Home Affiliate Marketing Blog FTC to Crack Down on Affiliate Sites

FTC to Crack Down on Affiliate Sites

FTC to Crack Down on Affiliate Sites

I like to think of myself as a relatively ethical person. Of course, as ethics are completely subjective, that statement is pretty redundant. Therein lies the problem – because even though I might not think something is ethical, that doesn't mean that someone else doesn't feel differently. That's the problem with self-regulation in industry – failing a law, the ethical standard is set by the lowest common denominator, meaning that pretty much anything can be acceptable so long as you can use the excuse “well, everybody else is doing it.” This creates a vicious cycle that Seth Godin very accurately described as “the race to the bottom.” We've seen this a lot recently with the financial crisis – no matter where you sit on the political spectrum, we can all pretty much agree that the current crisis was at least contributed to, if not caused by, unethical and dubious action of many traders and CEOs on Wall Street and in other financial institutions. But as so many of them have said “we didn't break any laws.” Obviously, this presents a problem.

The FTC has announced plans to enact regulation on the internet marketing community. Essentially, this regulation would prevent bloggers, affiliates or web-marketers from making atypical, unsubstantiated or downright untruthful claims about their own or another's products. That means that all those customer testimonials with “results not typical” disclaimers would no longer be permissible. In addition, it would require full disclosure of any vested interests, financial or otherwise that one has in a product or business when talking about it – think paid or affiliate reviews.

Five Things That Will Keep You on the Right Side of the Law

This regulation, many people may be uncertain of how it will affect them and what they will need to change. While the exact terms are still being defined, I believe the following tips should keep you on the right side of any proposed regulation.

1. The Grandparents Rule

This is probably my personal favorite. For whatever you're doing, if you'd feel uncomfortable explaining it to your grandparents, then chances are you might be doing something wrong. People are often able to mask their discomfort with what they're doing by keeping their actions secret – imagine telling someone who's opinion of you means a lot. I find this a good 'golden rule' for all business practice.

2. Disclosure – not just a old Demi Moore flick

If you have a vested interest in what your talking about, for example a review with an affiliate link, admit that you are an affiliate. If you are writing a paid review, state that as a disclaimer at the bottom. The goal here is to be 100% transparent. If you have honest reviews throughout your site, including negative reviews of sub-par products, then people can still find you credible even if you were paid to write it. Some bloggers have very effective blurbs on their page stating that they charge $X for a review, but they give no guarantee that the review will be positive.

3. Don't sell what you don't believe

If the claim just sounds ridiculous, and you don't trust that the product actually can do what it says it does – don't promote it. Check that there's actually verifiable evidence for the claims made by the product's creator.

4. The Middle of the Bell-Curve

Most people are average. If the “results not typical” disclaimer is no longer permitted, then you will actually have to make sure that the average user can receive the stated benefits of the product. Now this can be difficult, as many companies simply don't know what the average experience is and feedback is usually confined to those with extreme view – either those who loved the product, or those who hated. Perry Marshall has a great piece on this here. Personally I think they key is to approach it honestly, like if you were selling the product to a friend. Don't make guarantees where there is no guarantees – but you can tell people that if they work hard with a product, or if they commit to a product, they have a really good chance of succeeding.

5. Affiliates are Expendable

It would be nice to think that affiliate managers have the best interests of their affiliate at heart – unfortunately this isn't always the case. Some companies may have few qualms about letting their affiliates takes risks that they would not – allowing their affiliate to make more grandiose claims than in their own sales copy. Watch out for this. Make sure what you're saying is congruent with what the company is saying about themselves. Don't let them let you take the rap for inaccurate claims.

Blessing in Disguise

This regulation could be a great step forward for internet marketing. By punishing those who engage in disreputable actions, it makes the playing field more even for those who fall on the right side of the ethical line. While it's not surprising that some ad networks are coming out against this, I don't think it will be extinction-level-event that they're building it up to be. Just like the bankers who are balking at new laws and financial regulation – when you've made lots of money one way, you're going to be upset when someone tells you you can't do it any more. That doesn't mean that you're still not going to be able to make money – it probably just means that you're going to have to work a bit harder for it!

This regulation could also create a big plus for the internet marketing community – increased credibility. Scammers make it harder for every legitimate internet marketer to be taken seriously. As Seth Godin said in a recent interview with Shoemoney (listen here), our job would be infinitely easier if there were no scammers – as people would have no reason not to trust us when we're promoting a product.

While there may need to be a few tweaks to the regulation to make it realistic and workable, the sentiment – making marketers be honest, can not really be argued with.

In a perfect world we wouldn't need laws because everyone would always do the right thing. Unfortunately we don't, and laws are our way of maintaining the most fair and equitable treatment for the majority of the population. Agree? Disagree? Controversial stuff like this always brings out strong opinions, so I'd love to hear from you!

For more in-depth information on the FTC proposal, check out these great articles:

Update on the new FTC ruling. How this new regulation affects you.

17 Comments Add your comment
  • Reply Michael Pandos3448 days ago

    Great article... this is something that I've had some concerns with as I've been investigating the industry. I believe that integrity is the best policy in any business and your comment that ethics are subjective this day and age is UNFORTUNATELY very true.. John Maxell wrote a book called Business Ethics where he basically shares that Ethics is Ethics whether in business or not. There IS a standard of truth this country was built upon that is slowly being swept away and forgotten, but deep inside all of us is an inate conscious that keeps us fully aware when what we are thinking and doing falls outside the lines of Truth.

