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Legal and Privacy Issues with Social Media Unified Wine & Grape Symposium January 27, 2011 John Hinman Hinman & Carmichael LLP 260 California Street, Suite.

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Presentation on theme: "Legal and Privacy Issues with Social Media Unified Wine & Grape Symposium January 27, 2011 John Hinman Hinman & Carmichael LLP 260 California Street, Suite."— Presentation transcript:

1 Legal and Privacy Issues with Social Media Unified Wine & Grape Symposium January 27, 2011 John Hinman Hinman & Carmichael LLP 260 California Street, Suite 1001 San Francisco, CA 94111 TEL: 415-362-1215 jhinman@beveragelaw.com www.beveragelaw.com Tracy Genesen Kirkland & Ellis LLP 555 California St. San Francisco, CA 94104 TEL: 415-439-1826 tracy.genesen@kirkland.com www.kirkland.com Suzanne DeGalan Hinman & Carmichael LLP 260 California Street, Suite 1001 San Francisco, CA 94111 TEL: 415-362-1215 sdegalan@beveragelaw.com www.beveragelaw.com

2 Caveat The following model is a general framework that addresses most basic regulatory concerns. It is not represented to be a model compliant in all particulars with the laws of any specific state. Rather, prior to implementation the models are adjusted to accommodate local legal concerns. Different models for different states may be operated in parallel.

3 In the Beginning, there was the Direct to Consumer Symposium 2009 On-Line Sales/Marketing Programs Presented by: Matthew D. Botting General Counsel Cal. Alcoholic Beverage Control

4 Regulatory Issues Tied-house: No supplier may, directly or indirectly, furnish or give anything of value to any off-sale retail licensee. Free goods: No licensee may, directly or indirectly, give any premium, gift or free goods in connection with the sale or distribution of any alcoholic beverage, except as may be specifically authorized. Consignment sales: Sales of alcoholic beverages to consumers may only be from an inventory of product actually purchased and possessed by the licensee undertaking the sale. Exercising license privileges: Only licensees may exercise license privileges, including decisions regarding the purchase and pricing of alcoholic beverages.

5 Tied-House Section 25502: No supplier may, directly or indirectly, furnish, give, or lend any money or other thing of value to an off-sale retail licensee. Be very cautious of programs that involve both suppliers and retailers. If retailer receives any benefit from supplier payment or involvement, then could be problematic.

6 Free Goods Section 25600 and Rule 106: No licensee may, directly or indirectly, give any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, unless expressly permitted. Typical violations: free shipping; free gift; buy one, get one free; etc. Whether third-party called marketing agent of winery or agent of consumer, licensee will be subject to discipline.

7 Consignment Sales Comes up when sale made by retailer. At time of sale, retailer must actually own the wine being sold. Red flags include: Wine not ordered and/or winery not paid until after retailer makes the sale. Winery ships wine sold by the retailer. Any agreement under which retailer can return unsold wine to winery. (Sections 23355, 23393, 23394, 25502, and 25503(a).)

8 Exercising License Privileges Section 23300: Only licensees may exercise license privileges. Includes: Purchasing decisions. Pricing decision. Profiting from sale of alcoholic beverages. Biggest issue tends to be fees for services providedif based upon sale of alcoholic beverages (such as percentage basis) then problematic.

9 Within Weeks of the Direct to Consumer Symposium... The California Alcoholic Beverage Control Department issued its now-infamous Industry Advisory

10 INDUSTRY ADVISORY

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16 SO CAN YOU BE BOTH EFFECTIVE AND LEGAL WHEN USING SOCIAL MEDIA TO DRIVE SALES?

