Chapter7

Chapter 7

PR and the Law

This is PR 11th Edition
Newsom, Turk and Kruckeberg

Objectives
• To understand the legal environments of
PR practice
• To be familiar enough with the law to stay
within safe boundaries
• To develop an appreciation for working with
legal counsel
• To be sensitive to the impact of litigation on
public opinion


Laws Governing PR
• All countries have laws that govern what’s
legal
• What’s legal varies from country to country
• To work globally you must be familiar with
laws in all countries in which you work
• Legal counsel is valuable


Areas of PR Legal Exposure
• Normal: Civil, criminal laws that apply to all
• Work-oriented: laws particular to PR,
publicity, promotions and handling of crises
• Extraneous: laws that may affect some PR
activities
– Expert witness testimony
– Corporate political contributions
– Lobbying activities

Outsourcing Risks
• Organizations responsible for actions of
both employees and contract workers
• “Work for hire” legally the same as “in-
house” work in terms of responsibility


Functional Roots of PR
• Commercial speech
• Advertising
• Traditional speech
• Media materials


PR and Civil Law
• Can affect communication activities:
copyright infringement, violating SEC
regulations, distributing misleading news
release
• Can affect physical activities: accidents,
events the organization sponsors
• Can be either external or internal


PR and Criminal Law
• Bribery
• Price fixing
• Mail fraud
• Securities manipulation
• Perjury


Conspiracy Charges Against
Practitioners
• Engage in illegal activities
• Counsel, guide, direct policy behind illegal
activities
• Take a large personal part in it
• Set up a propaganda agency to fight
enemies of illegal activities
• Cooperate to further illegal activities


Typology of PR Legal Cases
• The big case
• The human interest case
• The routine case
• Testimony


The Big Case
• Antitrust
• Labor relations
• Product liability
• Mismanagement or fraud
• Other litigation


The Human Interest Case
• Minor civil rights charge
• Local zoning conflict
• Privacy suit brought by “glamour” name
• Air, water pollution
• Retirees seeking pensions


The Routine Case
• Mishaps that occur as result of doing
business
• Breach of contract
• Tax refunds
• Workman’s compensation


Testimony
• A PR practitioner is a participant of an issue
at hand such as a retirement program or
other company activity in which practitioner
has personal interest
• High-profile or company executive accused
of some illegal act


Litigation Journalism
• Increased potential for any legal action to
attract attention
• Use, manipulation of news and information
media to advance positions of parties in
civil lawsuits
• Promotion efforts of trial lawyers to attract
new clients for class action litigation
• Sometimes called litigation PR


Duty Obligation
• Act in a way consistent with what might be
expected of a “reasonable person”
• Interpret whether reader or listener acted
on the PR message “reasonably”
• If result is detrimental and quantifiable,
case may be actionable


Detrimental Reliance
• Reliance on information that is faulty
• Promise is broken
• PR either as recipient or source of faulty
information, broken promise


Vicarious Liability
• Organizational responsibility for actions of
employees, contractors
• Increasing outsourcing increases vicarious
liability


Working with Legal Counsel
• If you have counsel, use it
• Some attorneys not knowledgeable in
communications law so practitioner needs
to be familiar
• Establish liaison with corporate attorney,
outside legal counsel
• Relationship important in preparing,
reviewing financial materials


Ways to Stay Out of Trouble
• Recognize individual responsibility for
actions
• Know your business
• Ignore vague lines between advertising and
PR because the law often does
• Decide how much risk you are willing to run
• Know your enemy, especially in
government

PR and Legal Intersections
• Meeting federal, state and local government
agencies’ regulations
• Engaging in government-regulated
activities: libel and slander, privacy,
contempt of court, copyright, trademarks
and patents, lobbying, contracts,
advertising claims, promotional activities
• Contracting with clients, suppliers


PR’s Greatest Legal Danger
Zones
• Business memos
• Letters
• Proxy fights
• Use of photos
• Product claims
• Accusations that might be ruled libel or
slander
• Promotions involving games, contests


PR’s Greatest Legal Danger
Zones (cont.)
• Publicity that might misrepresent
• Political campaigns
• Contracts
• Privacy
• Actions involving “whistleblowers”


Government Regulations
• Postal Service
– Senders may be compelled to remove an
address from a mailing list
– Receivers have absolute discretion to decide
whether they wish to receive material
– Vendors have no constitutional right to send
unwanted materials
– Direct Marketing Association helps coordinate
controls on unsolicited mail


