FTC on Guidelines, Affiliate Disclosures, Compliance

The new Federal Trade Commission disclosure Guides are coming into force tomorrow (December 1, 2009).

I have just finished listening to a webinar where Jim Edwards is interviewing Mr. Richard Cleland of the FTC, and it does shed some light on both the FTC’s overall stand on the issue, and the peculiarities many affiliate marketers have been wondering about. The full interview/webinar may be found here.

Here are some of the key things have been mentioned in it:

General Points

“The FTC Act is very general. It prohibits deceptive and unfair acts or practices in commerce and misleading advertising… And that’s about all it says.”

The Guidelines that are coming into force tomorrow are “really intended to provide additional guidance on how these prohibitions apply to online marketers, bloggers, and in some cases, affiliates.” The businesses are expected to “voluntarily comply with the FTC Act.”

The guides are not regulations, but rather interpretations of the FTC Act.

The purpose of the Guides is to clearly mark the line, so that people do not step over it.

Overseas Affiliates

Jim asked a question that many overseas affiliates have been wondering: does all of this apply non-US companies? The answer was that it applies to entities “doing business in the US.” In scenrios when the FTC has no jurisdiction over the marketer who is located outside the US, they may/will go after the US-based company that is paying him/her, as any situation where a “part of the business or part of the transaction” takes place in the US, the FTC has jurisdiction over it.

Affiliate Disclosure

Speaking of the wording for the affiliate disclosure, it was made clear that it may be as short as “Disclosure: Compensated Affiliate” or as long as you want. What matters is that any advertisement that the marketer is being compensated for is marked as such. The disclosure must be clear, conspicuous and aiming to “alert the reader” that there is a “connection between the endorser and the seller.”

“The issue of affiliate marketing is broader than endorsements… There is a lot of affiliate marketing that is pure straight advertising,” and the FTC’s disclosure guidelines will not apply unless there is an endorsement/recommendation.

Monitoring, Policing & Enforcement

“Distributors who have reasonable training and monitoring programs are unlikely to be held accountable for rogue affiliates. The reasonableness of the program will be determined by the risk [of product misrepresentation for the affiliate’s benefit]. At a minimum, sellers should have a program to monitor what affiliates are saying about the products and take action against affiliates who are violating policy. This doesn’t necessarily require weekly checks or even monthly checks, but to say we never look at what our affiliates are doing is not an acceptable answer.” However broad this answer is, it is a good reply.

So, (i) inform/educate your affiliates (in the affiliate program agreement as I blogged here), (ii) monitor it to the best of your ability (solutions suggested: mandating affiliates to run “previously approved” ads only, or run ads on previously approved URLs only – ones that you will know to monitor, or by using tools like Google Alerts), and (iii) do provide them with “some kind of training” on how exactly they can stay compliant.

From the interview, it sounded like the FTC is (or will be) open to a dialogue with both merchants and affiliates if/when they have nothing to hide, and have proven that they have done everything to stay transparent and/or compliant.