Understanding the FTC’s Affiliate Disclosure Rules

Affiliate Marketing is a Priority Enforcement Area for the FTC. Here’s What Affiliates and Companies Need to Know.

Affiliate marketing plays a major role in today’s online economy. According to data from the SaaS Scout Research Group,affiliate marketing accounts for 15% of all digital media advertising revenue and 15% to 30% of all online sales. This has caused the U.S. Federal Trade Commission (FTC) to take notice. While the FTC has had rules in place for a long time, it has ramped up its enforcement efforts in recent years.

As a result, affiliate marketers need to ensure that they are doing everything necessary to maintain compliance. Companies that rely on affiliate marketers need to prioritize compliance as well. While many company owners and executives assume that contractually engaging independent third-party marketers to promote their products takes the compliance burden off of their shoulders, this is not the case. The FTC makes this clear, and companies can face liability (and have faced liability) for their affiliate marketers’ mistakes.

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10 Key Aspects of Affiliate Marketing Compliance

With this in mind, what do affiliate marketers and the companies that use them need to know about FTC compliance? Here are 10 key facts for avoiding unwanted FTC scrutiny:

1. Both Affiliate Marketers and Companies Need to Comply

As we mentioned above, the FTC’s affiliate marketing rules apply both to affiliate marketers and to the companies that rely on them. So, not only must affiliate marketers ensure that they are complying with all pertinent requirements (including the relevant provisions of the FTC’s Endorsement Guidelines), but companies must take adequate steps to ensure compliance as well.

The FTC makes clear that companies cannot avoid liability for unfair and deceptive marketing practices by relying on affiliate marketers instead of conducting their marketing activities in-house. While companies may enter into agreements with their affiliate marketers that provide for indemnification and other protections, this won’t serve to insulate companies from the direct threat of facing an FTC investigation.

2. The FTC’s Endorsement Guidelines Are Just a Starting Point

While the FTC expects affiliate marketers and companies to comply with the Endorsement Guidelines, it also makes clear that this is not sufficient on its own. Rather than serving as a definitive roadmap, the Endorsement Guidelines are instead just that—guidelines that are intended to help affiliate marketers and companies navigate their compliance obligations.

As a result, affiliate marketers and companies must work with their counsel to interpret and apply the Endorsement Guidelines within the specific context of their online operations. The Endorsement Guidelines impose different requirements in different circumstances, and custom-tailored compliance is essential for avoiding inadvertent violations.

3. Different Advertisements and Promotions Call for Different Disclosures

As an example of how the Endorsement Guidelines apply differently in different circumstances, the FTC writes in its Endorsement Guidelines: “In some instances – like when the affiliate link is embedded in your product review – a single disclosure may be adequate. . . . But if the product review containing the disclosure and the link are separated, readers may not make the connection.”

When it comes to affiliate marketing, context is one of the main keys to compliance. Ultimately, affiliate disclosures should “clearly and conspicuously” disclose the affiliate’s and company’s commercial relationship, and they should be structured so that, “readers can decide how much weight to give [the affiliate’s] endorsement.”

4. Affiliate Disclosures Must Be “Clear and Conspicuous”

The “clear and conspicuous” requirement we just mentioned is at the heart of FTC compliance for affiliate marketing. There is nothing inherently misleading or deceptive about affiliate marketing—and this is expressly recognized by the FTC. However, affiliate marketers and companies can run into trouble when they attempt to hide the nature of their relationship. If it is not clear that an affiliate is being compensated for generating sales, this can lead to FTC enforcement action.

5. Affiliate Marketing Disclosures Must Focus on the Consumer

When deciding what is clear and conspicuous, the FTC focuses on whether an affiliate disclosure would be obvious to the average consumer who is not familiar with the concept of affiliate marketing. As a result, affiliate marketers and companies need to take this same approach.

For example, the FTC specifically notes that labeling a link as an “Affiliate Link” is not enough. As the FTC goes on to explain, this is “inadequate” as an affiliate disclosure because, “[c]onsumers might not understand that ‘affiliate link’ means that the person placing the link is getting paid for purchases through the link.” This says a lot about the FTC’s approach to affiliate marketing compliance—and it is another key factor to consider when developing and reviewing affiliate disclosures.

6. “Affiliate Marketing” Involves More than Posting Affiliate Links (According to the FTC)

While much of the FTC’s discussion of affiliate marketing in the Endorsement Guidelines focuses on affiliate links, the FTC also makes clear that posting affiliate links is not the only activity that triggers compliance duties. The Endorsement Guidelines apply to all forms of compensated product and service promotion, including (but not limited to):

• Free products given in exchange for reviews
• Revenue-sharing arrangements
• Sponsorships

If an independent third party (i.e., an affiliate) receives any form of compensation or remuneration for promoting a company’s product or service, then both the affiliate and the company must comprehensively address FTC compliance.

7. Affiliates Cannot Blindly Rely on Companies’ Recommended Disclosures

Even if a company provides disclosure language to its affiliates, affiliates cannot blindly rely on this recommended language. If the language proves to be inadequate, the fact that it came from the company will not serve as a defense in an FTC enforcement proceeding. Instead, affiliates must consider the adequacy of any proposed language in light of their specific marketing efforts—and they should seek advice from their legal counsel as necessary.

8. Companies Cannot Blindly Rely on Their Affiliates’ Disclosure Efforts

Just as affiliates cannot blindly rely on companies’ recommended disclosures, companies cannot blindly rely on their affiliates’ disclosure efforts. As we said above, using affiliate marketers does not shield companies from their FTC compliance obligations. If an affiliate marketer publishes a deceptive or misleading advertisement for a company’s products or services, the company can still face liability.

9. The FTC is Prioritizing All Aspects of Online Consumer Protection (Including Affiliate Marketing Compliance)

As the digital marketplace continues to play an ever-expanding role in most people’s lives in the United States, the FTC is prioritizing all aspects of online consumer protection. This includes affiliate marketing compliance. If the FTC believes that an affiliate marketer’s disclosures are deceptive or deficient, it will take action—and this action can lead to either civil or criminal penalties for all parties involved.

10. Affiliate Marketers and Companies Need to Make Informed Decisions About FTC Compliance

To avoid unwanted—and potentially dangerous—scrutiny from the FTC, affiliate marketers and companies need to make informed decisions about all aspects of FTC compliance. They need to ensure that they have a clear understanding of their obligations, and they need to address these obligations within the context of their particular online marketing activities. By engaging legal counsel who has experience with both FTC compliance and FTC defense, affiliate marketers and companies can ensure that they are not unnecessarily exposing themselves to civil or criminal liability.

FAQs: FTC Compliance for Affiliate Marketers and Companies

Contact the FTC Compliance and Defense Lawyers at Oberheiden P.C.

If you need to know more about affiliate disclosure compliance, or if you are currently dealing with the FTC, we encourage you to contact us promptly for more information. Call 888-680-1745 or inquire online to schedule an appointment today.