Don't Get Snagged: Internet Rife With Legal Barbs

What some sales associates do in cyberspace could end up creating legal liabilities for unsuspecting brokers. Protect yourself by creating and enforcing an Internet policy manual.

March 1, 1998

Salespeople caught up in today’s mad rush to create an Internet presence could, in the process, be causing serious legal problems for their company and themselves.

Should you be worried? Internet legal troubles are very real. One technology company paid more than $2 million to settle a suit that resulted from an E-mail joke.

If you doubt such a thing could happen to you, consider these examples:

  • Sales associate Smith posts mortgage rates and terms on his Web page. He forgets that federal law requires appropriate disclosures when advertising mortgage rates and terms.
  • Sales associate Jones organizes a contest at her Web site. She overlooks the fact that contests of the type she's conducting are illegal in certain states.
  • Sales associate Doe borrows content from another Web site to use at his home page. Without getting the permission of the content provider, he “frames” the content. That is, he uses the content within his Web page frame in such a way that it appears that the content originates with Doe. He doesn’t know that the content provider could sue for copyright infringement.

In all three examples, the broker could be held partly liable for the sales associate's actions. Yet, many brokers don’t know what their salespeople are doing on the Internet.

I was speaking to a group of brokers recently, and one told me, “I scrutinize everything my salespeople do before it goes out the door, but I haven't given a second thought to what they’re doing on the Internet.”

He should. There are three types of legal liability that could result from improper use of the Internet:

  1. Regulatory—Example: salespeople failing to adequately identify themselves and their broker affiliation at the Internet site or in Internet communications
  2. Tort—Example: salespeople sending E-mails that could result in defamation, sexual harassment, racial discrimination, copyright infringement, or intellectual property right infringement lawsuits
  3. Criminal—Example: salespeople using the Internet to commit wire fraud or to download child pornography

This Is No Joke

Aside from these legal issues, Internet activity creates three other types of business risks:

  1. Damage to your company's goodwill and image—Example: spamming (broadcasting bulk E-mail) or inappropriate use of the company's logo on a salesperson's Web site
  2. Threats to the operation of your company's intranet—Example: downloading of virus-infected files, a problem that could shut down your system for days
  3. Security problems—Example: inappropriate forwarding of proprietary or transaction-related information to parties other than for whom it’s intended

The issue of Internet risk isn’t just theory. Here are some legal cases that either have recently gone to court or are about to go to court:

  • Expensive E-mail ‘joke’—An information technology company settled a sexual harassment case for $2.2 million in 1995 after an E-mail message discussing “why beer is better than women” made the rounds in the company's computer system.
  • Bait and switch Internet style—A New England company recently won a permanent injunction preventing a competitor from including the first company's trademark in the Web site coding, known as meta-tags, used by the second company to help software search engines locate the second company's Web site. This inclusion of a rival company's trademark effectively redirects potential consumers from one company to the other. It’s not too hard to imagine individual practitioners incorporating the name of rival companies into their Web sites to boost hit counts.
  • Unauthorized framing of content—Web-based news aggregator TotalNews was recently sued by such news providers as The Washington Post, CNN, and Reuters when TotalNews allegedly framed their content without permission. Framing—encapsulating information posted by other sites—is becoming increasingly popular among real estate professionals who have little time to develop their own high-quality content for their Web site.

Already, Some Close Calls

Given the current relaxed state of broker supervision of salespeople's Internet marketing, it’s just a matter of time before we start seeing more legal cases directly involving real estate activities on the Internet.

There have been some close calls.

In September 1997, a West Coast real estate commission issued a cease and desist order to an out-of-state practitioner for conducting unlicensed real estate activity on the Internet.

According to sources familiar with the case, the practitioner, who was a licensee in an East Coast state, allegedly had multiple individual Web presences, and one of the sites left the Web viewer with the misleading impression that the practitioner was located and licensed in the West Coast state of the complainant.

Apparently, the licensee was trying to develop a referral fee business by attracting potential clients from the West Coast state to his site and then, for a fee, referring them back to sales associates legally licensed in the West Coast state.

Sometimes just hiring otherwise solid sales associates without screening their current online activities can bring trouble.

One broker I spoke with recently conceded that he learned the hard way by failing to do just that. He was chagrined to learn that after he had hired a practitioner away from another company, the practitioner's Web site still had the former broker's logo but with the new company's telephone number and address.

Some listings from the practitioner's former company were advertised as still available, though they were, in fact, already sold. In addition, some of the marketing copy on the site used the term empty nesters, which is a potential federal fair housing violation.

Can't Stop the Game, So Instead Write Some Rules

How do you manage Internet risk? You have two choices: Prohibit your sales associates from using the Internet, or provide them a set of written Internet guidelines, policies, and procedures.

The first choice isn’t viable if you plan to compete. The second, if designed properly, will provide additional payoffs in the form of enhanced salesperson productivity and retention. Written Internet policies will also help you recruit top information-savvy sales professionals from other companies.

There are several key characteristics to consider:

  • Write policies that encourage practitioners’ creative use of the Internet for business purposes. But make sure salespeople stay within the boundaries laid out by the policies. The areas of potential risk mentioned earlier need to be addressed explicitly, with examples whenever possible.
  • Incorporate Internet policy into your standard operating policies and procedures. Well-designed Internet policies and procedures will augment, not replace, your existing policy manual. In cases where there is crossover—regulatory disclosure or sexual harassment, for example—your Internet policies and procedures should refer to those issues in your standard operating policies. By doing that, you keep things simple and avoid having to maintain two sets of the same policies.
  • Keep it brief and simple. Even the most brilliantly written Internet policies and procedures manual is worthless if no one reads it. Write it in a friendly, collaborative tone rather than in the confrontational style so often seen in other, more traditional policy manuals. Expect to revise the manual regularly to keep up with the rapid pace of Internet innovation and law.
  • Enforce salesperson compliance. One way to address this is by having salespeople complete an Internet activities report before being hired and whenever there's an anticipated material change to their online activities. The report alerts management to any anticipated material changes requiring broker approval.

The Internet offers tremendous opportunity to those who are skilled in tapping into its potential. However, it isn’t worth the risk of not monitoring your salespeople's Internet behavior.

Having an Internet risk management program as part of your overall strategic plan helps you get ahead, stay ahead, and protect your hard-won assets.

Michael Russer, a.k.a. Mr. Internet®, is CEO of Russer Communications. He is a leading speaker and author in the real estate industry and has been writing about Internet marketing and virtual outsourcing since the dawn of the commercial Internet.

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