FTC Affiliate Disclosure: 10 Things You Need to Know
Affiliate Marketing Presents Compliance Risks for Companies and Publishers. Here are 10 Important Facts about the FTC’s Affiliate Disclosure Requirements.
Affiliate marketing is big business. According to SaaS Scout Research Group, annual affiliate marketing spending is estimated at $12 billion, accounting for 15% of all digital media advertising revenue. The explosion of affiliate marketing in recent years has caused the U.S. Federal Trade Commission (FTC) to take notice. While there is nothing inherently unlawful about affiliate marketing, the FTC imposes various requirements (some of which are clearer than others), and failure to meet these requirements can lead to significant liability for companies and publishers.
10 Important Facts about FTC Compliance for Affiliate Marketers
So, if you are involved (or your company is involved) in affiliate marketing, what do you need to know about FTC compliance? Here are 10 important facts about FTC compliance for affiliate marketers:
1. The FTC’s Rules Apply to Companies and Affiliates
From an FTC compliance perspective, affiliate marketing falls under the broad umbrella of endorsements. The FTC has published an extensive set of Endorsement Guidelines, and these guidelines speak to online advertising generally and affiliate marketing specifically.
Importantly, the FTC’s Endorsement Guidelines apply equally to companies and their affiliates. Failure to make proper disclosure of an affiliate relationship can constitute an unfair method of competition and/or an unfair and deceptive trade practice under the Federal Trade Commission Act (the “FTC Act”). If an affiliate fails to make an appropriate disclosure, not only can the affiliate face liability under the FTC Act, but the company selling the relevant product or service can face liability as well.
2. The FTC’s Guidelines Do Not Provide a Clear Roadmap
While the FTC’s Endorsement Guidelines are extensive, they do not provide a clear roadmap for compliance. Rather, they are intended as a set of general rules for companies and affiliates to interpret and apply. As we discuss in greater detail below, the Endorsement Guidelines include a few specifics regarding affiliate disclosures. However, companies and affiliates are largely left to determine what is necessary on their own.
3. Compliance Requires a Case-by-Case Analysis
Due to the non-specific nature of the FTC’s guidance for affiliate disclosures, companies and affiliates must assess their compliance obligations on a case-by-case basis. What is adequate in one scenario won’t necessarily be adequate in another. When it comes to disclosure compliance, the general rule is that a disclosure must serve its intended purpose. A disclosure that might work on Twitter or Instagram, for example, might be deemed inadequate within the context of a lengthy blog post.
4. Affiliate Disclosures Should Be “Clear and Conspicuous”
While the FTC provides very little in the way of specific guidance with regard to affiliate disclosures, it does specify that such disclosures must be “clear and conspicuous.” According to the FTC, “If you disclose your relationship to the retailer clearly and conspicuously on your site, readers can decide how much weight to give your endorsement.”
The FTC notes in particular that disclosures that are separated from affiliate links can be problematic: “[I]f the product review containing the disclosure and the link are separated, readers may not make the connection.” Again, the focus is on whether a disclosure is sufficient to notify consumers of an affiliate’s relationship to a retailer in light of the particular circumstances in which the disclosure is presented. According to the FTC, “[t]he closer [a disclosure] is to your recommendation, the better,” and, “[p]utting disclosures in obscure places . . . isn’t good enough.”
5. An “Affiliate Link” Disclosure Isn’t Enough
The FTC also specifically states that labeling a link as an “affiliate link” is not enough. Noting that “[c]onsumers might not understand that ‘affiliate link’ means that the person placing the link is getting paid for purchases through the link,” the FTC states that such a disclosure is “inadequate.” In order to avoid unwanted FTC scrutiny, companies and affiliates should ask whether a consumer who is unfamiliar with the concept of affiliate marketing could reasonably understand the nature of the affiliate’s relationship to the company. If not, then more (and/or more conspicuous) disclosure language is necessary.
6. Getting Paid in Any Manner Can Be Enough to Require Disclosure
While the use of affiliate links is among the most common ways that affiliates receive compensation for referring customers to companies, this is not the only type of financial relationship that will trigger a disclosure requirement. Revenue-sharing arrangements, sponsorship deals, access to free products, and other arrangements require disclosure under the FTC’s rules and regulations as well.
