Last year I was asked to become an affiliate for an online course offered through a major course provider. When I received the instructions on what to do to become an affiliate and earn a commission, I noticed that the materials didn’t include any advice or examples of how to disclose the commission-based nature of the affiliate link I was expected to share.
So, I emailed the vice president of affiliate marketing for this company. I asked if they required their affiliates to disclose the arrangement. She said no. Also, she seemed a perplexed why I was even asking.
I was a little concerned that they were turning a blind eye to federal affiliate disclosure requirements. (I ended up not becoming an affiliate for other reasons.) And, it made me think that most people out there writing blogs and trying to monetize them have no clue about this requirement—or that they’re technically breaking federal law!
My guess is, most people want to be compliant but don’t know about the affiliate disclosure law and/or how to disclose their affiliate arrangements and paid placements. Hopefully, this article will resolve both of those concerns. And, for future reference, be sure to download the checklist I created to summarize the disclosure requirements. Just click below.
When You Need to Disclose
The most common situations covered by an affiliate disclosure are:
- Affiliate marketing; and
- Endorsements.
They’re slightly different, but they fall under the same disclosure law and have the same disclosure requirements. And, you might encounter them most commonly when posting to your blog or social media. Let’s look at each of them.
Affiliate marketing is when you receive money (a commission) when one of your readers makes a purchase after clicking on a link that’s been assigned to you. You agree to promote someone else’s product, service, or course in exchange for a cut of the purchase price. The link you’re provided by the person or company you’re promoting is trackable back to you as the source of the purchase. (I don’t pretend to understand all the tech behind that.)
According to the Interactive Advertising Bureau, affiliate marketing accounted for 170 million transactions in 2017, and 81 percent of brands rely on some form of affiliate marketing.
A great example of this kind of marketing is Amazon’s affiliate program, Amazon Associates. The Trial and Eater blog uses these links effectively, suggesting cooking tools or ingredients relevant to that post’s recipe. (I bought the pizza skillet she recommended in the post, and I was happy that she got a commission.)
An endorsement, for purposes of your blog and social posts, is slightly different. While you’re still promoting someone else’s product, you’re receiving free stuff or getting paid a fee in exchange for mentioning or reviewing the product. Unlike affiliate marketing, your reader doesn’t have to buy anything for you to get paid. This is a straightforward pay-to-post.
In most instances, an endorsement is trickier for the reader to understand that the reason you’re talking about this product is because you’re getting paid to. By the way, your “payment” could be a free product or service, a fee, or even a swanky trip somewhere.
And, even though it’s called an “endorsement” you don’t have to be a celebrity or have a million Instagram followers to fall under this disclosure requirement.
A real world example
Here’s a helpful example from the Federal Trade Commission (the agency responsible for enforcing affiliate disclosures):
A consumer who regularly purchases a particular brand of dog food decides one day to purchase a new, more expensive brand made by the same manufacturer. She writes in her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier, and that in her opinion, the new food definitely is worth the extra money. This posting would not be deemed an endorsement under the Guides.
Assume that rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases and its computer has generated a coupon for a free trial bag of this new brand. Again, her posting would not be deemed an endorsement under the Guides.
Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. If she receives a free bag of the new dog food through this program, her positive review would be considered an endorsement under the Guides.
That example is perfect for bloggers, but remember that the affiliate disclosure requirements apply everywhere online … your blog, YouTube, Instagram, an email to your subscribers … anywhere you’re posting a paid endorsement or an affiliate link.
What Federal Law Requires You to Disclose
Affiliate disclosures fall under 15 U.S.C. 45—a federal law that bans “unfair methods of competition.” That includes unfair or deceptive acts or practices affecting commerce. It’s that potential for deception where advertising—such as affiliate marketing and endorsements—comes under the law’s reach.
It’s a pretty broad law that can encompass virtually any industry or business situation. The Federal Trade Commission (FTC) has done a decent job in keeping up with the changing landscape of what is “advertising” with the proliferation of blogs and social media.
What the FTC is really concerned about with affiliate disclosures is whether there is a “material connection” between you and the true seller or promoter:
“When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.”
In other words, a consumer might place less weight on a celebrity raving about a skin cream if they knew that the celebrity received a $40,000 check for posting a picture of the skin cream on her Instagram feed.
But, that same rationale applies to you, too. Wouldn’t you like to know if I get paid $100 when you sign up for someone’s course that I talked about in an email? Exactly.
Important note—even though we’re talking about affiliate links and paid posts in this article, a material connection is not only a payment! It could be a relationship, like posting on behalf of a blood relative or in-law where that relationship isn’t clear. Or, even a paying client (current or past).
In other words, anytime you have a material connection to this other person you’re talking about and you’re asking people to support with their patronage, you need to make a disclosure.
To make determining when a disclosure might be required, I put together a handy checklist that you can download and refer to when you post an affiliate link or paid review. Click below to get your copy!
Recent enforcement actions
A few years ago, high-end retailer Lord & Taylor put together a marketing campaign for a particular paisley dress. The campaign included a paid advertorial story in a fashion magazine with an approved photo of the dress. Then Lord & Taylor gave the dress to 50 influencers and paid them between $1,000 and $4,000 to post photos of themselves in the dress on Instagram on one specified “product bomb” weekend—the same weekend when the magazine posted its “story” with the dress. Neither the magazine story nor the Instagram posts gave any indication that they were paid placements.
The dress quickly sold out.