17 Selection of Wine Overview of Process Customer Trusted Merchant Website Trusted Merchant Website Trusted Merchant Website Trusted Merchant Website Licensee (Winery Importer or Retailer) Licensee (Winery Importer or Retailer) Information 1 2 3

18 Beginning of process Step 1 Customer goes to website of Trusted Merchant (TM), sees recommendation for wine that has been tasted and is endorsed by TM and that TM has agreed may be advertised on TM website. Customer goes to TM website and starts process. Customer

19 Transmission of Customer Information Step 2 TM collects information from customer for transmission to Selling Licensee, who is only entity qualified to accept order. TM receives fee from Licensee for advertising and marketing services. Fees are usually fixed payments based on total transactions through website over varying periods of time. Trusted Merchant Website

20 Acceptance of Order by Licensee Step 3 Licensee receives customer information, verifies funds, age of customer, product availability, location of customer and accepts or rejects order. Acceptance or rejection communicated to customer. Selling Licensee (Winery or Retailer)

21 Delivery from Selling Licensee to Consumer Direct or Permit Customer in state of residence of seller, or permit state in which seller is qualified. Delivery requirements (taxes, identification requirements, case shipment restrictions, etc.) tracked by compliance software. Licensee (Winery or Retailer) Goods

22 Delivery from Selling Licensee to Consumer 3-Tier Winery/ Importer WholesalerRetailerConsumer Goods This is a dynamic system with information flowing back and forth between the participants on a real time basis. Funds are held by the retailer and reconciled on weekly or monthly basis by EFT or other electronic funds transmission systems. Reports may be generated at any point and each participant is responsible for its federal excise taxes, state taxes (excise and sales) and state permit reporting requirements.

23 Delivery from Selling Licensee to Consumer 3-Tier Step 1 Winery/Importer holds goods to satisfy expected orders based on information from marketing agent. Winery/Importer

24 Delivery from Selling Licensee to Consumer 3-Tier Step 2 Information and goods go to wholesaler; 1.Responsible for state import procedures 1.State Taxes 2.Delivery to Retailer [Note: if no at-rest delivery required by state, goods could go directly to retailer or consumer] Wholesaler

25 Delivery from Selling Licensee to Consumer 3-Tier Step 3 Retailer receives order information and processes credit card. Verifies age of consumer, product availability, location of customer, accepts order and directs shipment of wine to consumer. Retailer places funds (after deduction of retailer margin) into escrow account for disbursement up the chain to all vendors and service providers. Retailer

26 Avoiding Other Potential Legal Pitfalls in Social Media

27 General laws still apply: Copyright laws Trademark laws Privacy rights First Amendment issues Federal advertising standards for wine still apply, including: No false or misleading statements No disparagement No statements inconsistent with labeling No misleading health claims

28 Federal Law: Currently there is no single body of federal law regulating privacy, but the Federal Trade Commission regulates online privacy violations. The FTC recently proposed new guidelines for online consumer data collection. These include the proposal of a Do Not Track registry to allow consumers to opt out of data collection from behavioral marketing advertisers. California: Business & Professions Code §22575 et seq. requires commercial websites that collect personally identifiable information to follow certain guidelines. Best Practices: Businesses should track these developments and make sure their Privacy Policies are up-to-date and conspicuously posted.

29 THE TTB AND ADVERTISING – what is it? No person engaged in the business as a producer, rectifier, blender, importer, or wholesaler of wine, directly or indirectly or through an affiliate, shall publish or disseminate or cause to be published or disseminated by radio or television broadcast, or in any newspaper, periodical, or any publication, by any sign or outdoor advertisement, or any other printed or graphic matter, any advertisement of wine, if such advertising is in, or is calculated to induce sale in, interstate or foreign commerce, or is disseminated by mail, unless such advertisement is in conformity with §§4.60–4.65 of this part. 27 CFR 4.60 As used in §§4.60 through 4.65 of this part, the term advertisement includes any written or verbal statement, illustration, or depiction which is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, whether it appears in a newspaper, magazine, trade booklet, menu, wine card, leaflet, circular, mailer, book insert, catalog, promotional material, sales pamphlet, or any written, printed, graphic, or other matter accompanying the container, representations made on cases, billboard, sign, or the outdoor display, public transit card, other periodical literature, publication, or in a radio or television broadcast, or in any other media 27 CFR 4.61

