Commercial Disparagement An Increasing Concern In The Age Of Social Media

tweetsCompanies are turning to social media with increasing frequency to directly communicate with customers and potential customers.  T-Mobile USA is no exception. Not only did the company release an astonishingly snarky press release in January, complete with fake quotations attributed to AT&T, but both T-Mobile and its CEO, John Legere, have recently taken to Twitter to comment on the services of their competitors.  These comments, variously described in the media as “trash talk,” “mocking,” and “antics,” include such statements as “there are the same number of broncos getting into the end zone as customers going into @ATT stores” and “Hopefully he uses @TMobile because he’ll never get through on @ATT.”

Commercial Disparagement

Mr. Legere’s jokes are unlikely to be taken seriously or to give rise to liability.  However, there can be little doubt that the expanding use of social media by corporations will lead to more allegations of the tort of commercial disparagement.  Many states recognize this tort and give it various names, such as “product disparagement” and “trade libel.”  The elements generally include:

  1. Publishing a false statement;
  2. Concerning another’s products or services;
  3. Knowing that the statement was false or reckless as to its truth (or negligent in the case of statements about a private figure);
  4. Intending to cause financial harm; and
  5. Causing financial harm.

The difficulty in proving commercial disparagement often lies in the last element, which requires a plaintiff to tie the competitor’s statements to the loss of specific customers or other quantifiable loss.  As an example, even if T-Mobile had made a statement that caused customers to switch from ATT, the burden of locating these customers and showing they switched as a result of the offending Tweet would be enormous and time consuming, especially considering that Twitter allows its users to remain somewhat anonymous.

However, last year the Supreme Judicial Court of Massachusetts recognized an exception to this requirement that may make it easier for companies to pursue commercial disparagement in the social media age.

Widespread Dissemination Exception

The plaintiff in Hipsaver Inc. v. Kiel, 464 Mass. 517 (2013), was HipSaver, a company that makes protective pads intended to reduce the risk of hip fracture in the event of a fall.  The defendant, Dr. Douglas Kiel, conducted a clinical study on hip protectors and published an article that concluded: “hip protectors are not effective in nursing home populations.”  Hipsaver sued Dr. Kiel for commercial disparagement. The trial court granted Dr. Kiel summary judgment because Hipsaver was unable to link the “specific loss of sales to identifiable customers.”

On appeal, the Supreme Judicial Court affirmed, but in doing so recognized the “widespread dissemination” exception for proving damages in commercial disparagement cases.  This exception applies when a party widely disseminates a statement “and it would be impossible to identify particular customers who chose not to purchase a plaintiff’s goods or services” as a result of the statement.  In such circumstances, the plaintiff still needs to prove that it was harmed as a result of the statements, but it does not need to identify particular customers that it lost.

Although Dr. Kiel’s case did not involve social media, this exception appears to be tailor-made for the internet era. If applicable to the internet context, companies who are disparaged by a competitor would not have to chase individual anonymous internet users in order to prove damages (thereby possibly harassing or inconveniencing its own customers).  Instead, it could meet the damages element of the tort by relying on the widespread dissemination exception coupled with a showing of harm to its business that was caused by the disparaging statement and was not attributable to other causes.

 

Topics:  Corporate Counsel, Disparagement, First Amendment, Free Speech, Social Media

Published In: Business Torts Updates, Communications & Media Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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