(cont.)
• Securities and Exchange Commission
– Affects publicly owned corporations
– Affects release of personnel, financial
information by all companies regardless of
ownership
– Best defense in dealing with news releases is
to have thorough clearance
– Initial Public Offerings (IPOs) are a major
concern


(cont.)
– Concerns with information, simultaneously
disclosed to publics enabling investors to
evaluate financial decisions (Regulation FD)
– Requires regular reporting of financial
condition each quarter (10Q)
– Requires special filings that relate to material
issues (8K)
– Requires annual reports (10K)


Sarbanes-Oxley Corporate
Reform Law
• Enacted in 2002
• Aim is to bring transparency and responsibility to business
practices
• Costly to companies because it requires extensive
examination of internal audit systems
• Requires CEOs and CFOs to sign off personally on validity of
all financial reports
• Has affected nonprofits as well as publicly held companies
• Established Bureau of Consumer Financial Protection


SEC Major Court Decisions
• Texas Gulf Sulphur: trading violation
resulting from inadequate PR dissemination
of information, defined “insider”
• Pig ‘N’ Whistle: distribution of misleading,
untrue news releases


Executive Compensation
Disclosures
• Follow-up or additional disclosure may be
necessary when:
– New events make previous statements
misleading
– Outside reports are misleading or come from
people in a position to have had the
information approved by the company
– Executives, insiders trade shares
– Acquisitions or mergers reach agreement in
principle stage

Executive Compensation
Disclosures (cont.)
• Disclosure of senior executive
compensation required in proxy statements
– Employment, severance figures
– Director compensation
– Rewards, payouts, stock options


Rumors, Leaks and Insider
Information
• Three positions:
– Admit and disclose
– Make no comment and deny
– Dodge and mislead


“Insiders”
• Individuals with knowledge not available to
others
• Knowledge of information not generally
available


“Insider Trading”
• Using inside information to buy, sell securities,
puts, calls or other options on securities
• Regardless of whether action taken in name of
person initiating the transaction or someone else
• Requires immediate notification to the SEC and to
the stock market on which the shares are traded
and a news release to alert analysts and
shareholders and/or potential shareholders


Applicable Government
Regulations
• Federal Trade Commission
– Looks out for rights of both investors and
consumers
– Compliance with antitrust law, regulations
– Guards again false claims in advertising
– Advertising provisions have on some occasions
been extended to public relations programs
– Monitors infomercials as well as commercials
– Holds celebrities accountable for statements
they make in advertising

Regulations (cont.)
• Food and Drug Administration
– Protects consumers
– Has guidelines for consumer advertising
initiated by drug companies
– Promotions, news releases as well as
ads can lead to FDA trouble


Regulations (cont.)
• Federal Communications Commission (FCC)
– Broadcasting deregulated in 1981
– No more fairness doctrine since 1987
– Has made it more difficult to get public service time
– Greater hesitancy to accept issue advertising with no
more fairness doctrine
– Equal time rule still in force
– Also regulates telecommunications, including telephone
and computer, wireless networks and satellite
communications
– No authority over broadband providers


Lessons From Court Rulings
• False, misleading claims: Johnson & Johnson’s
Tylenol
• Special events: some donations tax deductible
• Discrimination and bias cases: airlines
• Investor relations: UBS AG of Switzerland
• Environmental: BP PLC


Free Speech
• May be endangered if publicity, advertising
involved
• Freedom of organization voice dulled by
legal actions against marketing and
advertising
• Recent gains for corporate free speech
(Massachusetts tobacco advertising) and
challenges of commercial free speech
(Nike)


Restrictions on Institutional
Voices
• Banning of tobacco advertising on
television
• Legal action against artists and arts
organizations over obscenity
• Identification of association affiliation in
individual practitioner advertising (Illinois
lawyer)


Contempt of Court
• Comment on pending case
• Failure to comply with judge’s ruling or
request
• Use of advertising and other
communication to influence juries


Publicizing Political Views
• State laws cannot prevent firms from
publicizing or advertising their position on
political issues
• Corporations have the right to support
candidates and convey information of public
interest, whether or not the issue directly
affects the company


Responsibilities of Practitioners
in Political Situations
• Lobbyists must register
• Practitioners responsible for accuracy of
statements they make, material they
provide as a source
• Public diplomacy and transparency


Freedom of Information Act
• Government-held information available to
media, public
• Includes company-provided information
• Only trade secrets and confidential
commercial or financial data obtained from
non-government sources are exempt from
disclosure


