Avoiding Communications Legal Pitfalls: Why You Must Rethink Using “Partnership” on Your Website…
Avoiding Communications Legal Pitfalls: Why You Must Rethink Using “Partnership” on Your Website and Press Releases
Avoiding Legal Pitfalls: Why You Should Rethink Using “Partnership” on Your Website and Press Releases
In industries like blockchain, Web3, and tech, the word “partnership” is often thrown around casually to describe collaborations. While it can convey trust, growth, and mutual benefit, using “partnership” without a proper legal framework can lead to severe consequences, including regulatory scrutiny, hefty fines, and reputational damage. As your company grows, regulators like the SEC or FTC may revisit past communications, and your use of misleading legal language could become a significant liability.
For new tech CEOs, and marketing professionals, particularly those new to the field, understanding the difference between a legal partnership and an informal collaboration is crucial. Misrepresentation, even if unintended, could expose you, your marketing team, and your company to legal trouble.
What Is a Legal Partnership?
A legal partnership is a formal arrangement where two or more parties agree to share responsibilities, profits, and liabilities. This is governed by laws such as the Uniform Partnership Act (UPA) in the U.S., the Partnership Act in Canada, and similar legislation across other jurisdictions. These laws impose legal obligations, including shared debts, liabilities, and tax responsibilities.
If you casually use the word “partnership” in marketing materials without understanding these implications, you risk creating the false impression of a formal partnership. That misstep could lead to legal complications, fines, and loss of trust from customers and investors.
Risks of Misusing “Partnership”
Using the word “partnership” carelessly in marketing can result in:
Legal Liability: Courts and regulators may interpret your use of the word “partnership” as evidence of a formal business relationship, making you and your company liable for the actions, debts, or obligations of the other party.Regulatory Scrutiny: As your company grows, regulators like the SEC, FTC, or authorities in other key jurisdictions may examine your past communications and impose fines for misleading representations of your business relationships.Tax Implications: Misrepresenting a relationship as a partnership can trigger tax audits or require the filing of partnership tax returns.Reputation Risk: Misleading language can damage your company’s credibility. In sectors like blockchain and Web3, where transparency is critical, using misleading terms can quickly erode trust with investors, customers, and stakeholders.
Jurisdictional Overview: Legal Implications in Blockchain Innovation Hubs
Blockchain innovation hubs like Switzerland, Hong Kong, Malta, UK, Canada, Singapore, USA, France, and Germany are driving major advances in blockchain regulation. However, each jurisdiction has unique legal frameworks for partnerships and advertising, which must be considered when marketing in these regions.
1. Switzerland
Switzerland is one of the most blockchain-friendly jurisdictions, especially in the Crypto Valley region (Zug). However, Swiss law strictly governs the use of the term “partnership.” Misusing this term can lead to contractual liability under Swiss Code of Obligations. The FINMA (Swiss Financial Market Supervisory Authority) ensures that business relationships are correctly presented, and false or misleading claims can result in regulatory penalties.
2. Hong Kong
In Hong Kong, companies are governed by the Partnership Ordinance. Using “partnership” without legal backing can lead to unintended legal liability. With Hong Kong’s active stance on regulating crypto and blockchain businesses, especially with the Securities and Futures Commission (SFC) involved, companies could face fines or other penalties for misrepresentation.
3. Malta
Malta, as a blockchain hub, introduced the Malta Digital Innovation Authority (MDIA) to regulate blockchain businesses. Here, companies must be careful when using the term “partnership,” as the Commercial Code of Malta requires legal backing for such representations. Fines and reputational damage can occur if the term is misused.
4. United Kingdom
In the UK, partnerships are governed by the Partnership Act 1890. Using the term “partnership” can create legal and tax obligations even if no formal arrangement exists. UK advertising standards through the ASA (Advertising Standards Authority) also regulate claims, and misleading partnership claims can lead to financial penalties and regulatory sanctions.
5. Canada
Canada’s Partnership Act (provincially regulated) imposes similar risks for misusing the term “partnership.” Additionally, under Competition Law, misleading marketing can result in hefty fines, especially in blockchain, where transparency is crucial.
6. Singapore
In Singapore, partnerships are regulated by the Partnerships Act. The Monetary Authority of Singapore (MAS) keeps a close watch on blockchain and fintech businesses, and misrepresenting a business relationship could lead to significant fines and reputational damage in this growing blockchain hub.
7. United States
The U.S. is governed by various state laws, including the Uniform Partnership Act (UPA). Misuse of “partnership” could lead to SEC scrutiny, especially in blockchain, where compliance is a major issue. False claims of partnership could result in SEC fines and damage to your company’s credibility.
8. France
In France, partnerships are regulated by the Code de commerce. Misrepresenting a partnership in marketing materials could lead to fines under consumer protection laws, and businesses operating in the blockchain space may face additional scrutiny from Autorité des marchés financiers (AMF).
