How Do The FTC’s Guidelines Affect Affiliates and Merchants?
By Anna Johnson on October 18th, 2009With the U.S. Federal Trade Commission’s planned changes to its Guides Concerning the Use of Endorsements and Testimonials in Advertising, many Internet marketers are wondering about the impact the changes may have on merchants on the one hand, and affiliates on the other. Who will the FTC go after if an affiliate… or a merchant… does the wrong thing?
I’m not a U.S. attorney – and, if in doubt, you should definitely consult a qualified lawyer – but it seems to me that the FTC could end up targeting either or both of a merchant and affiliate, regardless of who appears to be unlawfully using testimonials or endorsements in contravention of the FTC Act.
If, for example, a merchant gives an affiliate an advertisement to run and that affiliate starts adding some results-based testimonials to the ad that aren’t appropriately qualified… or if the affiliate endorses the merchant’s product in a review or blog post without disclosing the fact that they’re an affiliate… then the FTC could certainly bring an action against the affiliate… But it could also bring an action against the merchant.
Why? Because the FTC might view the merchant as having conspired with the affiliate to break the law by effectively approving or allowing the affiliate’s ad or endorsement.
I know, I know – that’s hardly fair if the merchant never even saw the affiliate’s ad or endorsement. And, since the FTC has said it will approach each situation on a case by case basis, it may not view the merchant in this light at all. But in this overly litigious world, we just can’t rule anything out.
Similarly, if an affiliate legitimately promotes an offer and the merchant misuses testimonials or otherwise misleads people, the FTC could also target the affiliate (as well as the merchant) for legal action. Again, this is because the FTC could view the affiliate has having participated in the misleading conduct.
Now, before you panic, let me say this:
When it comes to being liable for the conduct of others, your risk as a merchant or affiliate HAS NOT CHANGED since the FTC announced its intention to update the Guides Concerning the Use of Endorsements and Testimonials in Advertising.
There was such a thing as contravening the FTC Act before the FTC updated its Guides. In fact, there was – and is – also such a thing as contravening all kinds of other laws, including those in other countries. Depending on the relevant country, if you promote to people in that country… you’re subject to its laws.
The risk of a merchant having rogue affiliates on their hands… or the risk of an affiliate mistakenly promoting a dodgy merchant… is still the same. Rogues are rogues and the FTC’s new interpretation of the law is unlikely to change the spots of those who intend to do the wrong thing (out of ignorance or malice).
So how do you protect yourself as a merchant, or as an affiliate? Well, there are practical ways, and there are legal ways.
One, potentially practical, way of protecting yourself as a merchant is to run a closed affiliate program. This allows you to review each affiliate who applies to join your program and screen out those you think won’t do the right thing.
Similarly, a practical way to protect yourself as an affiliate is to be careful about whom you promote.
Another measure that may be practical for you – either as a merchant or affiliate – is to quickly end any affiliate relationships or promotions where you suspect the person or company on the other side is acting unlawfully.
One legal way to protect yourself as a merchant is to include specific terms in your affiliate program terms and conditions that clearly state what affiliates may or may not do, and that specify that the affiliate will indemnify you for any breaches of the affiliate terms and for any unlawful acts.
Theoretically, as an affiliate, you can also negotiate affiliate terms and conditions that similarly protect you. In reality, however, most affiliates don’t have the bargaining power or the time or interest in negotiating affiliate terms for promotions that may only last a few days or weeks. On that basis, negotiating the affiliate terms may not be practical and your best bet may be to avoid dealing with merchants you don’t trust.
On the other hand…
The reality of affiliate marketing is such that we often can’t be totally sure about whom and what we’re dealing with – as merchants or affiliates – even if we take various legal or practical measures. And even if there’s a risk of something going pear-shaped… we’ve got to ask ourselves: is the risk really all that high?
Business is full of risks and affiliate marketing is no different. And whilst the FTC’s approach to the law may have changed, the risks involved in affiliate marketing haven’t really changed. You’re either dealing with someone who abides by the law or you’re not.
Will the FTC clamp down on every single instance of rogue activity? Well, has it clamped down on all the rogue activity you’ve probably already witnessed and been frustrated by?
As an under-resourced government agency, the FTC is most likely to investigate cases where there are big names, big amounts of money, and flagrant breaches of the law involved.
That doesn’t mean you should risk breaking the law yourself. Nor does it mean you should take unjustifiable risks dealing with dubious merchants or affiliates. It just means that you might want to be practical… and not get caught up in all the fear-mongering infecting the Internet marketing community right now.