30 No person engaged in the business as a producer, rectifier, blender, importer, or wholesaler of wine, directly or indirectly or through an affiliate, shall publish or disseminate or cause to be published or disseminated by radio or television broadcast, or in any newspaper, periodical, or any publication, by any sign or outdoor advertisement, or any other printed or graphic matter, any advertisement of wine, if such advertising is in, or is calculated to induce sale in, interstate or foreign commerce, or is disseminated by mail, unless such advertisement is in conformity with §§4.60–4.65 of this part. 27 CFR 4.60 …radio or television broadcast, or in any newspaper, periodical, or any publication, by any sign or outdoor advertisement, or any other printed or graphic matter…

31 As used in §§4.60 through 4.65 of this part, the term advertisement includes any written or verbal statement, illustration, or depiction which is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, whether it appears in a newspaper, magazine, trade booklet, menu, wine card, leaflet, circular, mailer, book insert, catalog, promotional material, sales pamphlet, or any written, printed, graphic, or other matter accompanying the container, representations made on cases, billboard, sign, or the outdoor display, public transit card, other periodical literature, publication, or in a radio or television broadcast, or in any other media 27 CFR 4.61 …written or verbal statement, illustration, or depiction…

32 Mandatory Statements: At the very least, all advertisements must state the name and address (county and state) of the permittee responsible for its publication. 27 C.F.R. §4.62(a) Legibility of Mandatory Information: All statements appearing in any written, printed or graphic advertisement shall be in lettering or type size sufficient to be conspicuous and legible. 27 C.F.R. §4.63. Every Post, Blog Entry, Uploaded Video and Tweet from Your Company Is An Advertisement.

33 In Old Media... You Worry About Your Own Actions.

34 In New Media (Blogs, Facebook, Twitter, YouTube) You Worry About the Actions of Everyone Else.

35 LIKE WHO?

36 Privacy violations Copyright Infringement Trademark Infringement Harassment Impersonation Defamation

37 Best Practices If content is on your own blog, add appropriate disclaimers and other language to your Terms of Use. If content is on Facebook, Twitter or other public social media sites, rely on these sites Terms of Use. Monitor your social media for offending material. When appropriate, work with the social media site to remove offending material.

38 What happens if a customer posts a comment on your social media site that seems to violate the federal advertising standards for wine? Example: I had a wine tasting party and we compared X wine with Y and Z, and Z was the best. In fact, X wine tasted like dirt. Example: Lets face it, wine drinkers live longer than anyone else.

39 27 C.F.R. §4.61(b) provides that an advertisement does NOT include: Any editorial or other reading material... In any periodical or publication or newspaper for the publication of which no money or valuable consideration is paid or promised, directly or indirectly, by any permittee, and which is not written by or at the direction of the permittee.

40 LIKE WHO ELSE?

41 Like Employees – Theyre your greatest asset. But What If You Need to Curb Their Enthusiasm?

42 Federal Trade Commission Guidelines for Endorsements and Testimonials (16 C.F.R. 255) As of December 1, 2009, businesses now have the responsibility to educate and require disclosure from company employees and any influential bloggers the companies work with on social media marketing programs. In essence, employees who discuss your company or its products on their own personal social media sites must fully disclose their affiliation with your company on these personal blogs, Facebook pages, etc.

43 Copyright infringement Revealing employer trade secrets/proprietary information Gripe sites: criticizing employer And everyones favorite... Unprofessional messages and photos

44 Create a Social Media Policy. Educate Employees Regarding: Endorsements and Disclosures on Personal Social Media Sites Protection of Companys Trade Secrets and Other Proprietary Information Obtaining Permission Before Posting Any Copyrighted Material Using Discretion Following the Federal Advertising Standards for Wine in 27 C.F.R. 4.60 to 4.65 And Above All...

45 Blog about it Post it Tweet it... Until youve gotten the appropriate internal approvals. Treat your social media marketing products with the same standards of care and quality you use for traditional marketing publications and programs. DONT:

46 CAREFUL – ITS DANGEROUS OUT THERE

47 Questions???


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