Monday, September 8, 2008

Social Media, Rumors, and Defamation

A week ago, I posted an article entitled Social Media and Brand Control: A Historical Perspective. I received some interesting comments from an anonymous reader who asked what ramifications there might be to spreading false rumors and whether Social Media might be used by companies to spread rumors about competitors. He or she asked:
Do you think there are new avenues now for marketers to competitively position their products against another by starting rumors? Given the ability to spread information in a much faster way, this would seem to be a valuable (and possibly very unethical) method of combating a competitor....but if you can't find or prosecute the source, what is to lose? And, what can the competitor do to provide that "ounce of prevention"?
I think these are interesting questions to explore since the instantaneous and distributed nature of Social Media might make it a tempting target for unethical behavior. The first thing to note is that while the commenter suggested that spreading false rumors about competition was "possibly very unethical," there is no "possibly" about it. Spreading misinformation about competitors is not only unethical but also illegal and potentially very dangerous to both financial health and brand. Here are some past cases and what we can learn from them:

Corona and Luce & Sons
Corporate smearing was a reality well before the advent of Social Media. One of the better known examples is a false rumor that spread widely in the 80s about beer brand Corona; gossip was that Mexican workers urinated into the bottles destined for the United States.

While rumors are hard to trace, Corona succeeded in tracking this one back to Luce & Sons, a Reno distributor of competing import, Heineken. Barton Beers, Corona's US partner, sued Luce & Sons and won an out of court settlement requiring Luce to issue a statement promoting that Corona beer was "free of any contamination."

While it would seem Corona "won" this case, the power of Word of Mouth is demonstrated by the impact this rumor had on the brand. Even after the case was settled, the rumor lived on; it reportedly took Corona $500,000 (in 1990 dollars) in advertising and PR to repair the damage.

Lesson: The Corona/Luce case is a lesson in monitoring Word of Mouth in order to evaluate and execute appropriate action. In many cases, rumors may not be worth the effort and risk of responding, but brands must be vigilant, proactive in their assessments, and ready to respond when necessary. As for the question of whether or not legal recourse is always helpful, let's explore a similar case with McDonald's in the UK.

McDonald's and Environmental Activists
In Britain, McDonald's sued two green activists over criticisms made in leaflets handed out on street corners. The leaflets claimed that McDonald's exploited children in its advertising, were cruel to animals, destroyed rain forests and contributed to Third-World starvation. McDonald's won the case but lost the PR battle.

As noted in the Business Times, the case "tied down McDonald's management," cost the company around £10-million in legal fees, and gave a national stage to accusations that previously had been limited to street corner fliers. In the article, McDonald's execs mount an interesting and persuasive case for why the legal effort was necessary, but as one libel expert puts it, "Even if they were completely successful, in these circumstances there will always be residual sympathy for the little guys. It is very unusual for a company to sue individuals. It is a risky strategy."

Lesson: In cases when false rumors are spread, we can all sympathize with the desire to find who is responsible, prove them wrong, publicly shame them, and make them pay. Unfortunately, this strategy--regardless of the legal merit--isn't always in the best interest of shareholders. What is in the best interest of the brand is to ensure the false rumors don't stick in the minds of consumers.

Almost a century before the Internet, Mark Twain recognized the power of Social Media when he said, "A lie can travel halfway around the world while the truth is putting on its shoes." This adage should be framed on the wall of every PR, marketing, and legal resource in corporate America. The problem with pursuing a legal action isn't the cost, or the potential for loss, or the pulpit you might give your detractors; it's that even if you win, your message won't travel as quickly or as widely as the original falsehood.

There is no rule of thumb that can be applied to every case, but as noted in a previous post here on Experience: The Blog, the best defense against false rumors isn't the law; it's communication. If someone says you're destroying the rain forest, tell consumers the many ways you support environmental causes. A battle in court to be proven right may be tempting, but being right doesn't increase sales or stock price; winning the battle for the mind of the consumer is the only battle that matters.

Snapple and the KKK
It is enticing to think that blatantly ridiculous rumors will simply fade away and are best left unanswered. Be aware this approach may be a little too tempting, as Snapple learned.

In the early 90s, rumors began circulating that Snapple was associated with the KKK. Snapple decided not to respond immediately. Leonard Marsh, the company's president, said the rumors were, "so ridiculous we thought they would go away, but they didn't. It reached the point it was getting out of hand and we had to address it." The company eventually launched an ad campaign directly refuting the rumors, and the three co-founders appeared on MTV to get the truth out.

