“It takes 20 years to build a reputation and five minutes to ruin it.”
—Warren Buffett

You have worked hard for years to build a well-respected, profitable business in Maine.  Yet things are slow.  You search for an answer.  You Google your company’s name and find misleading, negative reviews. Is the author a disgruntled ex-employee or an underhanded competitor hiding behind a fake Internet persona?  What do you do?  While social media has revolutionized how businesses and consumers interact, it has also created new legal risks and challenges for businesses attempting to capitalize on the Internet’s vital role as a source of consumer information.  Facebook and Twitter are now common ways for businesses to connect with their customers.  Similarly, consumers use a host of other social media platforms, including Yelp, Google, YouTube and blogs to share their experiences and opinions—both good and bad—of a company’s product or service.  Legal developments typically trail behind societal changes.  The same is true in the social media context:  Our society’s almost universal use and reliance on social media is now just beginning to reveal a number of legal risks to businesses, including two primary risks:  (1) consumers or competitors posting false negative reviews that adversely impact sales, profits and the company’s reputation, and (2) a company creating its own liability by posting false (or confidential) information online. Communicating untrue information that negatively affects a person’s or a business’ profits, sales or monetary gain is known as defamation.  These statements are either slander (spoken defamation) or libel (written defamation) and can be the basis of a lawsuit.  The laid-back, shoot-from-the-hip style of most social media users for posting their comments online can have monumental consequences for the reputation and liability of your business.


Although there is some variation from state to state, defamation generally occurs when Person A makes a false statement to Person B about Person C, and that false statement causes economic loss to Person C.  In the resulting lawsuit, Person C sues Person A for defamation.


At one time, a word-of-mouth recommendation was the most trusted and valued endorsement a company could earn.  While word-of-mouth still exists today, it takes on a modern format:  Internet reviews, product or service ratings and user comments.  This information creates a company’s reputation in the 21st century. With today’s ever-increasing reliance on the Internet, a company’s online reputation is one of its most valuable assets.  A recent market survey by Cone, a Boston-based market research firm, found that 80 percent of people have changed a product or service decision due to a bad review.[1]  Therefore, it is not surprising that companies go to great lengths to protect, maintain and improve their online reputations. Historically, companies avoided confronting negative reviews under the theory that more attention would heighten the damage.  But recently, this trend has been changing.  Companies are more quickly responding to defamatory comments by taking legal action against the authors of false and misleading online reviews.


If someone makes false or defamatory statements about your company, consider taking the following steps: (1) react to the false statement in a positive way, (2) use the site’s administrative procedures to remove untrue content, and (3) request a retraction of the statement.  If these attempts are unsuccessful or if you wish to pursue a defamation case, be sure to obtain the name and any other identifying information of the author of the untrue statement, take a picture or “screen shot” of the defamatory statement, and keep track of all related business expenses and losses that result from the defamatory statement.


Companies operating in today’s environment must recognize they too face liability for defamatory statements made by even low-level employees.  A company’s public communications, whether made by the CEO or a newly hired employee managing its Facebook or Twitter page, can be actionable for defamation if the statements are untrue and cause monetary damage.  To protect your business from potential social media liability, you should:

  1. Have a clear company policy that provides guidance regarding the proper use of social networking sites;
  2. Train all employees on your social media policy and the importance of appropriate social media use;
  3. Carefully select and limit the number of employees who will be the voice of the company on social media sites; and
  4. Be careful and respectful.  Post only truthful statements, as truth is a defense to defamation; and obtain appropriate insurance coverage (be sure to understand the scope of the coverage and the exclusions).

Implementing a social media policy is an essential to protect your business.  We recommend that you consult with an attorney to be sure you are in compliance with the latest rulings in your state.  Companies often fail to properly implement their social media policy.  Be sure your employees know its importance and how to conduct themselves.  As social media continues to play a vital role in how businesses and consumers interact, be aware that while defamation lawsuits can be a powerful tool to protect your online reputation, they are also something to guard against.  Closely monitor online reviews of your company, as they substantially affect your business.  As unscrupulous individuals and businesses use social media to harm others, defamation claims will continue to present one avenue to protect your company.  But first, limit the risk.  Take proactive steps to avoid inappropriate online posts and manage the unforeseeable risks through company-wide training and the purchase of insurance.

Social media is here to stay.  Businesses must accept the challenge of operating in this new environment.  By understanding these rules and turning them to your advantage, you will maximize your chances of operating a successful business.

William J. Gallitto is an attorney with Bergen & Parkinson and is a member of the firm’s Civil Litigation Group.  He routinely represents and counsels companies and businesses in litigation, planning and risk management.  Bill can be reached at wgallitto@bergenparkinson.com.


[1] Cone Communications, Cone Online Influence Trend Tracker, and Game Changer: Cone Survey Finds 4-out-of-5 Consumers Reverse Purchase Decisions Based on Negative Online Reviews.



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