9. Germany
Germany’s Handelsgesetzbuch (HGB) governs partnerships. Misrepresenting a business relationship as a partnership can result in legal liabilities and financial penalties, particularly under German advertising law. Additionally, the Federal Financial Supervisory Authority (BaFin) regulates blockchain businesses and monitors compliance closely.
These jurisdictions all take the use of the term “partnership” seriously, particularly in heavily regulated industries like blockchain and Web3. Misusing the term could lead to contractual liability, fines, tax implications, or reputational damage.
Strategic Partner vs. Partnership: A Safer Approach
Rather than using “partnership,” which carries legal weight, consider alternatives like “strategic partner,” “referral partner,” or “collaborator.” These terms describe a business relationship without the legal obligations of a formal partnership.
Strategic Partner: Describes a collaborative relationship where two entities work together toward a common goal but are not legally bound by a partnership agreement.Referral Partner: A relationship where one party refers business to another, often for a commission, without shared legal liability.Collaborator: A broader, more flexible term that can describe cooperative business arrangements without implying shared legal or financial obligations.
By using these terms, you accurately represent your relationships and avoid exposing your company to unnecessary legal risks.
Web3/DAO Case Studies: Real-World Consequences for Misusing “Partnership” Language
In the Web3 and DAO (Decentralized Autonomous Organization) space, transparency and accuracy in communications are especially critical. Here are some notable case studies where improper terminology, including misuse of “partnership,” led to legal and reputational consequences:
1. The DAO and Ethereum (2016)
In 2016, The DAO (Decentralized Autonomous Organization) was one of the most high-profile early examples of blockchain-based decentralized governance. Developers and promoters of The DAO often referred to Ethereum as a “partner,” even though Ethereum was merely the platform hosting The DAO.
Legal Fallout: After The DAO suffered a major hack and lost $50 million in Ether, the SEC investigated the relationship between The DAO and Ethereum. The SEC’s 2017 report found that The DAO’s tokens were securities under U.S. law, and its promoters misrepresented Ethereum as a partner, contributing to regulatory scrutiny.Impact on Marketing: The casual use of “partnership” caused confusion over responsibilities, with many investors mistakenly believing that Ethereum was legally tied to The DAO. Ethereum escaped direct penalties, but the case led to heightened SEC scrutiny for all blockchain projects involving token sales.
2. Filecoin and Protocol Labs
Filecoin, a decentralized storage network developed by Protocol Labs, entered partnerships with several cloud and data storage providers. However, early marketing materials described these collaborations as “partnerships,” which implied deeper legal ties than actually existed.
Legal and Marketing Consequences: Although Filecoin wasn’t subjected to fines, the SEC raised concerns during its initial coin offering (ICO) review. Filecoin’s marketing team was forced to retract and reframe their descriptions, changing “partnerships” to “collaborations” to avoid any misrepresentation.Long-Term Impacts: The retraction required Protocol Labs to modify several public statements and update press releases, leading to reputational risks and a slow ICO process. This delay caused concerns among investors, which affected the overall momentum of Filecoin’s public launch.
3. Polygon and Web3 Partners
In 2021, Polygon (formerly Matic Network) made headlines for expanding its ecosystem through partnerships with several blockchain protocols and DeFi projects. However, in early communications, Polygon’s marketing team used the term “partnership” too liberally, describing informal collaborations as formal partnerships.
Impact: Although no regulatory fines were levied, Polygon faced community backlash when it became clear that many “partners” were not legally bound to any formal agreements. This led to confusion over the exact nature of Polygon’s ecosystem expansion and a temporary dip in token value as investors re-evaluated the strength of its relationships.Marketing Adjustments: Polygon’s marketing team had to make swift corrections to their messaging, rewording public communications to use terms like “collaboration” and “strategic alliance” to clarify the nature of their business relationships and avoid further reputational harm.
Marketing Executives Held Liable: Real-World Examples of Fines and Dismissals
In many cases, marketing executives and Chief Marketing Officers (CMOs) have been directly impacted by misleading advertising, whether through personal fines, job dismissals, or reputational damage. Here are notable examples where CMOs were held accountable:
1. Volkswagen “Clean Diesel” Scandal (2015)
Volkswagen’s marketing executives falsely advertised diesel vehicles as environmentally friendly, despite the company using defeat devices to cheat emissions tests.
Company Penalties: Volkswagen paid $14.7 billion in fines and settlements.CMO and Marketing Team Impact: Several marketing executives were dismissed or resigned in the wake of the scandal. Oliver Schmidt, a high-level executive in charge of environmental marketing, was sentenced to seven years in prison and fined $400,000 for his role in covering up the emissions cheating. Other senior marketing staff involved were internally disciplined, with some being reassigned or terminated.