Right to Know Laws
• State laws patterned after Federal Freedom
of Information law
• Information available regarding
environmental and other social threats


Open Meeting Laws
• Some organizational meetings must be
open to the public
• “Sunshine” laws in some states keep
government meetings open
• Personnel matters sometime, but not
always, justify closed meeting


Copyright Laws
• Protect creative work in both form and style
from being used without permission
• Organizations own copyrights on materials
prepared on company time by employees
using company resources
• When work is purchased from an outside
vendor, agreement regarding ownership
should be signed to protect organization,
PR person and vendor


Copyright Laws (cont.)
• Copyright may be assigned or transferred
to someone enabling him or her to
reproduce, distribute, copy the work
• Covers written and recorded work
• An intangible property right that begins
when an original work is created
• Lasts up to 95 years
• Registered with the Copyright Office of the
Library of Congress

Copyright Laws (cont.)
• Fair use is defense against copyright
infringement: use in commentary or
criticism, news reporting, teaching,
scholarship or research
• Music is copyrighted so use in PR usually
requires permission and/or payment for use
• Internet material can be protected but at
issue is grey area of on-line linking to
another’s material


Patents and Trademarks
• Not the same as copyrights
• Patents: government granted protection for
inventions and novelties
• Trademarks: protection for distinctive
recognizable symbols like a brand name or
logo


Libel and Slander
• Libel is written or otherwise published
defamation
• Slander is spoken defamation
• Libel generally seen as more serious
offense than slander


Civil Libel
• Non-criminal defamation of character by
malicious publication tending to blacken
reputation of a living person in a way that
exposes him or her to public hatred,
contempt or ridicule
• Injuring person in his or her trade or
profession
• “Alleged” offers no protection


Civil Libel (cont.)
• When public officials and figures are
involved, “actual malice” must be proved
• Publication defined as dissemination of
more than one copy
• Office memos, letters, emails constitute
publication


Criminal Libel
• Breach of peace or treason
• Inciting to riot or some other form of
violence
• Publishing an obscenity or blasphemy
• Charges rarely pressed
• Twenty tips to avoid libel suits


Slander
• Spoken defamation
• If defamation is broadcast, it is civil libel if a
script was prepared and distributed to two
or more people


Defenses Against Libel
• Truth
• Privilege
• Fair comment


Libel Protection Provided by the
Constitution
• New York Times v. Sullivan: public official,
malice, commercial speech
– Supreme Court extends requirements for
“actual malice” to public figures other than
government officials
– Supreme Court holds that public figures must
prove statements false, defamatory and
published with knowledge they were false or
with reckless disregard


Libel Protection Provided by the
Constitution (cont.)
• Statute of limitations
– Varies state by state
– Fair comment held to include both facts and
opinions


Right of Privacy
• Applies only to people, not organizations
• Intrusion into solitude
• Portraying someone in a false light
• Public disclosure of private information
• Appropriation of someone’s likeness
without consent
• Best defense: consent, release forms


Internet Privacy Issues
• Information behind an e-mail alias may be
subpoenaed
• Access to use of personal information in
databases
• “Cookies” deposited on hard drives by visits
to websites


Contracts and Consents
• Contracts: spell out exactly what the
contracted individual or organization is to
do
• Consent release: written consent,
consideration, scope of use defined,
duration, binding, no other consideration
involved


Model Releases
• Model release:
– permission to use someone’s likeness in
publicity or advertising
– if person is minor, permission of parent or
guardian is required
– specifies intended use of the photos or
video


Employee Contracts
• Wise to get employees to sign contract
pledging loyalty and confidentiality
• Covenant is moral commitment
• Contract is a legal document


Photo Agreement
• Contract between PR practitioner and
freelance photographer hired to work on a
photography assignment
• Spells out limits, uses for photographs


Work for Hire
• Sets up terms of agreement between PR
practitioner firm and writer, artist or other
individual hired for a specific job


Printing Contract
• Should address deadlines, dummies,
corrections, makeup and layout, printing
technique to be used, materials to be
purchased and used, art charges, paper
• New contract for each job


PR Services and Taxes
• As tax bases are sought, efforts will be
made to tax the service sector, including
professional services like PR


Working Across Borders
• Bribes are tax deductible in some countries, illegal
in others
• Investment and banking rules that govern
securities compliance proceedings vary from
country to country
• How law enforcement agencies deal with violations
also differs from country to country
• Advertising regulation varies from country to
country


Chapter7

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