses.  In addition to challenging the manner in which Coastal Contacts made the offer, 1-800 Contacts claimed that the Likes were fraudulently obtained because of the lure of “free” glasses and that any representation of the number of Coastal Contacts’ Likes was thus misleading.  This was the first time and, to date, the only time the NAD has examined the nature of Likes.  In its decision, the NAD used the vague but inclusive phrase, “a general social endorsement” to characterize Likes.  The NAD concluded that Facebook users would interpret Likes in a variety of ways and would understand that Likes are sometimes obtained through “like-gated” promotions, without any specific disclosure of that fact.  In this instance, the NAD concluded that there was nothing misleading about the number of Coastal Contacts’ Likes displayed on its Facebook page because those consumers who Liked Coastal Contacts in connection with the special offer were responding a legitimate offer and had in fact been given the benefit of the offer.  Otherwise, had the offer of “free” glasses been deceptive, the Likes would have indeed been considered fraudulent endorsements.
The Federal Trade Commission has yet to consider a case involving Likes.  However, the FTC’s revised Endorsement Guides, issued in late 2010, do address endorsements made through social media.  This, as well as the emerging case law on social media endorsements, should serve as a reminder that, while social media is often informal, the formal strictures of advertising law still apply.

For more information, please contact Eric Unis or John Hutchins.