Marketers who improperly use company names could face criminal and civil penalties

Anyone running a social media profile on a client’s behalf should be very careful when tweeting or posting on the client’s behalf. The consequences of careless references to or variations of a company’s name could be severe under certain understated provisions of the new Companies Act.

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The Companies Act’s provisions

Section 32 of the Companies Act deals with “[u]se of company name and registration number” and subsections 3 and 5 are the clauses social media practitioners should be aware of:

(3) A person must not—

(a) use the name or registration number of a company in a manner likely to convey an impression that the person is acting or communicating on behalf of that company, unless the company has authorised that person to do so; or
(b) use a form of name for any purpose if, in the circumstances, the use of that form of name is likely to convey a false impression that the name is the name of a company.

(4) …
(5) Contravention of subsection (1), (2), (3) or (4) is an offence.

The term “person” in the Companies Act “includes a juristic person”. In our law there are two basic types of “persons”. We have natural persons which are human beings and juristic persons which are corporate entities like companies and close corporations.

What this means is that any person who uses a company’s name that suggests that the person is communicating on the company’s behalf and isn’t actually authorised to do that will be committing an offence under the Companies Act. That is fairly straightforward but subsection 3(b) is not nearly as clear although can be even more problematic for careless marketers. It uses the phrase “form of name” which is only used in this sub-section of the Act. The word “form” is defined fairly extensively in the Oxford Dictionary of English, and includes the following definitions:

  • the visible shape or configuration of something
  • a particular way in which a thing exists or appears
  • any of the ways in which a word may be spelled, pronounced, or inflected

It appears that “form of name” includes both variations of the company name (for example, “Pick ‘n Pay” as a commonly used variation of Pick n Pay Stores Limited or Pick n Pay Holdings Limited or “Woolies” as a common reference to Woolworths (Proprietary) Limited or Woolworths Holdings Limited – assuming you know which one you are referring to) and it may even include variations of the company’s trade marks, such as logos, and other representations of the company’s name. Assuming this is how the clause will be interpreted, subsection 3(b) criminalises a variation of a company’s name which conveys “a false impression” that the variation “is the name of a company”. The idea here may be to ensure that company’s names and branding is accurately and reliably conveyed to the public and the risk of confusion minimised.

Section 218 deals with “[c]ivil actions” (as opposed to the criminal offences that a violation of section 32 would constitute) and subsections 218(2) and (3) state the following:

(2) Any person who contravenes any provision of this Act is liable to any other person for any loss or damage suffered by that person as a result of that contravention.
(3) The provisions of this section do not affect the right to any remedy that a person may otherwise have.

These two subsections in section 218 introduce specific liability for any “loss or damage” caused by “[a]ny person” and suffered by “any other person” and doesn’t exclude whatever other remedies “a person” may have in law. This clause’s scope is pretty broad, may be open to constitutional scrutiny, and opens the door to civil liability in the form of a financial sanction flowing from the contravention of the Companies Act in addition to whatever other remedies may be available.

What does this mean for marketers?

Drawing all of this together, a marketer or other social media practitioner could find him or herself being charged with a criminal offence and sued for monetary damages for either using a company’s name in such a way as to falsely suggest the marketer or practitioner is authorised to represent the company concerned or where the marketer or practitioner uses a “form” of a company’s name that is not the company’s actual name and, instead, falsely creates the impression that it is. This sort of issue could easily arise in the manner in which a brand’s Twitter or Facebook pages are operated (both how they are set up and presented to the public, fans and followers as well as what is published in those streams) as well as out of a marketer’s or practitioner’s efforts to promote the brand.

One specific challenge tweeting under a brand’s name without drawing a distinction between the person doing the tweeting and the brand’s official communications where the tweeter posts updates that don’t fall within the tweeter’s mandate (for example, a personal comment that isn’t sanctioned by the company). Another is using an unauthorised “form” of a company’s name in a Facebook Page update or blog post, for example. These sorts of mistakes can be made but they potentially carry severe consequences (an offence could mean a fine or imprisonment not exceeding 12 months, or both). Given the definition of “person”, agencies that operate social media profiles can also find themselves in trouble.

Managing these risks

Managing these risks and still diligently promoting a brand can be accomplished. Agencies must have clearly defined roles and parameters and these must be effectively communicated to their staff and compliance with these restraints must monitored. This means being specific with clients in agreements and communications regarding the agency’s use of a client’s brand and the manner in which the agency’s staff will communicate with fans and followers on the client’s behalf. Agency staff should also draw clear distinctions between posts intended to be associated with the client and its brand, on the one hand, and posts which are not. There should be no confusion between a company or its brand, on one hand, and the people promoting it behind the scenes.

Appropriate risk management steps should be taken from the start and maintained on an ongoing basis, taking into account changing circumstances, instructions and feedback received from the public, the client and other relevant stakeholders. Not making the effort to better manage these risks could result in more serious consequences down the line than the upfront cost of developing and implementing the appropriate framework.

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