Dan Kilian and Kristina Reid of Meade Lexus in Southfield, Mich., are using social media to raise the dealership’s online profile. But they also have taken steps to remain compliant, adding links to any required disclosure statements.

Dan Kilian and Kristina Reid of Meade Lexus in Southfield, Mich., are using social media to raise the dealership’s online profile. But they also have taken steps to remain compliant, adding links to any required disclosure statements.

It was bound to happen. The tremendous growth in digital and social media marketing was simply too difficult for government regulators to ignore. That’s why social media ethics are no longer based solely on personal preference. It’s now a matter of law.

Take the Federal Trade Commission’s truth in advertising laws, which hadn’t been updated since 1980. But because of the boom in online marketing activities, the FTC is now actively updating its rules. The agency’s position, which is shared by state regulators, is that social media is not a loophole for deceptive marketing practices. Regulators are actively enforcing rules and cracking down, so let’s review four key areas your dealership can’t afford to ignore.

1. Faking Reviews

The FTC has updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising to require that companies ensure their online posts are completely accurate and not misleading. Planting or allowing fake reviews to be posted is a violation.

Keep in mind that the guidelines are extremely broad and can apply to anyone writing reviews on rating sites such as Google Reviews, or promoting products via social media sites, including blogs. For dealers, companies which promise to improve your ratings on review sites should be viewed with skepticism.

Last October, a BMW dealership in San Antonio suffered serious damage to its reputation after it was caught posting fake online reviews. The culprit was a company the dealership hired to contact customers to generate actual reviews. After clicking on a suspicious reviewer’s profile, a customer discovered that the author had written five-star reviews for numerous dealerships and other businesses, and not just in San Antonio. Even worse, all those reviews were posted on the same day.

This is happening every day, folks, so be wary of the companies you hire to help you with your digital marketing efforts. And don’t forget your own staff. The FTC recently charged a California marketing company with deceptive advertising after it found employees were posing as ordinary consumers and posting positive reviews.

Dealers may face liability if employees use social media to comment on their employer’s services or products without disclosing their relationship with the business. Remember, the FTC requires all “material connections” between a poster and the companies they review to be disclosed. That extends to any association that could affect the reviewer’s credibility.

So, if employees, friends, family or vendors post reviews to prop up a dealership’s online reputation, they must clearly disclose their relationship with the company. Additionally, the reviews themselves must be an honest opinion based on a real experience. The FTC’s rules stipulate that reviewers must never endorse a product or service that they have not used personally. Remember, it’s all about transparency and full disclosure.

Failing to follow those guidelines puts more than your reputation at risk. It also can result in substantial penalties. In 2009, then-New York Attorney General Andrew Cuomo fined a cosmetic surgery practice $300,000 for ordering its employees to write fake reviews for its facelift procedure. Last March, the FTC ordered a company marketing instructional DVDs to pay $250,000 for fake reviews posted by the company’s affiliate marketers.

The FTC also has indicated that companies are fully responsible and liable for any inappropriate actions committed by their employees, vendors and any advocates they recruit. The reviewers themselves also may be held personally liable for statements made in the course of their endorsements.[PAGEBREAK]

2. Paying for Reviews

The practice of offering a free oil change or gas card to a customer in exchange for a positive survey has long been frowned upon by manufacturers. Their concern is valid. There are no factory gatekeepers when it comes to online ratings, and they know dealers may be tempted to entice customers with some type of incentive to get them to post a review.

The good news is there is no law prohibiting that practice — yet. But regulations do require that a reviewer who has been provided with any form of compensation (e.g., free services, rewards, incentives, promotional items, gifts or samples), must fully disclose the source and nature of any compensation received.

3. Advertising on Social Media Sites

The benefit of trying to “sell” on social media sites by posting inventory, prices or monthly payments is an ongoing debate, but many dealers are already doing it. While I have no opinion on the relative merits of whether or not to sell on social media, it’s important to note the potential implications of these types of activities.

Social media tends to be a low-key, casual form of communication, but that doesn’t mean advertising regulations don’t apply. In fact, the FTC recently announced that it was updating its guide on social media advertising. First published in 2000, “Dot Com Disclosures: Information About Online Advertising” was written to inform advertisers that consumer protection and disclosure laws would be applied just as strictly to the digital realm.

So, if inventory is posted or prices and payments are quoted on social media, it’s likely that the posts will be considered advertisements. That means they are subject to state and federal disclosure and truth in advertising regulations.

Lack of space is not an acceptable excuse. If you’re advertising on Twitter, your 140 characters must include a clear link to any necessary disclosures. A good rule of thumb is to have any information that could possibly be construed as advertising reviewed by upper management or a qualified professional before it is posted.

4. Failure to Create a Social Media Policy

Social networking sites, blogs and video sharing have soared in popularity. Unfortunately, according to an informal poll conducted by  law firm Proskauer Rose, 45 percent of companies have no social media policy at all. Hopefully, your dealership isn’t one of them.

Dealerships need to control the information that’s coming out of their business. Written policies and procedures must spell out how employees are expected to conduct themselves online. If anything, a good policy can help take the guesswork out of what is appropriate for employees to post about a company to their social networks.

There also are a number of potential legal issues with employees operating in the social media sphere that need to be addressed. Claims for violation of privacy, harassment, discrimination or defamation are a real risk, and employees can harm a dealership’s reputation by posting controversial or inappropriate comments.

However, employer restrictions on the use of social media can be tricky. The National Labor Relations Board (NLRB) recently issued a complaint against an Illinois dealership, charging management with unlawfully terminating an employee for making critical comments about the store on Facebook. While some unprofessional and inappropriate conduct may not be protected, the intersection of social media and the National Labor Relations Act is an evolving area of the law.

The best way to protect your dealership from legal trouble is to establish formal policies for your staff. But remember, creating a policy also means creating a training program to educate employees about appropriate social media use and disclosure. Having both is the only way your policies will be legally defensible.

Jim Radogna is president of Dealer Compliance Consultants Inc., a San Diego-based provider of training and compliance solutions. He can be reached at [email protected]