Social media: managing your legal risk

Kate Gordon, Senior Associate, M+K Lawyers

Facebook, Twitter, LinkedIn, YouTube, Google+, Pinterest, Instagram, Snapchat… the list goes on. The constant rise of social media brings with it new commercial and marketing opportunities for businesses. With opportunity comes risk, and business owners need to carefully manage these risks.

What are the risks?

Imagine one of your employees’ posts false comments about a competitor on your organisation’s Facebook page. It goes viral. Are you aware of the risks your organisation may face from this type of situation?

Misleading and deceptive conduct Online content that is misleading and deceptive may breach the Australian Consumer Law.

In Seafolly v Madden, the owner of a small swimwear business, White Sands, posted on her Facebook page a number of extracts from the Seafolly catalogue of the Seafolly designs with the question “The most sincere form of flattery?” and the equivalent names for her designs. The owner also contacted various media outlets and the story quickly spread. Seafolly sued the owner, Madden, for misleading and deceptive conduct in breach of the Australian Consumer Law. In her defence, Madden stated that her comments were personal in nature and not business related. The Court disagreed with Madden and found her liable for misleading and deceptive conduct.

False or misleading representations

Businesses are responsible for ensuring that the content on their social media pages are accurate. Any false or misleading comments, regardless of whether it is generated by the company, its employees, customers or other third parties, may breach consumer laws.

In ACCC v Allergy Pathway (No.2), the ACCC alleged that Allergy Pathway was in breach of an earlier undertaking it had given that it would not publish misleading representations about the company’s services on its Facebook and Twitter pages. The publications included testimonials written and published by clients on Allergy Pathway’s Facebook wall. Allergy Pathway knew that clients had published testimonials but it took no steps to have them removed. The Court ultimately found that by its knowledge, and subsequent lack of action, Allergy Pathway became the publisher of the testimonials and was in breach of its undertaking to the Court.


Comments published on social media may be defamatory.

In Mickle v Farley, a teacher was awarded $105,000 in damages in Australia’s first Twitter defamation case to proceed to a trial. The Court held that a former student had defamed music teacher Christine Mickle, making false allegations about her on Twitter and Facebook.


Discrimination may arise through the misuse of social media. Comments that are aimed at certain individuals may constitute discrimination and, if not dealt with appropriately, may result in a company being held to be vicariously liability for that discrimination.

The Advertising Standards Board investigated a complaint that content on Victoria Bitter beer’s Facebook page breached the Australian Association of National Advertisers Code of Ethics. The Board determined that the Code applied to a brand owner’s Facebook page (including content posted by third parties), as it is a marketing tool over which the advertiser has reasonable control. The Board held that Victoria Bitter had breached the Code, because some user posts were discriminatory towards women, degrading to homosexuals, used obscene language and did not  treat sex, sexuality and nudity appropriately in the circumstances.

Other legal risks

Other legal issues that may arise from the use of social media include:

• Copyright infringement

• Trade mark infringement

• Breach of privacy

• Unauthorised disclosure of confidential information

• For listed companies, breach of the continuous disclosure obligations.

Brand Damage

Social media poses a significant reputational risk to organisations. Negative online content can go viral very quickly and the potential for damage is far greater and longer lasting than printed material. It’s crucial that every organisation has policies and procedures in place to deal with any attack on its brands.

How can a business manage its risk?

There are several ways an organisation can manage its social media risk.

Social Media Policies

One of the best ways to manage the risk is to have a comprehensive social media policy in place and staff trained on it. This should set out clear guidelines for how the business and its employees, and for franchisors, the franchisees, are to use (or not use) and manage social media.

Social media policies are most effective if they are written in an easy to read, conversational style. It may include:

• parameters as to use e.g. absolute prohibitions, or use only with permission;

• if use is permitted, the guidelines for use e.g. guidance on how to avoide breaching the law;

• a prohibition on disclosure of the organisation’s confidential information, and a clear statement of what the business considers is confidential;

• the ownership (and consequential password, access controls) of the social media account (this is of particular relevance for LinkedIn, which may raise client solicitation issues);

• a statement that compliance with the business’ social media policy is mandatory;

• the ramifications of non-compliance e.g. disciplinary action, breach of contract, termination; and

• a reminder that when in doubt, do not post!

The following case highlights the importance of ensuring everyone understands the business’ social media policy. Logistics company Linfox was ordered to restore pay to an employee, whom it terminated for making inappropriate comments about managers on Facebook. The  employee’s dismissal was found to be harsh, unjust and unreasonable, because the employer had not communicated its social media strategy to the employee.


Training should be put in place for all employees, and more detailed training for those who use social media as part of their roles. General social media training should be incorporated as part of a business’ induction procedures and training, so that all employees are aware of any social
media polices and the employee’s rights and obligations.


Knowledge is power - and a key tactic for minimising social media risk is consistent monitoring of the main platforms. This should include considering monitoring of social media outside of business hours, as many social media incidents occur at night or on the weekend. At a  minimum, organisations should use a paid tool or software to ‘monitor’ social media for references to their brand.

Next steps

Identifying and managing social media risk is essential for all business owners. Creating and communicating an effective social media policy, together with training and active monitoring, can assist in managing the risks. In doing so, a business will be taking important steps to create a culture where everyone understands the social media risks and the importance of protecting your brands.

Kate Gordon is a Senior Associate at M+K Lawyers. She has a wide range of experience in commercial transactions and specialises in franchising matters. Kate’s experience spans both private practice and in-house counsel roles, in Australia and internationally. In particular, Kate has  acted as in-house counsel for franchisors.

M+K Lawyers is a growing firm of commercial lawyers and industry advocates, devoted to the needs of businesses and asset owners in the midmarket.

T: 03 9794 2505

File Attachment: