Are Affiliate Managers and OPMs Responsible for Disclosure?

FTC Affiliate DisclosureEarlier this year, the FTC updated its guidance regarding disclosure of advertising in blogs and on social media (See .com Disclosures: How to Make Effective Disclosures in Digital Advertising.) It got a little bit of attention, but mainly from attorneys and “the sky is falling” types. A few of us wrote about it, but not many of us affiliates have actually started obeying it. Why should we? The guidelines basically say that affiliates will not be held liable, the merchants will. It will just be a lot of work for us to make changes to our sites.

But the FTC isn’t laying low in this. In fact, they are moving forward even further with a workshop scheduled for December to “examine the practice of blending advertisements with news, entertainment, and other content in digital media.” The end result may be even more “guidance” that restricts how affiliates operate.

I’m surprised that affiliate managers and Outsourced Program Managers (OPMs) haven’t jumped on all of this. In fact, I thought they would be the ones leading the charge to get affiliates compliant. Why? Because I think they are the ones actually most responsible for all of this.

What Are the FTC Guidelines?

In short, the new doc.com Disclosures are just a clarification of existing law from the Federal Trade Commission Act. They regulate “unfair or deceptive acts or practices.” I wrote a previous post that describes it all in much more detail and is aimed toward affiliates (Affiliates Take Note: New FTC Disclosure Guidelines).

The new guidelines clearly state that disclosure law applies to blog posts and social media, even where you have limited characters to disclose. The guidelines also apply whether you are making a commission off of your links, received a placement fee, or even just received free product for the review.

The guidelines make it clear that the “old way” of putting a basic disclaimer somewhere on your site or even at the bottom of blog posts no longer counts. If you put an affiliate link on Facebook or Twitter, you must disclose that it is an advertisement BEFORE the link. How many people do you see actually doing that?

Who Is Liable When the Rules Are Broken?

The FTC has been clear so far that bloggers will not be liable for the advertising. It really doesn’t make any sense. If the rules apply to us and we break them, why won’t we get in trouble? I suspect it is only a matter of time before this gets changed.

Merchants are completely liable. Just ask Legacy Learning Systems, who happened to be the first casualty in the enforcement of these rules. Because affiliates were giving them positive “reviews” and not disclosing their affiliate links, Legacy had to fork over a $250,000 settlement. Plus pay lots of attorney fees. Plus now be monitored closely by the FTC for years to come.

They weren’t doing anything that the rest of us are not doing. Someone just complained and they got caught (probably a competitor).

Why Affiliate Managers Should Be Responsible

The average merchant doesn’t have much to do with managing their program. They either have one person in-house who understands affiliate marketing or no one in-house and have outsourced the management to an OPM. The merchant trusts that the affiliate manager (in either case) is the one who understands affiliate marketing and knows the rules.

Affiliate managers are the ones who are recruiting bloggers (who may not even know anything about affiliate marketing when they put up the links). Affiliate managers are arranging free products to be sent out in exchange for the reviews. Affiliate managers may even be negotiating “special placement” for a merchant in exchange for money. In short, affiliate managers are the ones working closely with the affiliates, encouraging them to promote the merchants and seeing first-hand where the links are being placed.

Merchants rely on the person managing their program to be educated about the industry, which includes things like advertising disclosure. The FTC itself has said that how the disclosure is “monitored and enforced” will be taken into account by the FTC if a complaint is brought against a merchant. That falls directly into the purview of the affiliate manager.

What Should Be Done?

I don’t want to create more work for all of us, and without a doubt these guidelines create more work for affiliates, affiliate managers, and merchants alike. At the same time, I fear for who will be caught in the cross-fire as the government continues to crack down on online advertising. I think it’s up to the affiliate managers and OPMs to include “disclosure terms” in their terms of service and spot check their affiliates to ensure that they are complying.

What incentive is there for me to comply if no one else is? If affiliate managers start requiring it, we will all have to comply or lose our relationships with the merchants.

There are resources out there to point affiliates to. Affiliate managers do not have to reinvent the wheel. Heck, just point your affiliates to this post going forward. Or the other links within this post.

