The Libel Trade: Are actions for Defamation of Business Reputation becoming part of PR strategy?

Following the announcement that the Economist has reached a settlement in a libel action brought against them by both Russian Oil Tycoon Gennady Timchenko and his Oil Company Gunvor, research from leading legal publisher Sweet and Maxwell (as published in The Times) suggests that the number of libel actions brought by businesses is on the increase as they fight to protect their reputations. The research suggests that the number of claims buy businesses has trebled over the last 12 months.

The traditional view has always been that defamation claims – i.e. libel, slander or malicious falsehood, are mainly used by celebrities to manage a PR disaster or correct a tabloid when a story is published which paints them in a negative light. However, times have changed and, as celebrities increasingly turn to privacy actions to maintain their public image, the approach of Businesses to their reputations and to libel claims appears to be changing with them.

The main reason for this is probably the fact that we now live in a world where reputations can be made or unmade in a much shorter time through either the traditional press or via online media; where news can leak much more quickly and reach a much greater number of people.

The Court has dealt with a number of cases over the past ten years or so dealing with the growing problem of internet libel; the growth of the Web into Web 2.0 has meant that rather than a website presenting information to the world with users only being able to read what’s said without offering an opinion, anyone can now have their say on virtually anything, which can lead to negative opinion snowballing, especially if there are other users who agree with what is said and make their own opinion heard.

Not only that, but whilst the credit crunch continues, the public is becoming more and more curious about exactly what businesses are doing and how it may affect them, meaning that, as in the cases of Northern Rock and Apple (who were recently forced to deny rumours that Steve Jobs would have to leave his post as CEO due to illness), share values could be directly affected by negative publicity in a much shorter period of time.

PR is becoming more and more important to businesses and as such, reputations are being defended more fiercely. A case in point is the action brought by Morrisons against the OFT following accusations of anti-competitive trading in dairy products, which saw the OFT issue a public apology and agree to pay the retail giant’s court costs and a sum of £100,000 in damages. A further example is Tiscali’s very public dispute with BT over a letter sent out during takeover talks which suggested that broadband customers should switch to BT  – Tiscali claimed that the letter implied that their service would be affected.

In the Web 2.0 world, articles and news items such as this will repeatedly appear online, which from a libel point of view means that the likely award of damages could be far higher than a case involving a newspaper simply because more people can read them. Not only that, but libel cases allow Claimants to bring proceedings against whoever is responsible for “publishing” the offending statement (i.e. passing it on to other third parties or being involved in the process), which can in limited circumstances include Internet Service Providers and Websites who may operate bulleting boards which contain defamatory material. These third party links in the chain do have a defence to such claims, but one that only has any chance of working if the material forming the complaint is taken down pretty much immediately. The Court dealt with this over the course of last month in the Metropolitan Schools & Designtechnica case, which saw Google unsuccessfully sued over defamatory comments which appeared in search engine results. As such, comments are usually removed from websites very quickly to avoid such claims which in turn means that if you act quickly, then you can stop unfair rather than bad news travelling quite as fast. The fact remains, however, that once information is out on the web, it’s very difficult to put the genie back in the bottle.

Businesses find themselves at present in a very precarious position, especially in the financial sector, where bad publicity can deter potential investment. This doesn’t mean, however, that issuing a claim is mandatory or inevitable. There is a procedure in place as part of the Court Rules to ensure that complaints are put to the offending publication or third party before a case comes before a Judge, mainly designed to ensure that the parties try to settle claims where possible and thereby avoid what can be very costly litigation, especially given that many libel claims are fought under “no win, no fee” arrangements where the losing party pays a higher proportion of the winner’s costs. Alternatively, a number of other options are available and can at times be used in conjunction with a libel claim, such as a compliant to the ITC or Press Complaints Commission (both of which are free of charge). In many cases, libel claims settle without ever reaching Court, but given that you only have a year to make them it’s important to set out your complaint in writing as soon as possible.

What is clear is that the reputation of any business has become increasingly fragile. As the credit crunch continues and the press becomes increasingly forced to report “edgier” stories to guarantee circulation where traditional print media is in decline, more businesses will find themselves under attack or subject to scrutiny and it’s important to work with both your PR agency and your lawyers to make sure that, where there is a legitimate claim that your reputation has been damaged unfairly, action is taken as quickly as possible. It’s not always true that there’s no such thing as bad publicity, especially when it’s inaccurate.

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