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Will Affiliate Disclosures Become Required by Law?

Posted By Darren Rowse 13th of December 2006 Affiliate Programs 0 Comments

Copyblogger points to an article that indicates that Affiliate Marketing Disclosure may become Mandatory by law. This will be a fascinating one to watch and could have implications for bloggers on many levels.

The article states:

“The Federal Trade Commission yesterday said that companies engaging in word-of-mouth marketing, in which people are compensated to promote products to their peers, must disclose those relationships….

Word-of-mouth marketing can take any form of peer-to-peer communication, such as a post on a Web blog, a MySpace.com page for a movie character, or the comments of a stranger on a bus.”

Questions it leaves me with include:

  • How they’ll police it?
  • Whether this will only apply to US bloggers (I’m presuming so)?
  • How it will impact sites that have many tens thousands of pages with deep link affiliate promotions already in their archives? Will it be retrospective?
  • how they’ll define what is and isn’t a disclosure?

There’s more on this over at Tony Hung’s blog.

Don’t know what Affiliate Marketing is? Read What is Affiliate Marketing?

About Darren Rowse
Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook and LinkedIn.
  1. I share your questions about this new policy. I’m guessing they are only going to go after new affiliate links as opposed to those that have already been archived. I am not involved in affiliate marketing, but I am curious as to whether it is already considered common courtesy to denote affiliate links?

  2. More importantly (IMO), how will this affect viral marketing? Take, for instance, the Sony fake blog that was outed this week… Are they breaking the law?

  3. Darren I think if something like that becomes law then the merchants who are located in the US and governed by US law will require affiliates – who reside outside of the US – to abide by the US laws or not promote them.

  4. I love the copyblogger, but I think his headline is misleading. Sorry Brian, but nowhere in there did I see anything about affiliate marketing, only word of mouth marketing.

    As a champion of the affiliate marketing industry for the past 6 years or more, I can’t let this slide :) Maybe I’m wrong, but I just don’t see the connection to the ruling and the real business of affiliate marketing. When I say “real business” I’m talking about real companies that drive this industry, not lame-o spam sites and stuff like that, that someone everyone seems to think affiliate marketing is all about. It’s not.

    As far as blogs go, well, look, my stance on non-disclosure and PP is VERY clear. I don’t like it. Disclosure is required in my book for bloggers.

    Now, Jim, you say, you own an affiliate marketing network for bloggers, right? Yes, I do, and I’ve always stuck by the fact that disclosure on blogs is actually MORE effective than not disclosing. That’s why every BlogKits text link or banner ad always states that you’re “helping my blog by shopping here” or “support this blog”.

    I just wanted to come here and point out to all the probloggers out there that the need for alarm is in my opinion not warranted. Unless you’re writing content that is made to fool people, keep doing what you’re doing and let’s let this play out. Nobody is going to jail for affiliate marketing is what I’m trying to say. :)

  5. Just chiming in again, this piece is a better explanation I think.


    “The FTC decision means that companies such as Procter & Gamble, Hershey Co. and countless other corporations, agencies and buzz-specialty shops will avoid the specter of a thorough probe of their marketing practices. However, the FTC did leave the door open for the commission to examine issues on a case-by-case basis. In short, marketers could be playing with fire if they pay people to post opinions about products such as movies, cellphones or electronics to websites without making their sponsorship clearly visible.”

    I don’t get affiliate marketing out of that, do you?

  6. Studying a commercial law degree this is very interesting. One of the basic principles that one learns is that a company with operations in an overseas country must abide by the laws of that land. Very interesting to bloggers.

  7. If such a law comes to effect, and since it is a US law so only US-based sites are subject to it, I wonder if foreign sites that for one reason or another does not disclose their affiliate links, will their sites be blocked in the US?

  8. It is more a matter of whether foreign businesses can be held accountable in foreign countries. The best example I can think of this is one I studied with Yahoo! where they provided information from their emails to the Chinese Govt which led to the prosecution of a Chinese citizen. Many US citizens thought this was wrong as it was anti privacy laws which US holds important but which China does not. The outcome being that Yahoo! in their TOS say that they will abide by the laws of any nation in which they operate. I don’t think this affiliate stuff will go this far though. Not by a long shot. Darren?

  9. Jim, I’m reading this news as an attorney, not as a journalist, and I think my interpretation is correct. Affiliate marketing IS word of mouth marketing in many of its most effective forms. Think about it… WOM simply means recommended by a third party.

    Just because they speak in terms of WOM instead of AM means very little from a legal perspective. What the FTC said is that recommending products or services for compensation without disclosure can been construed to fall within the very strict US laws already in place against deceptive advertising. That’s why companies send new ad copy to legal for a compliance check, but somehow the law doesn’t apply to affiliates?