It was a successful campaign from a sales perspective, but the FTC took issue with it and filed a complaint against Lord & Taylor. The retailer eventually settled the case, and basically got a slap on the wrist—not a surprising result really, as this was one of the first notable enforcement efforts of endorsement disclosures. Still, not everyone listened.
The FTC continues to remind influencers about disclosure requirements, sending stern letters to more than 90 social media influencers in 2017 sweep. In my personal opinion, it’s only a matter of time before they start seeking penalties for non-disclosure, especially for repeat offenders. For now, they’re educating and warning affiliates and endorsers.
One thing that was clear in the Lord & Taylor case is that the FTC looks to the brand first, not necessarily the person making the post. So, if you’re offering a course or anything with an affiliate aspect to it, and you’re asking people to share your stuff with their audience and giving them a cut, make it very clear that you expect they will disclose the nature of the relationship. Literally, make it a requirement and make sure they actually do it! If nothing else, send them a copy of this article.
How to Disclose Your Affiliate Arrangements
The FTC requires an affiliate or endorser to “clearly and conspicuously disclose their relationships to brands” when promoting or endorsing products. Unfortunately, there’s no set formula when it comes to what is “clear and conspicuous.” It will depend on the nature of the ad (post) and the information that needs to be conveyed.
What is clear from FTC guidance is that they’ll look at what an affiliate disclosure says (is it clear?) and where it’s placed (is it conspicuous?) when determining if it’s sufficient to prevent deceptive advertising.
What to Say
In a recent study by Princeton University, researchers looked for affiliate marketing links in 500,000 YouTube videos and more than 2.1 million pins on Pinterest. Of the videos and pins that had an affiliate link, they found that only ten percent of the YouTube posts and seven percent of the Pinterest posts had some kind of affiliate disclosure.
What’s interesting about this study is that researchers went a step further and asked 1,800 users if they actually understood what the disclosures meant. This is a key in the FTC’s guidelines and enforcement—does a “reasonable person” understand there’s a material connection between the person making the post and the item being mentioned in the post?
The Princeton study found that nearly 95 percent of users understood an “explanation disclosure.” Something like “when you buy through these links I get paid a commission.” Other types of disclosures were less clear; for example, only 65 percent of users understood what “this is an affiliate link” meant. (A great reminder for us online business owners and marketers that our lingo means nothing to the average consumer!)
The law would also seem to require disclosure of which links are commission-paying links, rather than making the consumer guess which ones pay you. So, a generic “this post contains affiliate links” at the top of a post probably isn’t good enough. Be specific and identify which links pay you.
For paid review or endorsement posts on social media, the FTC has stated its disfavor of unclear expressions like “Thanks Brand X” (it’s not clear that you’re thanking them for sending you to Fashion Week for free) or hashtags like “#sp” or “#partner” to designate that it’s a sponsored post. Be clear and specific. Some suggestions are #sponsored or #paidendorsement.
For client or family relationships, it could be as simple as, “I’m so proud of my sister Nancy and her new online bakery.”
RULES OF THUMB:
1. Explain the relationship in simple, clear terms anyone can understand, such as “When you purchase through this link, I will be paid a small commission,” or, “Brand X sent me a free bag of dog food.”
2. Be specific about what links are affiliate links.
3. Avoid abbreviations and jargon.
Where to place a disclosure
The guiding principle here, according to the FTC, is “proximity increases the likelihood that consumers will see the disclosure and relate it to the relevant claim or product.” Proximity means how close the disclosure is to the product reference or link—the closer, the better.
“They shouldn’t have to hunt for it,” notes the FTC in its written guidance.
Generally speaking, the FTC frowns on:
- Hiding a disclosure on an About page or “terms of use” page
- Making a consumer scroll down to the bottom of the page to see the disclosure
- Putting the disclosure at the end of a long string of hashtags
- Placing a disclosure at the end of a post containing a paid review or affiliate link
For links, the FTC wants to ensure that a disclosure is communicated before a consumer makes a purchase. So, for an affiliate links, that means disclosing the affiliate nature of a link before the link appears—not at the bottom of the page—or at the very least, right next to the link where the consumer can easily see it before clicking.
Paid reviews or mentions on social media pose different issues, especially since different platforms have different capabilities and display areas. For example, the FTC would like see disclosures within the first line or two of an Instagram post since that’s what is visible as a consumer scrolls through her feed.
Obviously, that doesn’t make for the most attractive post. I understand that the FTC is talking with social media sites to perhaps design functionalities to help posters comply with the disclosure law.
RULES OF THUMB:
1. The closer, the better.
2. Disclose before the consumer clicks or buys.
3. Don’t hide the disclosure.
Where to Go for More Info
The FTC website is chock full of resources and guides to help bloggers and business owners to stay in compliance. Here are a few if you’d like to read for yourself:
- .com Disclosures: How to Make Effective Disclosures in Digital Advertising
- Guides Concerning Use of Endorsements and Testimonials In Advertising
- The FTC’s Endorsement Guides: What People Are Asking
It’s safe to say this area of affiliate disclosure will continue to be shaped as brands come up with even more creative ways to promote their products. For now, do your best to disclose when you’re posting affiliate links and/or paid reviews or posts.
Remember to download the handy reference guide, the Disclosure Checklist for Bloggers. Click below and enter your details and you’ll get it right away!
Disclaimer: The author is a licensed attorney in the State of Nevada not currently engaged in private practice. This article is of a general nature and not meant for any specific situation. It is for education and entertainment only. No legal advice is provided, nor should be inferred, and no client relationship exists between the reader and the author. Always consult an attorney in your jurisdiction if you have any questions about your legal rights or responsibilities.
