What you need to know about compliance in the affiliate marketing industry

Affiliate marketing is built on fostering relationships between brands and publishers — and providing something of value to the consumer such as a coupon, a special offer, cash back or product advice. The channel affords advertisers some of the best opportunities to reach consumers in a unique environment, but understanding the boundaries within which affiliate marketing operates is critical.

With evolving laws and policies from the Federal Trade Commission, networks need to ensure that their programs are aligned with federal requirements.

To provide more insight into how affiliate marketing is monitored by the FTC and ways that marketers can keep their programs compliant, I interviewed my colleague, Jennifer Moor, who leads Rakuten Affiliate Network’s Brand Quality and Regulatory Compliance service.

Before we start, Moor wants to remind readers that she is not an attorney, and thus this interview should not be considered legal advice. She recommends consulting your own legal counsel to determine your company’s appetite for risk.

Q: I recently saw a stat on eMarketer that only 11 percent of marketers are aware of or understand the FTC guidelines around influencer marketing. In your experience, has this been the case?

Absolutely. The majority of influencers are unaware of what the guidelines require. We see YouTube channels of popular influencers shut down every day for not complying with the guides. Unfortunately, most of the time, the influencer didn’t know these guidelines even existed.

However, my hope is that the stat will be much higher by next year. With all the recent cases brought by the FTC against advertisers, we are seeing a shift in the industry around ensuring influencers are aware of what is required of them and complying with the guides.

Q: If I’m an advertiser that does not work with influencers, do I need to be aware of the FTC requirements around influencers?

Yes, as you are reading through the FTC website, you will see multiple references mentioned, including endorser, affiliate, publisher and influencer. From a regulation perspective, they are all the same. If there is a material connection between the advertiser and the affiliate, influencer, etc., then that relationship needs to be disclosed to the consumer.

Q: You mentioned disclosures. Do the FTC guides give any recommended language that publishers need to use to disclose their connection to advertisers?

No, the FTC does not give any specific language that you’re required to use. They just say the disclosure needs to be “clear and conspicuous.” They also state that it should be in unambiguous language that stands out (e.g., not using light gray font on a white background). They provide what they call the 4 Ps to help marketers:

• Prominence — Is the disclosure big enough for consumers to read easily?
• Presentation — Is the disclosure worded in a way that consumers can easily understand?
• Placement — Geography matters. Is the disclosure where consumers are likely to look?
• Proximity — Is the disclosure close to the claim it modifies?

Q: Are disclosures the only thing advertisers should be aware of?

No, the Federal Trade Commission Act, section 5, is a basic consumer protection statute that says, “unfair or deceptive acts or practices in or affecting commerce, is declared unlawful.” This is a pretty broad statement, so the FTC issued guides for advertisers to better understand how to market products to consumers to help mitigate the risk of misperception. Some of these guides include: made in the USA labeling, environmental claims, free claims, etc.

It’s important that publishers who are marketing products on behalf of a brand understand what the guidelines say. More importantly, it is essential that publishers are complying with all the requirements for substantiating claims. For example, the use of superlative language such as “best jeans in the world” could be deemed deceptive if the claim is not substantiated by scientific evidence.

Q: What happens if the FTC finds a program that is out of compliance?

The FTC utilizes different funnels to mine complaints, such as the Better Business Bureau, their Facebook page and their own complaints hotline. In general, if the FTC receives multiple complaints about an advertiser, they will send an informal communication letter.

However, if the FTC continues to receive complaints and the issue is continuing to occur, they will issue a formal letter called a CID (Civil Investigation Demand) which essentially says they want to see all your marketing around the area of concern. At this time, advertisers can choose to quash the investigation. If the FTC decides to move forward, they could potentially:

• freeze your assets.
• file suit.
• require you to submit all your marketing and oversight to them for the next 10 to 20 years. This used to be five to 10, but now the standard has been set at 10 to 20 years.

Q: And lastly, who is ultimately responsible for ensuring that an affiliate program is compliant?

One of the most important things advertisers need to understand is that they are responsible for what affiliates say about their products online. The FTC says that as long as there is a material connection, advertisers are liable for what publishers are saying or not saying about their products.

The FTC also says that advertisers need to make a reasonable effort to monitor what publishers are saying about their brands. They also state advertisers should instruct publishers to disclose their material connection to them.