Social networking sites such as Facebook, MySpace and Bebo may have started as the preserve of the individual — but now both are big business. Even ministers are getting in on the act.

The Home Office is considering plans to force such sites to hold data about their users’ movements to thwart criminals who use them to communicate. That information would then be stored on a central database as part of the Government’s proposed “intercept modernisation programme”.

The news has been condemned by civil liberties groups that claim that the plans would mean excessive delving into the lives of law-abiding citizens. About 25 million people in Britain, almost half the population, are thought to use social networking sites, with Facebook boasting 17 million British users.

So it is no surprise that from ministers to multinationals and law firms, people are discovering that social networking does what it says on the tin. The U-turn by Allen & Overy, the City firm, of nearly two years ago — it banned the use of Facebook by staff, only to rescind its decision almost immediately — epitomises the zeitgeist. “Given that Facebook is used by many people for networking — for business purposes as well as social,” A&O’s IT manager said, “we are going to open up access to the site again.”

But the social media’s popularity has a downside. And it is one encapsulated by a problem faced by many journalists, who often opt not to read online comments to their articles to avoid the welter of abuse that comes their way. Yet can the companies adopting social networking platforms for their brands afford to do the same?

Rob Marcus, the founder of Chat Moderators, a company specialising in moderating user-generated content (UGC), says no. He advocates ongoing assessment of comments posted on a company’s social media platforms. “The case for moderating to prevent brand damage is simple — if you don’t want to be associated with inappropriate, offensive or potentially abusive material then moderation is a small price to pay.”

Companies are confused about their legal obligations. Many, it seems, believe that the only legal risk they need consider is defamation. But Duncan Lamont, a partner at Charles Russell, cautions that this just the tip of the iceberg. “People may create a contempt-of-court risk if they choose to speculate on the guilt or innocence of celebrities caught up in criminal cases, or they may republish copyright works or use obscene or racist language or other offensive slurs,” Lamont says.

Such conduct leaves brands potentially exposed to damaging allegations that they may tolerate discrimination, race hatred or worse. Unmoderated sites are always at the risk of being hijacked, and when things go wrong, the media may label as irresponsible a brand owner who simply relied on its terms and conditions having been complied with.

Lamont warns of another problem: privacy. After highly publicised celebrity cases such as that of Max Mosley, the president of world motor sport, Lamont expects that “privacy invasions are going to be the subject of increasing damages awards, whether what is said is true or not. The invasive comment may be enough to justify a claim and this is something that may get through key-word searches and require alert moderation.”

It is not just the greater legal risks from defamation. Nigel Tait, a partner at Carter-Ruck, points out that libel remains as much of an issue as ever — thanks to the uncertainties created by the Defamation Act 1996. “Section 1 of the Act attempted to improve the common law defence of innocent dissemination,” Tait says, “so that a person has a defence if he shows that he was not the author, editor or publisher of the statement complained of, that he took reasonable care in relation to its publication, and that he did not know, and had no reason to believe, that what he did caused or contributed to the publication.

“The trouble with this provision is that prior review of comments on social networking platforms can mean that someone becomes an editor and is therefore outside the scope of the defence.”

Simon Morrissey, partner at Lewis Silkin, says the real issue for brands embracing social networking is not whether to moderate, but who should do it and when. Some brand owners are trying to put the job onto their marketing suppliers rather than doing it themselves, or retaining the services of a specialist moderating supplier.

That brings another whole area of risk. As Morrisey explains: “It can expose those non-specialist suppliers to contractual liability if the moderation is carried out poorly. The site owner has to decide whether to engage in pre or post-publication moderation or use a mixture of both. Which option is chosen depends on the brand owner’s attitude to legal risk, potential damage to the brand and the nature of the service being moderated.”

For Marcus, these myriad issues mean that moderation is crucial. “It is impossible to deal with troublemakers and bullies, or even to answer simple questions from an audience, without moderating,” he says. “Owners of social media sites might be better off viewing moderation not so much as something that opens the door to litigation, but as an opportunity to enhance brand values by raising the quality of the user experience.”

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