The FTC is reasonable. If you have a couple of affiliates here and there who are driving almost no revenue and you don’t catch their links, I don’t think you will be in trouble. But if your top 10 revenue-driving affiliates are all violating the guidelines and you do nothing about it, you are opening your merchant up to a lot of liability. Take a page from the Legacy Learning Systems settlement and put into place a system where you monitor the highest ranking affiliates frequently and the rest on a spot check basis.

Many of us will be keeping our eyes open for the results of that FTC workshop in December, but waiting until then to make any changes to our sites would be foolish.

Who do you think should be responsible for disclosure violations–the merchants or the affiliates? What role do the affiliates managers play in education and compliance? Will you make changes to your disclosure if the merchants do not require you to make them?

(Fine print–I’m a lawyer but none of this should be taken as legal advice. Because that’s the way it works with lawyer bloggers)

About Tricia Meyer

Tricia Meyer is the owner of SunshineRewards.com, HelpingMomsConnect.com, and a number of niche sites (including co-owning Wine Club Reviews and Ratings). She writes and speaks about marketing to women, monetizing blogs, and the basics of affiliate marketing. Tricia is a graduate of Ball State University and the Indiana University School of Law, Bloomington. You can find her on Twitter @sunshinetricia.

  • Cindy Mikulandrich Ballard

    As OPM’s we tell our affiliates doing reviews the rules, we give them examples of sentences they can use and tell them where to place them. This is part of the rules to do any reviews of our merchant products, and we tell them that once the blog is live they have to send us the link to it so we can inspect it properly. Of course, there isn’t much we can do if they don’t comply since we can’t physically remove the post but we do have the requirements in writing and emails where the agreed to follow FTC regulations. Thats about all we can do to protect our merchants.

  • http://www.revenews.com Angel Djambazov

    When we implement content marketing or “native advertising” strategies for clients, part of the implementation plan involves communicating appropriate disclosure requirements to bloggers/publishers, getting their buy-in on disclosure, and developing an enforcement plan. Part of that enforcement plan’s consequences is that we don’t continue to work with bloggers who can’t play by the agreed upon rules. Just not worth the risk.

    The real challenge comes in monitoring compliance outside of specific campaigns. When you have programs with several thousand affiliates in them it is difficult to have clarity on just how the affiliates are using the links posted in the network. Monitoring at scale without advanced analytics is not practical. So other than occasional spot checks and being very clear in the merchant T&Cs affiliate managers are a bit hamstrung. This is especially true for OPMs since often we do not have full access to the merchant’s analytic resources or buy off that such monitoring, which is not sales related, is a critical function.

    But I do completely agree that OPMs are ethically required to at least make their clients aware of the issues.

  • http://www.typoassassin.com/ asrguy

    “But if your top 10 revenue-driving affiliates are all violating the guidelines and you do nothing about it, you are opening your merchant up to a lot of liability.”

    One of the constraints is that AM’s are typically paid a % of affiliate sales, unless they are somehow a stakeholder in the business itself.

    In an ideal world we’d all like to say that they don’t look the other way, and that it’s in the AM’s interest to look out for the merchant re liability and lost profits (e.g. in the case of typo domain affiliates making commissions).

    But the world is not ideal and in our experience many AM’s are just out there looking for themselves. It’s not entirely their fault – it’s a fault of the compensation systems they are under and the business owners not overseeing what is really going on.

    As for your comment “I’m surprised that affiliate managers and Outsourced Program Managers (OPMs) haven’t jumped on all of this.” – really? Is it such a surprise.

    Maybe I’m just getting cynical but until the business owners adjust the compensation to reward AM’s to address issues that can reduce commissions but reduce risk and increase profits, it shouldn’t be a surprise.

    Luckily some AM’s out there are ahead of the curve doing the right thing, and helping to clean up their programs at the risk of losing some commissions.