The company took further steps to fight the rumors. The gossip claimed an illustration of a ship on the Snapple label was a slave boat and that a small "K" on the label represented the KKK. Snapple redesigned their bottle to make clear the ship represented the Boston Tea Party and the "K" was enhanced with the words "kosher pareve."

Lesson: Don't be afraid to act, and don't think the only response mechanism is PR and advertising. Remember that the product itself and its packaging might be used to combat misinformation. Snapple came to feel they waited too long to fight the rumors, and their willingness to change the product packaging helped to make the gossipers look ridiculous and erroneous.

Another thing to note about the Snapple incident is that the company's efforts to find the source of the rumors were unsuccessful. This is pure speculation on my part, but I wonder if locating the source of misinformation might actually encourage the wrong response. Corona found the source, sued, and secured a public statement, but the rumors persisted and forced the company to further action; Snapple couldn't find the source of the rumor and instead took their case directly to consumers through PR and packaging alterations. Perhaps Corona might have been more immediately successful by securing third-party tests of their product and adding an objective seal of purity and quality to their bottles.

American Express and Edmond Safra
Another famous example of corporate smearing dates back to the late 80s. American Express was caught spreading false stories tying rival financier Edmond Safra to money-laundering, organized crime and the Iran-Contra affair. Safra sued, and even though there was a question that some of stories may have been true, American Express felt they were better served avoiding the bad PR and court costs, so they agreed to donate $8-million to charities chosen by Safra.

Lesson: Spreading rumors can easily turn out as bad for the spreader as the target. This is especially important to consider in the age of social media, when employees may independently share rumors or misinformation that reaches a wide audience. With the stakes so high, don't assume your employees know the rules; have a strong ethics policy and make sure it gets communicated.

As noted in Rumors and Rumor Control By Allan J. Kimmel:
Because a company's business partners, such as retail sales personnel, distributors, suppliers, wholesalers, and other organizations must do business with other firms, it is essential to maintain trusting relationships with these intermediaries to establish a positive reputation of the company as fair, ethical, and trustworthy. Attempts to plant rumors about competitors, for example, should be clearly prohibited by corporate ethics code. Not only does a company run the risk that its corporate name will ultimate replace the intended rumor target, but it would service to undermine its relationships with other stakeholders once word gets out about its rumor-planting actions.
There are few best practices for rumor control in Social Media but as past cases demonstrate, there are some tips to keep in mind:
  • A strong brand is the best defense. A brand that consumers trust and in which they feel involved is less likely to face repercussions from misinformation than brands that start in a weaker position in consumer perception.

  • Monitoring your brand in Social Media is vital. Not every rumor demands a response, but every rumor requires your knowledge, assessment, and ongoing observation.

  • Be prepared for response. Don't wait until a crisis has arrived to consider who is responsible or how you'll act. Have a Social Media crisis plan ready that identifies resources and available actions.

  • Fight for the mind of the consumer. Consider that winning in court may provide little or no benefit, so even if your organization will pursue legal options, that should not stop full and immediate attention to communications. Don't rely on the ultimate outcome of a lawsuit for any benefit in your battle against misinformation.

  • Take the fight to the consumer: As discussed on this blog in the past, you cannot fight a wildfire in Social Media by talking to traditional media. PR to big media can be a tactic you pursue, but should only be one tactic among many. Share valid information in the same social media channels that are being used to disseminate the false accusations.

  • Ensure ethical behavior: Remember that Social Media is giving a megaphone to far more people than in the past, including your employees. The next nasty rumor that circulates in your industry may just come from one of your employees, and the ramifications to the organization could be substantial. Have a strong ethics policy and make sure all employees understand it. And involve your stakeholders, including suppliers and customers, in regular and open efforts to evaluate and enforce corporate ethics policies.
As evidenced by the Mark Twain sentiment, rumors and Social Media aren't really new. What is new is the speed and reach of information and interactions. This is why today's Social Media demands attention and care by all organizations.


Anonymous said...

Great article but can I have your point of view on this case I hope you could write something about it. Thanks

Augie Ray said...

Good luck with your situation. Not knowing the laws in your country, I don't think I can offer any insights. I hope your grievances are resolved to your satisfaction as quickly as possible.