As a result, just because a social media post or blog article does not contain a direct affiliate link, this does not necessarily mean that a disclosure is unnecessary. To the contrary, any time a third party (i.e. an affiliate) gets paid directly or indirectly for promoting a company’s product or service online, the general rule is that some form of disclosure will be required.
7. Affiliates Cannot Rely on Companies for Compliance
While affiliates can certainly use disclosure language provided to them by the companies whose products and services they promote, they cannot rely on these companies for their own FTC compliance. Affiliates must still independently assess their disclosure obligation; and, in the event of an FTC investigation, “The company said this disclosure was enough,” will not be a valid defense.
8. Both the Affiliate and the Company Can Face Liability for Disclosure Violations
On the same token, companies that rely on affiliates to promote their products and services must be careful to ensure that their affiliates are complying with all pertinent legal and regulatory requirements. If a company’s affiliates engage in unfair or deceptive advertising practices, this can create exposure for the company. As a result, while companies need to be careful to avoid providing their affiliates with legal advice, they must monitor to ensure that their affiliates’ disclosures (or lack thereof) do not present a risk for liability.
9. The FTC is Paying Attention to Affiliate Marketing, Sponsored Content, and Other Online Ads
While the FTC does not have agents scouring the internet for affiliate disclosure violations, it is paying attention. If consumers or competitors report disclosure violations, the FTC will take appropriate enforcement action in many cases. The FTC has recently made clear that it is devoting significant resources to protecting consumers online—and this includes holding advertisers accountable for affiliate marketing, sponsored content, and other online advertising violations.
10. The Consequences of Failing to Provide an Adequate Affiliate Disclosure Can Be Significant
While one-off disclosure violations aren’t likely to trigger enforcement action, significant violations of the FTC’s affiliate disclosure requirements can lead to significant consequences. Companies and affiliates can face substantial fines under the FTC Act, and the FTC can seek other remedies (i.e. injunctions prohibiting companies and individuals from engaging in affiliate marketing) as well.
FAQs: Affiliate Marketing and FTC Compliance
How Important is It for Companies and Affiliates to Comply with the FTC’s Disclosure Requirements?
Compliance with the FTC’s affiliate disclosure requirements is extremely important. The FTC is prioritizing compliance in digital advertising, and it is pursuing enforcement actions against companies and individuals suspected of misleading or causing financial harm to consumers through inadequate (or non-existent) affiliate disclosures. These enforcement actions can lead to substantial fines and other penalties.
How Do I Know if My Affiliate Disclosure Will Satisfy the FTC?
Affiliate disclosures must be evaluated in context on a case-by-case basis. Different disclosures will be sufficient (or insufficient) in different circumstances, and companies and affiliates both need to make informed decisions about what is required. Working with experienced FTC compliance counsel allows companies and affiliates to ensure that they have given due consideration to all pertinent factors.
What Should I Do if I Haven’t Included Disclosures with My Affiliate Links?
If you are an affiliate and you have failed to include disclosures with your affiliate links in the past, you should consult with an FTC compliance lawyer promptly. You will need to bring your affiliate marketing content into compliance, and you will need to work with an experienced lawyer who can help you take appropriate steps to mitigate your risk effectively.
How Can Companies Avoid Liability for Affiliates’ Disclosure Violations?
In order to avoid liability for their affiliates’ disclosure violations, companies can (and should) adopt custom-tailored FTC compliance policies and procedures. These policies and procedures should address the company’s obligations with respect to affiliate disclosures specifically, and they should be adequate to ensure that the company will be able to assert a sound defense strategy in the event of an FTC investigation.
Schedule a Confidential Consultation with an FTC Compliance Attorney at Oberheiden P.C.
Do you have questions about FTC disclosure compliance within the context of affiliate marketing? If so, we can help, and we encourage you to contact us for a complimentary consultation. To schedule an appointment with an FTC compliance attorney at Oberheiden P.C., please call 888-680-1745 or tell us how we can help you online today.