  • Kellie Stevens

    I’ll try to be brief. haha. The FTC has already held affiliates & bloggers liable. So regardless of the “guidelines”, it would be prudent for affiliates to comply with the FTC regarding what they consider deceptive advertising practices. Guidelines are just that. They do not restrict the FTC for going after who they feel is most culpable in a particular situation.

    I’ve had several managers and OPM’s contact me regarding this issue over the last couple of years, so some are paying attention. And I have seen evidence of some affiliates following the rules. What Angel mentions about scale/monitoring goes back to Tricia’s good point of the FTC being reasonable (I know…I know…those 2 don’t seem to go together at times). My experience when working in health care and dealing with the overwhelming government regulations comes down to “due diligence”. Can you show due diligence in meeting the regulations? My advice to managers and OPM’s are to have written policies in place and then to follow them. Be able to back up with documentation your efforts at compliance. You’ll probably never be 100%, but you need to show you tried. Are you manually approving affiliates or auto-approving? If auto-approving can you show you later review the sites? Can you show where you have addressed the issue with non-complaint affiliates? Can you show action taken when an affiliate didn’t comply? Can you show that you have informed your affiliates of the correct way to disclose? etc/etc/etc. If you have nothing in place and/or turned a blind eye, then you are opening up yourself to risk.

    But personally I don’t think affiliates are off the hook even now.

    • http://www.tricia.me/ TriciaMeyer

      I really, really like these questions that you pose, Kellie. They get at the heart of it. It doesn’t have to be part of the job that takes up all your time. That would be unreasonable. But it has to at least be a PART of the job.

      The affiliates that we have seen penalized have been pretty egregious. Not really just a lack of “disclosure” but out and out fake reviews, right? Reviews that were made to look like news or testimonials to intentionally deceive people. I can see why the government went after them first. But from there it then starts to be a slippery slope down to what is a real and what is a fake review when money is involved.

  • http://www.typoassassin.com/ asrguy

    I’m not sure why anyone would want “auto approve” of affiliate applications. It costs more to undo damage than any time you save by not reviewing the apps up front.

  • http://sectionhiker.com/ Philip Werner

    The FTC has a long history of going after network marketing firms (many who call their sales associates affiliates) for deceptive advertising, particulalrly for “medical” benefits. How certain are you that the FTC’s latest enforcement action and their recommendations about affiliates isn’t really targeted at network marketing companies and NOT at bloggers who are NOT engaging in deceptive advertising practices. Having worked as a service provider to both the affiliate marketing and network marketing industries, it is easy to confuse the two, particularly when referring to “affiliates.” As a journalist, I’d recommend you interview some network marketing experts to round out your coverage. You are clearly approaching this article from the viewpoint of the affiliate marketing industry, but missing the nuances, history, and intent of the FTC’s enforcement actions against a company with a very different business and compensation structure than what we know as affiliate marketing.

    • http://www.tricia.me/ TriciaMeyer

      Thanks for your comment, Philip. I actually did not approach it as a journalist because I am not a journalist. I am an affiliate marketer, so that is how I approached it. I’m certain that the FTC’s latest guidelines apply to bloggers because Example 21 in those guidelines specifically says “The blogger in this example obtained the paint she is reviewing for free and must disclose that fact. Although she does so at the end of her post, there are several hyperlinks before that disclosure that could distract readers and cause them to click away before they get to the end of the post.” The guidelines actually show a blog post and use it as an example of what could be considered an “unfair or deceptive act or practice.”

      Furthermore, while the FTC has, indeed, gone after network marketing firms, the entire Legacy Learning Systems settlement was predicated on the use of affiliate links in reviews. That settlement directly instructed Legacy to monitor their affiliate program for disclosure. Since then, Legacy has put into place strict rules for their affiliates or the affiliates will be removed from the program.

      I’m not sure how you can say that I have missed the nuances, history, and intent of the FTC’s enforcement actions in those two examples. Perhaps you are referring only to the cases against networks such as Clickbooth? While those are related tangentially to the issue because they show that the FTC is cracking down, they do not provide the specific guidance for affiliate marketers that the March .com Disclosures and the Legacy Learning Systems settlement provided.

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