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.

Earlier today Janet Meiners Thaeler (aka NewspaperGirl) tweeted:

CMP.ly is said to have been born “in response to a continued push for transparency and honesty in blogging and within social media and digital communications”. This solution seeks to address the problem of “no established structure or format for disclosures to follow”, and provide “a series of simple and transparent disclosures that are identifiable at a quick glance, even within the tight constraints of 140 character twitter messages” [more here]. I especially like (a) the option of eloquently disclosing on Twitter via their short URL (e.g.: disclosure of a sponsor-endorser relationship – www.cmp.ly/3), and (b) the idea of a WordPress plugin mentioned in the above-quoted tweet.

CMP.ly has categorized all disclosures into 6 types: (i) unpaid personal opinion, (ii) feedback on a review copy, (iii) one in response to a sample receipt, (iv) paid/sponsored post, (v) one where an employee/shareholder/business relationship is present, and (vi) custom disclosure:

They are now in Beta and open to suggestions. The service will be offered free of charge. So if you have ideas on how to develop/improve it, I am sure they will embrace them with open arms.

Good to see this development. Between CMP.ly, its WP plugin (whenever it launches) and the DisclosurePolicy.org Generator affiliates will have some good options to choose from while wording their disclosure policies to comply with the new FTC’s disclosure rules.

Yesterday evening the team at #SocialMedia has published a good blog post on the FTC’s new rules. They have referred to my earlier statement that the new guidelines imply a shift in responsibility: from the advertiser (who, back in the years when “such traditional media as television, commercials and print advertisements” mattered most, had to “disclose material connections between the advertiser and the endorser”) to the publisher (who is now distributing his/her own endorsement via Social media, and is believed to be “the party primarily responsible for disclosing material connections with the advertiser”).

#SocialMedia wrote:

While some may say this officially shifts the responsibility of disclosure from the advertisers to the publishers, what it really does is says that everyone is accountable — the advertisers and the publishers.  No longer can we stand around like school-children and point fingers at each other saying “she did it”!  We are all responsible and accountable.

And I agree 100%.

While initially FTC did sound like they are going to chase bloggers, two days after the announcement of the new rules, an FTC’s representative stated that bloggers should not be afraid of any penalty fines as they would first receive a warning, and then, if they refuse to comply, FTC “would institute a proceeding with a cease-and-desist order and mandate compliance with the law”. We were also told that it is in reality advertisers that the FTC is going to focus on — on the education that they provide their publishers with, and on the monitoring and policing mechanisms that they put into place [more here].

While the initial focus of the Guides Concerning the Use of Endorsements and Testimonials in Advertising did seem to be on the publishers, the latter comments by FTC sought to calm them, and put much of the responsibility on the advertisers’ shoulders. Regardless of whether some of the expectations (like effective policing of publishers’ compliance with the new rules) are realistic or not, I think approaching the subject as one effecting both affiliates/publishers and merchants/advertisers — where both parties are responsible and accountable — is a good strategy.

Fall 2009 issue of the Online Strategies magazine had an interesting article by two lawyers, Jeffrey Knowles and Thomas Cohen. It is believed that “they were given advanced notice of impending changes”, and devoted this article to educating both affiliates and merchants on how to stay compliant with the FTC’s rules. Their advise was:

Affiliates

1. Ensure that your marketing in a “truthful, substantiated and not decepting or unfair” manner (looks like they meant “deceptive” here)
2. Stay away from publishing false content, or offering “incentives to consumers in return for their response to any ad, unless the offer’s terms and conditions of the offer are clearly and conspicuously disclosed”
3. Stay away from “fake news articles” and always clearly disclose when “the content is an advertisement”
4. Do not post “false or unsubstantiated endorsements, and be sure” that you always “disclose any material connections with the merchant”
5. Do not infringe trademarks, copyrights, patent rights, “or any other intellectual property right”

Merchants:

1. When entering into an agreement with an affiliate marketer, make it mandatory for the affiliate to agree that all content used to drive traffic to your site will “abide by all state and federal consumer protection laws and regulations including the FTC Act and the CAN-SPAM Act”
2. Make it explicit that affiliates are also agreeing “to comply with the FTC’s Endorsement Guides”
3. Ensure that affiliates are also agreeing to stay away from intellectual property rights infringements
4. Ensure that your affiliate program agreement requires “that affiliates clearly and conspicuously disclose the terms and conditions of any incentives, points, rewards, cash or prizes promised to consumers in return for their response to any advertisement”
5. Finally, the agreement “must provide that any affiliates who violate these laws, regulations and guides shall be terminated by the merchant or network, and shall forfeit any commissions earned in the course of committing such violations”

The full text of the Knowles and Cohn’s article may be found here. The advice sounds easy to follow, and unless advertisers are held rigidly accountable for the monitoring and policing, there should be no problem complying. Much will be clarified further with time (I am closely monitoring what is happening on this front and will keep my readers posted). At this stage, it is important for both merchants, and affiliate to understand that everyone will be held responsible, and ensure that their strategies, policies and disclosures are intact.

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See also:

• “How to Word Disclosures & Agreements to Meet FTC Rules” post

Over the past four days I have been receiving numerous emails from merchants and affiliates, asking how to word their texts to meet the new Federal Trade Commission rules for testimonials, reviews and endorsements.

Affiliates wonder how to put together disclosures:

As a publisher, is there generic type of blurb that I could add to my website that would cover me for the FTC guidelines you were talking about.

…while merchants want to know how to phrase their affiliate program agreements:

What do we need to do?  Your help and guidance is appreciated.

Affiliates, several good examples of disclosure policies have been posted over the past few days. Below I am listing the ones that I have found to be especially well-put-together. They may provide a good starting point for crafting your own policy:

• Scott Jangro’s disclosure
• Tim Carter’s disclosure
• Sarah Mae’s disclosure
• KitchenStewardship.com’s disclosure
• Matt Cutts’ disclosure
• …and see also DisclosurePolicy.org for help

Per FTC’s recent interview, affiliates are not expected to include the disclosure on every page of their website. “Whether you make it outside of the text but in proximity to blog, or incorporate it into the blog discussion itself — those are the issues that bloggers will have discretion about” [source]. So a dedicated Disclosure Policy page visible from every page of the website should suffice.

Affiliate program managers and advertisers/merchants, on the other hand, may use the following text I have put together, making it a sub-clause of an Affiliate Obligations clause in their programs’ Terms of Service:

We strongly advise affiliates to stay compliant with the Federal Trade Commission (FTC) guidelines on testimonials and endorsements. All endorsements, reviews, testimonials on CompanyName.com’s products and services, as well as relationships between other types of content websites (forums, blogs, microblogs and other  Social Media channels) and CompanyName must be clearly disclosed in a separate policy on the affiliate sites. FTC points out that “when there exists a connection between the endorser and the seller of the advertised product” it is imperative that such connection is “fully disclosed”. FTC deems the relationship in an endorser-sponsor light, and believes that the end user has the right to understand that one exists [full text here]. We share the undergirding idea of this approach, and strongly encourage our affiliates to adhere to the FTC’s rules. We also reserve the right to terminate relationship with any non-compliant affiliates.

As always, I am open to comments and criticisms.