Earlier this year, the U.S. Federal Trade Commission updated its disclosure-of-advertising guidelines to include blogs and social media. If you are paying a monetary or product incentive to promote your brand, product, or service on social media or a blog, you must adhere to FTC disclosure-of-advertising guidelines — here’s the PDF.
Since the affiliate marketing model is performance- and commission-based, this means that if you run an affiliate program, all of your content affiliates must follow these guidelines. Further, if the FTC finds that disclosure guidelines are not met, the retailer could be held liable, not the affiliate. This is exactly what occurred in 2011, when Legacy Learning, a company that sells a popular series of guitar-lesson DVDs, paid $250,000 to settle FTC charges that it deceptively advertised its products through online affiliate marketers who falsely posed as ordinary consumers or independent reviewers.
Paid Favorable Reviews Costly
“Legacy Learning taught us that retailers can be held liable for favorable reviews done on their behalf when there was a financial connection to the reviewer,” explains Tricia Meyer, an affiliate marketer, consultant, and attorney who has kept close tabs on the evolution of FTC disclosure guidelines. “ The biggest change since (the Legacy Learning) case is that the FTC has expanded the Guidelines to explicitly include social media, even where there is a limited character count, and to state that disclosure must be made before any links that would take the reader to the retailer site.”
As an example within the guidelines, the FTC provides a screenshot (below) of a blogger that obtained the paint she is reviewing for free.
While the blogger does disclose her relationship with the advertiser within the body of the post, she does so at the end of the review. The FTC states this is insufficient disclosure because the disclosure is not “clear and conspicuous.”
“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 state.
As Meyer emphasizes, disclosure guidelines also apply to social media posts, such those on Facebook or Twitter, that often have limited character counts. Again, the FTC provides an example of proper disclosure within its guidelines. The sample tweet below begins with “Ad:” and also discloses the amount of weight (“Typical loss: 1lb/wk.”) that consumers using the product can generally expect to lose.
The FTC further illustrates that including a link to a disclosure page within a post, or disclosure of a monetized relationship in a previous or subsequent social media post, is not sufficient action to avoid penalties. Nuances like these are why retailers need to be aware of disclosure criteria when developing online ads, and when working with affiliates. Meyer says retailers need to take a proactive stance in ensuring affiliates follow disclosure guidelines, not just to protect themselves against potential FTC fines, but to ensure a level playing field across their affiliate base.
Retailers Must Enforce
“Not only do retailers have a duty to their consumers to enforce blogger disclosure under the FTC Guidelines but they have a duty to their affiliates. When a retailer does not enforce disclosure, it creates an uneven playing field between the bloggers who are doing the right thing in disclosing and those who are not following the Guidelines,” Meyer says.
Meyer further emphasizes that the FTC guidelines don’t apply to just affiliates, but to any advertising partner that receives some sort of incentive or compensation for promoting the retailer’s product or brand.
“Bloggers need to disclose any material connection that they have to the retailer. This would include receiving a free product, receiving a commission or referral fees through special links, or even receiving a special deal on products by virtue of their relationship with the retailer,” explains Meyer.
Perhaps the most challenging guideline to adhere to is the one regarding “clear and conspicuous disclosure.” The guidelines clearly state that there is “no set formula for clear and conspicuous disclosure; it depends on the information that must be provided and the nature of the advertisement.”
That said, to evaluate whether or not a particular disclosure is clear and conspicuous, the retailer should consider the disclosure’s placement, prominence, whether or not there are elements in place that could distract the reader from the disclosure, whether or not the disclosure is present regardless of the path by which the consumer arrived at the claim, whether the disclosure is understandable by the audience, and whether or not the duration of an audio or video disclosure are of a sufficient volume and duration.
In short, it’s critically important for retailers to ensure that affiliate adherence to disclosure guidelines is clearly stated within affiliate terms and conditions, and that a process is in place to ensure affiliate compliance.