Social Media in Regulated Industries: What You Are Up Against
(This is part 1 of a 2-part blog series on Social Media in Regulated Industries.)
According to the 2008 Cone Business in Social Media Study, “93 percent of social media users believe a company should have a presence in social media, while an overwhelming 85 percent believe a company should not only be present but also interact with its consumers via social media.”
As more people are turning to social networks as a means to connect with businesses, organizations are increasingly using social media to:
- Enhance their relationships with key audiences
- Increase brand awareness
- Perform market research
- Expand their reach
To do this effectively, they must continuously listen and respond to their audiences in a transparent and time-effective manner.
However, some organizations face industry regulations, laws and company policies that severely limit how and what they can communicate online. Because of this, they must be careful when engaging on social networking sites. Failure to comply with established rules could result in lawsuits, fines, reputation damage and more.
If you are in a regulated industry — such as: financial, healthcare, insurance, pharmaceutical, or alcohol, wine and spirits — the first step in social media participation is to understand the risks and regulations you face, and then to develop strategies that fit within these regulations.
In this post, we’ll look into a few regulations. Later this week, we'll touch on some corresponding strategies.
(Please note that this is not a complete list. For all the regulations that apply to your business, it is best to speak with your legal department.)
Publicly Traded Companies
First of all, if your company is publicly traded, you’ll have to face these regulations in addition to any industry-specific ones.
The Securities and Exchange Commission (SEC) monitors the activities of publicly traded companies in the United States. The Regulations Fair Disclosure policy, adopted in 2000, mandates that all publicly traded companies release material information to investors and the public at the same time. Lack of compliance could result in charges of insider trading or selective disclosure.
The article “Twitter: New Opportunities and Headaches for Companies,” also warns that publicly traded companies need to be cautious about providing forward-looking statements, without appropriate cautionary announcements.
For guidance from the SEC on how publicly traded companies can interact on online public forums, see Release No. 34-58288.
Financial
The financial industry is composed of banks, financial institutions and investment companies. These institutions face numerous federal, regional and self-imposed regulations, including:
Promotions must be fair, clear and not misleading. Because of this, most regulations center on full disclosure of terms, and features or availability of products and services (including pricing, rates, rewards, eligibility). For example, see the truth-in-lending and truth-in-savings advertising rules established by the Federal government in 1968.
Financial organizations also face risks associated with security and the confidentiality of sensitive financial information. Social media should NOT be used to collect personal information from customers or prospects, as this could lead to incidents of identity theft or phishing.
Finally, “financial institutions are generally required to retain copies of customer communications, which would presumably include Twitter tweets and Facebook comments, so a system for capturing this information and, if feasible, linking it to the customer's account record should be implemented.” (Andrew M. Baer, Social Media: Risk Management Strategies for Financial Institutions)
Healthcare
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) protects the privacy of patients, by ensuring that their medical information is kept confidential. Because of this, healthcare organizations need to be careful that they are not disclosing personal information through their social media communications (this even includes the fact that a patient-doctor relationship exists).
There are also regulations limiting to whom and what kind of medical advice healthcare organizations can provide. Disclaimers, such as the one found on WebMD, may be necessary to protect your institution.
Pharmaceuticals
Marketing of drugs and health care devices is monitored through the Food and Drug Administration (FDA).
According to the article, “Why Pharma Fears Social Networking,” the FDA requires that all reports of adverse effects, which are communicated to a manufacturer, be reported to the FDA. Because of this, some consumer comments made on social networking sites could qualify as adverse effect notifications that must be reported.
Note: The number of qualifying online comments is much less than most pharmaceutical companies think. A Nielson report, mentioned in a presentation by Johnathan Richman, found that only 1 in 500 online comments have enough information to be deemed adverse effect reports.
An additional concern of pharmaceutical companies is the need to present information that is not “false, misleading, or lacking facts,” and that “shows a fair balance of the risks or benefits of the drug or device.” (Emily P. Walker, “FDA Begins to Shape Rules for Online Drug, Device Ads”)
Space limitations of social networking platforms, such as the 140-character limit on Twitter, often do not present enough room to list all the information required by the FDA.
The FDA is working on setting up guidelines to help pharmaceutical companies navigate online communications; however, no set policy is currently in existence. Public opinion on the subject is being accepted until February 2010. (Emily P. Walker, “FDA Begins to Shape Rules for Online Drug, Device Ads”)
Insurance
In his article, “Leveraging Social Media in Regulated Industries,” Jason Falls states that insurance agents/brokers can only give advice to people in the state they are licensed. This can cause social media complications, since the demographics of most sites span all geographic regions.
For examples of insurance companies using social media, check out Jeremiah Owyang’s post on the subject.
Alcohol, Wine and Spirits
The Alcohol, Wine and Spirits industry can only market its products to individuals of legal drinking age. Companies are policed by a collection of organizations and associations worldwide. In the United States, the main association is the Distilled Spirits Council of the United States (DISCUS), which represents more than 90% of the liquor companies in the country.
DISCUS holds its members accountable for being socially responsible by advocating that companies do not market on any platform where more than 70% of its demographics are under 21 (2009 Distilled Spirits Council Code of Responsible Practices). For a list of specific regulations that the spirits industry must comply with, see Jason Falls’ article "Leveraging Social Media in Regulated Industries.”
To support these guidelines, Facebook has also established its own set of rules for alcohol advertisers, which can be found in section ten of its Advertising Guidelines.
However, despite these regulations, some groups, such as the The Institute on Global Drug Policy and Practice, believe that stricter regulations should be put in place for advertising alcohol online.
Overcoming Social Media Obstacles
Although these regulations may seem overwhelming, don’t let them deter your organization from enjoying the business benefits of social media participation. Numerous organizations within regulated industries have been effective at participating on social media networking sites while staying compliant. For example, the Pharma and Healthcare Social Media Wiki contains a variety of healthcare and pharmaceutical companies active on social networking sites.
As your customers and prospects continue to get more information from social networking sites (social networks and blogs are now the 4th most popular online activity ahead of personal email), it will be those organizations that don’t let regulations get in the way that will thrive above their competition. Therefore, be different, take a risk and disrupt your market.
Check back later this week for part two of this blog post, featuring tips and best practices for participating on social media, despite your industry’s regulations.
Social Media in Regulated Industries Blog Series Links
Part 1 – Social Media in Regulated Industries: What You Are Up Against
Part 2 – Social Media in Regulated Industries: How to Participate
Tracy DiMarino is an associate consultant at PR 20/20, a Cleveland-based inbound marketing agency and PR firm. Follow Tracy on Twitter @TracyDiMarino.
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