In session “Branding in the Age of Social Media and the Impact of Consumer Brand Empowerment,” one of the panelists starts off by answering questions that are often raised by the public.

How does consumer empowerment work? “Social media binds together communities that once were geographically isolated, greatly increasing the pace and intensity of collaboration,” says Alexander Bayer, a partner at Pinsent Masons in Munich. “Now that these once-remote communities are densely networked, their cultural influence has become direct and substantial.”

How does consumer empowerment influence brand attitudes of other consumers? “With a few clicks, you can jump into the center of any subculture, and participants’ intensive interactions move seamlessly among the web, physical spaces, and traditional media,” Bayer says. “Together members are pushing forward new ideas, products, practices and aesthetics — bypassing mass-culture gatekeepers.”

Has social media made brands more or less significant? “While crowd culture has deflated conventional branding models, such as branded content and sponsorships, it actually makes an alternative model — cultural branding — even more powerful,” he says.

What can brand owners do to increase cultural relevance in the age of crowd culture? “Opportunities come into view only if brands use the prism of cultural branding — doing research to identify ideologies that are relevant to the category and gaining traction in crowd cultures,” he says.

“When marketing brands through social media, they must be able to maintain control over how their IP is used or obtain permission from third parties to use their IP. They must also abide by the rules and guidelines of organizations such as the FTC, SEC, FINRA, FDA and ASA. Name squatting on Twitter and Facebook, etc, will be suspended, and attempts to sell or extort will also result in account suspension — the same applies to impersonation accounts,” he says. “Traditional marketing law principles apply equally to the world of blogs and social media.”

Originally, the Endorsement Guides from the Federal Trade Commission Rules were written in 1980 and did not address social media, he says. “Overriding concern of the revised rules are ‘clearly and conspicuously disclose.’”

The three main principles include: 1. endorsements must be truthful and non-misleading; 2. if the advertiser does not have proof that the endorser’s experience represents what consumers will achieve by using the product, the advertisement must clearly and conspicuously disclose the generally expected results in the depicted circumstances; and 3. if there is a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed, he says.

“Everyone should be playing by the same rules, whether you are a professional reviewer or an amateur reviewer. Just be upfront about the connections you have and any conflicts of interest you may have with a given company,” Mary Engle, associate director at the Bureau of Consumer Protection, explains the purpose of the amendments to the FTC Endorsement Guidelines.

Endorsements and testimonials are identified as “any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflect the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.”

The FTC sees compensation by a company as a material fact that consumers would want to know before making a decision on the credibility of an endorsement. “Endorsements must reflect endorser’s honest, personal opinion and endorsers can only make substantiated claims — they must disclose connection to company (material connection). Company using third party endorsers must monitor those endorsements to make sure they remain true and substantiated,” Bayer says. “Celebrities should disclose their relationship with a marketer when touting the marketer’s product or service on talk shows, interviews or social media.”

Examples of not an endorser or in other words, no disclosure necessary include you purchasing a product on your own and receiving a free sample from a store, he says.

You are an endorser and disclosure is necessary, if any of the following situations applies. “1. If a manufacturer provides with a product coupled with the expectation that you will provide a review; 2. If you write about specific topics and receive a free product in exchange for a review; 3. You participate in an online message board discussion that is sponsored by your employer and regarding one of your employer’s products; 4. You participate in a ‘street team’ and are responsible for promoting new products in exchange for compensation 5. You receive cash or in-kind payment (including free products or services for review),” he says

Once you are identified as an endorser, you might consider using one of the following examples for disclosure purposes.

Disclosure of Material Connection: “I am the CEO of Thomas Nelson, the company that published this book. Regardless, I only recommend books that I have personally read and believe will be good for my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: ‘Guides Concerning the Use of Endorsements and Testimonials in Advertising.’”

Disclosure of Material Connection: “This is a ‘sponsored post.’ The company that sponsored it compensated me via a cash payment, gift, or something else of value to write it. Regardless, I only recommend products/services I use personally and believe will be good for my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: ‘Guides Concerning the Use of Endorsements and Testimonials in Advertising.’”

Facebook post: “I’m working with _________ (company) now and I really love their ________ (product),” Bayer says. “Disclose connections between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement.”

Twitter: Reserve a certain number of characters in order to disclose the nature and purpose of the tweet (e.g. #sponsor, #spon, #endorsement, #ad, #client, #advisoryboard, #paid-ad)

Also, there are non-legal issues to consider, says Lauren Dienes-Middlen, SVP & Assistant GC-IP at World Wresting Entertainment. “Who is creating content? What is the approval process for content like videos, tweets and posts that need to be in line with company branded message? How often to update the content?”

Additional non-legal issues include “who is monitoring feedback? Who is responding to them? How to respond to negative comments? How quickly do you respond? When do you remove inappropriate content? When do you block a user?”

“What employers should do is to create social media policies for their companies, be it use of email, internet, or social media. Include new policies in employee handbooks and/or separate agreements and have them signed by employees. Confer with employment and social media attorneys regarding rules,” Dienes-Middlen says. “Train managers on new policies. Appoint ‘authorized social media users.’ Discuss rules with IT departments on filters or blocks on company networks. Appoint people to monitor social media uses (not to be too strict, though). Revisit & revise to keep current with technology. List official social media accounts on company websites.”

While doing the above, be mindful of possible First Amendment violations (i.e. Freedom of Speech, Freedom of Association), she reminds. “Brands should also watch out for National Labour Relations Act violations as employers are prohibited from quashing employee communication about issues relating to their workplace.”

Johnny Chan