    There is no exception mentioned for contingent payments based on a sale actually being made. And why would there be? It’s either compensation without disclosure or it’s not, and it’s either deceptive or it’s not.

    This may end up being something that amounts to very little from an enforcement standpoint, but if I had a one or more profitable “independent review” sites, I would be nervous.

  10. The notice must be clear and conspicuous and must inform customers of
    the type of information the financial entity collects, and whether and to whom it intends to disclose the information (both affiliate and non-affiliate disclosures). If the anticipated disclosure is not permitted under one of the enumerated business or law enforcement exceptions, the financial institution must obtain the consumer’s consent (“opt in”) prior to disclosing the information to a nonaffiliated third party. If the consumer does not affirmatively consent, the financial entity may not make the disclosure.

  11. “The comments of a stranger on a bus”???

  12. […] I just found a couple of posts on this interesting development in the world of affiliate marketing. One, at Copyblogger, the other at Problogger. […]

  13. Word-of-Mouth Hullabaloo…

    Bloggers take note. Today there is a great buzz about Word of Mouth Marketing and how it may impact bloggers. Seth Godin, Darren Rouse and Brian Clark all wrote about this topic in the past day. When I see everyone……

  14. I don’t think I ever really thought about this concept before but I think it might actually be a good thing if run and managed properly. My biggest worries is that the few people who run unethical will get around the rules but all us legit bloggers will be affected by it.

  15. It seems that disclosure should be required. It would be a bear to police. Perhaps a regulatory agency could randomly test some bloggers for disclosure compliance. The selection criteria would have to be very circumscribed. It sounds very big brother but during the dot.com bust I saw people get burned for $1000’s in part because of word of mouth touts placed in chat rooms. If somebody is being paid to tout something, it should be disclosed.

    Is this type of disclosure required by other entities/media? Unless things of changed, it’s certainly not required of brokerage houses which tout stocks on one hand and collecting underwriting fees with the other.


  16. […] For some reason I read Darren’s post today before Brian’s (who is a lawyer) – there is some interesting discussion in both threads. […]

  17. Darren, the FTC’s take on deception is a topic I have studied for a while now, and I really like Brian Clark’s # 10 comment here. The FTC policy statement on deception from 10/14/83 can be applied to all forms of advertising and marketing, and will apply now to the Internet in a case by case progression, IMO. It says in the “Summary”: “Third, the representation, omission, or practice must be a “material” one. The basic question is whether the act or practice is likely to affect the consumer’s conduct or decision with regard to a product or service. If so, the practice is material, and consumer injury is likely, because consumers are likely to have chosen differently but for the deception.”

    The “practice” could be affiliate links, the omission could be the lack of clear, conspicuous, complete, and comprehendable disclosure. Those four factors will determine what is or isn’t a disclosure. But as for enforcement, it probably will come from consumer advocate buyers who feel (right or wrong) that they have been deceived, as well as aggressive competitors. The FTC is limited in what it can do, in my opinion, from legal and “limited resource” perspectives, and their FTC Complaint Form is structured to deal with fraud involving a financial loss of some kind, but it does have an “Explain Your Problem” fill-in-box.

    IMO, there will eventually be pressure in the international community to have international standards adopted. Also, it probably will be retrospective if Internet users of search engines are abel to find older deep link affiliate promotions without having to go to archived web pages. Of course, this will all take time, but probably will eventually happen due to what was in CR Webwatch’s “A Matter of Trust: What Users Want From Web Sites” in 2002: “But the online reality today is that few Internet users say they can trust Web sites that offer products or services for sale or the sites that provide advice about which products or services to buy.”

  18. […] Will Affiliate Disclosures Become Required by Law? Problogger […]

  19. i doubt it could be retroactive, for the reason you stated, and because this seems like it might come up under something like a criminal fraud statute, and there’s a legal maxim against retroactivity in criminal law


  20. […] It also could well end up being an illegal practice in some parts of the world with the recent statement of the FTC saying that ‘companies engaging in word-of-mouth marketing, in which people are compensated to promote products to their peers, must disclose those relationships’. […]

  21. I honestly think this won’t go anywhere in the US legislature. There is already enough government intervention in free trade. Why would anyone stand for this garbage.

  22. The trick, if there is such a thing, is variety. Make certain you collect a steady and varied collection of links

  23. Great post, look forward to more.

  24. Well said, finally a good report on this stuff

  25. I really find Victor’s blog interesting with great articles I find this guy a good writer, congrats Blog Raters posting articles about some other bloggers speaks great about yours. This post is short but informative.

  26. The idea of a money affiliate program arose back in the mid-1990’s when a large internet business decided to try posting advertisements on host websites, offering compensation to the site owners when they brought in new customers. Of course, other businesses were quick to recognize the opportunities presented by a money affiliate program, and a whole industry was soon born.

  27. Always love your posts. Really appreciate your sharing this information.

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