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Social Networking Under the Regulatory Microscope

These days, everyone is doing the social networking thing – especially companies looking to extend and impress their brand on online audiences.  Burberry just announced a social networking foray to help people share stories about their – uhm – first Burberry trench coat. Even the New York Times is getting in on the action, with tips on how to market your business on Facebook, while harvesting the “gold mines of demographic information” offered on this granddaddy of all social networking sites.

But even as companies race to embrace social networking in any possible form, regulators are increasing their oversight.  And if social networking is in your marketing plan, then you probably should take a look at these recent decisions – from federal and state regulators – that are “on point” for any site that features social networking technology.

First, there’s the FTC order (and whopping $250,000 fine) against Iconix Brand Group.  Iconix is home to some of the most durable brands in fashion – Bongo, Candies, London Fog.  According to the FTC, Iconix was collecting personal information from children under the age of 13 – on websites that were directed to this very tweeny, Britney-loving audience (Ms. Spears is the current spokeswoman for Candies).  This violated the Children’s Online Privacy Protection Act or COPPA – particularly as Iconix also failed to post a clear, understandable and complete privacy policy.

Iconix also ran foul of the FTC Act , by stating, in its privacy policy that it would not collect personal information from kids without their parents’ consent and would delete any personal information that it became aware of (but then proceeding to do the very opposite). FTC Chairman Jon Leibowitz’s summed up his thoughts with this pithy quote: “Children’s privacy is paramount, and Iconix really missed the boat by denying parents control over their kids’ information online.”

Second, there’s continued activity among state AG offices on certain marketing practices that take advantage of those huge address books members upload to their social networking accounts.  Just this past week, the New York and Texas Attorney General Offices settled with Tagged.com for violations arising out of its practice of sending promotional emails to the contact lists of their members without permission (yes, we’ve all got a few of those). In the words of NY AG Cuomo, Tagged “hijacked” the address books of its members, and then “blasted” those member contacts with spam.

Clearly, companies that market via social networking technology (and techniques) must be very cognizant of the patchwork of laws that regulate how a user’s personal information is used in online marketing efforts.  Recent studies show that users do care about their privacy online, and this suggests that a clear privacy policy that respects user personal information is good for compliance and business.  After all, it is the user (or in the case of children under 13, the user’s parents) that should decide when and how their personal information is being used.

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