Trade Libel Case Study: Web Development Firms v. SMBs

online trade libel lawyer In this post:

  • Review of an online trade libel lawsuit  involving a Web / SEO company
  • Explanation of the difference between free speech and defamation
  • Tips on how Web development and online marketing firms can protect against Internet trade libel

It happens a lot: a small business owner hires a firm to update its website or manage an online marketing campaign; expectations aren’t met; the business relationship devolves into a lawsuit.

That’s exactly what happened between Spot Shooter Archery – a sporting goods store — and Five Sparrows – a Web development and online marketing firm.

The case raises three defamation law questions:

  • Does the First Amendment protect all negative consumer reviews?
  • Why do relationships between Web development firms and SMBs often disintegrate? Is it a matter of weak contracts and miscommunication?
  • What does it take to win a trade libel or professional defamation lawsuit?

We’ll explore these issues by deconstructing Five Sparrows vs. Spot Shooter Archery.

Online Business Defamation Case Study: SMB v. Web Firm

The Relationship

  • Five Sparrows offers website development, SEO, and online marketing services.
  • Jim Beasley is the owner of Spot Shooter Archery – a hunting and target archery store.
  • Beasley hired Five Sparrows to upgrade Spot Shooter Archery’s website.
  • Both Spot Shooter Archery and Five Sparrows belong to the same business networking group.

Google Plus Accusations

According to small business owner Beasley, his website upgrade wasn’t successful. Alleged functionality issues and status quo traffic had the archery guru seeing red. In frustration, Beasley pounded out a 1-star review on Five Sparrow’s Google + page. It reads:

“Please do not deal with this company”

“After almost five months and several thousand dollars, our e-commerce store is still not done and we have zero return [sic] on our investment. They talk a great game [sic] but you will lose your money. Five Sparrows has hurt our store’s finances. We have tried to work with them [sic] but I’m giving up! PLEASE STAY AWAY!”

Beasley also sent a letter to their business networking group.

Web Developer’s Online Trade Libel Lawsuit

Five Sparrows – the Web/SEO firm – tells a different tale than Beasley. According to Five Sparrows, Spot Shooter Archery’s shopping cart and contact form were “fully functional” and featured added search engine optimization elements.

In addition to the derogatory Google + review, Five Sparrows also took issue with the letter Beasley sent to the networking group. So, to restore its good reputation, the firm filed a defamation lawsuit.

Free Speech v. Defamation

Does Beasley have the legal right to post a negative review about Five Sparrows’ services? Absolutely. Just as Spot Shooter customers can write negative reviews of the store. The First Amendment guarantees this fundamental free speech right.

But what isn’t legal is publishing or distributing false statements of fact about another person or business. Doing so is defamatory, and it is against the law from sea to shining sea.

Five Sparrows, however, contends that the lawsuit is not about “negative comments” or trying to silence a critic – it’s about a false statement of fact, because in the estimation of the Web developers, they satisfied every contractual obligation.

What Businesses Must Prove To Win Online Defamation Lawsuits

Can Five Sparrows win this online trade libel lawsuit? To do so, the Web firm would need to satisfy the four pillars of U.S. defamation law:

  • Publication or Broadcast: A statement must be made public, in print, electronically, or verbally.
  • Falsity: The declaration under review must be an unprivileged false statement of fact.
  • Harm: The material in question must cause the plaintiff material or reputational harm.
  • Intent: The plaintiff must prove that the defendant acted with either negligence or actual malice.

Trade Libel Lawsuits Involving Web/SEO Firms Are Common

Marketing and Web development firms frequently find themselves the target of terrible online reviews. Why is that? Simply stated: Internet marketing and search engine optimization aren’t exact sciences.

To avoid SMB/Web Development trade libel lawsuits, firms should explain mitigating factors – like the nebulous, mercurial nature of the ever-mighty Google algorithm. Furthermore, Web development and SEO firms should use client contracts that protect against uncontrollable market factors and “project creep.”

TL;DR: Free speech doesn’t mean you can publicly lie about other businesses. But to win a defamation lawsuit, you must satisfy the four pillars of libel. SMBs and Web development firms often clash because of poorly communicated expectations on both sides. Detailed contracts and pre-work-commencement discussions usually squelch problems down the road.

Contact An Online Trade Libel Lawyer

Do you have an Internet trade libel issue? Are you ready to speak with an attorney? If yes, contact Kelly / Warner to get started. To read more about our team, go here. To get in touch, head on over here.

*Please Note: Kelly / Warner does not represent either party discussed herein; nor do we have a public opinion on its merits. We’re simply using this online trade libel case to explore aspects of business defamation law.

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