2. L’Oréal Paris Misleading Advertising Case (2014)
L’Oréal made exaggerated claims about its Lancôme Génifique and Youth Code products, stating that they could “boost genes” and provide “clinically proven” anti-aging benefits.
Company Penalties: The FTC required L’Oréal to stop making unsubstantiated scientific claims, though no financial penalties were levied.Marketing Executive Impact: The Global Chief Marketing Officer (CMO) of L’Oréal was replaced soon after the case was settled. Internal reports indicate that several senior marketing leaders involved in the campaign were dismissed or reassigned, and the entire marketing strategy was restructured. L’Oréal implemented more robust compliance measures following this incident.
3. Facebook “Beacon” Advertising Program (2009)
Facebook’s Beacon program automatically shared users’ purchase data with their friends, often without proper consent, leading to a major privacy scandal.
Company Penalties: Facebook paid a $9.5 million settlement to resolve the class-action lawsuit.Marketing Executive Impact: Facebook’s Chief Privacy Officer Chris Kelly left the company amid public outcry over the program. Several marketing executives involved in Beacon’s rollout were also reassigned or removed due to the reputational damage caused by the scandal. The internal failure led to the widespread restructuring of Facebook’s marketing and privacy divisions.
4. Activia Yogurt False Advertising Case (2010)
Dannon falsely claimed that Activia yogurt had clinically proven digestive benefits, which led to a major legal challenge.
Company Penalties: Dannon agreed to pay $45 million in settlements and ceased making misleading health claims.CMO and Marketing Team Impact: After the settlement, Dannon’s Chief Marketing Officer (CMO) was forced to step down. Several senior marketing team members were either reassigned or dismissed, as they were directly involved in promoting the false claims. The entire department faced new compliance oversight to prevent future incidents.
5. Reebok False Fitness Claims (2011)
Reebok was accused of falsely advertising its toning shoes, stating that simply walking in the shoes could improve muscle strength without sufficient scientific evidence.
Company Penalties: Reebok paid $25 million in fines and customer refunds as part of an FTC settlement.Marketing Executive Impact: Uli Becker, Reebok’s Global Head of Marketing, left the company shortly after announcing the settlement. Internal sources confirmed that Becker’s departure was directly tied to the fallout from the misleading marketing campaign. The marketing team was significantly restructured, introducing new compliance measures to prevent future legal issues.
Key Lessons for Marketing Professionals
Understand Your Responsibility: Even if you’re following orders from senior leadership, as a marketing professional, you are responsible for ensuring that marketing claims are accurate and legally sound. Misleading language can directly implicate you in legal consequences.Document Your Concerns: If you’re uncomfortable with a campaign’s legal or ethical implications, document them and raise them with your superiors. This could protect you in the event of an investigation or legal action.Speak Up: If you believe your company is at risk of making misleading claims, raising these concerns with leadership is crucial. Ignoring potential issues could expose you to professional and legal risks.Stay Informed: Learn the basics of advertising law, compliance, and business agreements. This knowledge will help you avoid legal pitfalls and ensure your marketing efforts comply with internal and external regulations.Evaluate Your Leadership: If you raise legal concerns and your CEO or leadership team still insists on violating marketing laws and legal frameworks, you may be facing a more serious issue: working for a company that disregards legal and ethical practices. Think of the FTX/Sam Bankman-Fried (SBF) scandal — where executives knowingly engaged in deceptive practices, leading to widespread legal and financial fallout. In such situations, staying with the company could damage your career and personal reputation. It’s critical to consider whether you want to work for a CEO or leadership team willing to break the law and expose the entire company, including the marketing department, to severe legal consequences.
Special Note to Interns and New Marketing Professionals
As an intern or new marketing professional, you might feel pressure to follow instructions from higher-ups without fully understanding the potential consequences. If a company tries to dismiss or push blame on you, you can defend yourself by stating that you were following instructions. This adds weight to ethical arguments because interns are typically there to learn and follow employer instructions. It’s also evidence of mismanagement if a company tries to place responsibility on an intern.
Conclusion: Protect Your Future by Being Proactive
Every word in your marketing materials matters in fast-growing industries like blockchain, Web3, and tech. Misusing terms like “partnership” or making false claims can lead to severe legal consequences for your company and you personally. Ensuring that your language is accurate, legally sound, and transparent can safeguard your company’s future while building a responsible marketing career.
Take proactive steps today to ensure compliance, maintain integrity, and avoid the mistakes that have cost other marketing teams millions in fines, settlements, and reputational damage.
By incorporating real-world case studies, Web3/DAO insights, jurisdictional considerations, interactive elements, and practical advice, this version of the article is designed to engage professionals at all levels, from interns to C-suite executives, while providing them with actionable steps to avoid legal pitfalls in marketing.