    Success built on integrity and ethics WILL last and it will be something you can look back on with satisfaction. Anything else and you're gonna live with that Pit in your heart and stomach, knowing you're living of the backs of others because of your dishonesty.

    Thanks again.. Looking forward to the FTC filter that will keep this industry from becoming another "AMWAY" mirage.

    Mike

  • Reply Chris Goodson3448 days ago

    Yep i haveto agree, honets ethical people rock!

  • Reply Christoph Dollis3448 days ago

    This is a wonderful post, Mark.

    I have the same philosophy in my day job, which is B2B online advertising sales (undoubtedly a big part of what attracted me to internet marketing).

    When I joined Affilorama Premium earlier this month, I completed my profile focussing heavily on the same points you touched on in this article. What it comes down to is saying the truth and promoting products that actually help people. If you want to see my idea on this in a nutshell, see my profile.

    I joined Affilorama PRECISELY because I heard you were an ethical marketer, from Phil Miranda. Strangely enough, I had just been conned out of...

    $7!

    Yep, $7 by one of the "internet gurus" Miranda bashes as making wild couldn't possibly be true claims (because he recycles his sales copy and images, etc., and there's no way it COULD be possible).

    I then read what Miranda had to say about you, and it was positive, and so I am here. Your internet support staff have been excellent and very upfront, your audio interviews have given me hope that it's possible to earn money online, and that it's worth, at the very least, effort in testing to see if it'll work for me.

    Thanks for your blog. Thanks for supporting ethical and decent marketing practices.

    Seth Godin's blog is awesome.

  • Reply Grace Thoma3447 days ago

    The problem with this type of government regulation is that it tends to lean towards, broad, sweeping, overbearing rules. Compliance becomes almost a full-time job and small marketers get pushed out of the market.

    Bureaucrats, such as those in the FTC, don't often have a good understanding of the issues, or nuances, in the marketplace and end up penalizing everyone instead of only the scammers.

    This is exactly what has recently happen in the child's product marketplace. A new law put 1000's of honest, small businesses, like my wife's, out of business. Anyone that sells products that are geared towards children 12 and under must have all the products components testing for trace elements of lead and other chemicals.

    My wife published a childrens board book with a gameboard and every element of the book and gameboard would have to be tested. The paper, the glue, the ink, the packaging all have to be tested seperately and then every product has to to be labeled as having been tested. And it doesn't make any difference how long ago the product was manufactured..it still has to be tested.

    The cost for all this was huge and even if you do the testing the liability issues were frightning. The end result is that 1000's of perfectly good books and gameboards are now on their way to a landfill somewhere.

    I completely agree that honest, ethical marketer is essential. We all should be transparent.

    I just hope that the FTC doesn't go overboard and put honest people out of business in the name of protecting the public.

  • Reply Fernando Morales3446 days ago

    Great post.

    With all the fake reviews and less than genuine claims that are being made in the marketplace today, this was bound to happen sooner or later.

    It's already a tough business to work with, however I believe it will lend to creating better marketers and more credibility for the affiliate marketing industry as a whole in the long run.

    Affiliate marketing is the only real opportunity for average joes' worldwide to combat the sweeping economic crisis affecting families everywhere. It will be well worth the effort to roll with the punches to keep that opportunity alive.

    Cheers,
    Nando

  • Reply Terence Bratley3446 days ago

    Will this apply to non-USA residents too? If not, it won't change very much.

  • Reply Mark Davies3445 days ago

    Thanks for the heads up Chris, It will be very interesting indeed to see how this all plays out.
    Digital Zip- your point is well taken, If the FtC (which of course is the Federal Trade Commission - US GOV agency)
    puts this into effect in the US will this only effect Us Affiliates? How about only US adwords advertisers?
    hmmmmm

  • Reply Chris Goddard3445 days ago

    Thanks for all the interesting contributions!

    @BoatGirl: You are right, government agencies don't always know how to enact laws that still allow business to function well. You example is well taken. Hopefully though, because of the nature of the web, and the conceivably low cost of compliance (just tell the truth), it should hopefully not come to that.

    @DigitalZip: No, the FTC is a US government agency, and therefore would not hold much water outside the US. It will, however, still have a marked impact on the industry, because no matter where affiliate are based, they invariably use services that are based out of the US, whether it be Google of many of the prominent affiliate programs. Only time will tell though.

    Thanks again!

  • Reply June • 3444 days ago

    Excellent article! This is something that every marketer should read! I have always believed in ethical marketing, and yes, we do have to monitor ourselves, however there are those that have always been scammers or black hat marketers and always will be.

    I can't decide if having the FCC step in will be a good thing or a bad thing. I believe that the government already takes too much interest in parts of our lives that are none of their business, thereby giving them too much control.

    If the FCC starts regulating U.S. Internet users, it may curb some of the U.S. scammers, but it could also make it more difficult for people that are just voicing their opinions and not necessarily putting claims to anything.

    Because the issues the FCC are attempting to address are a global issue and not just a U.S. issue, what will be the outcome? Will the Americans be shackled for their free speech rights while the Internet users overseas still have free reign to say and do whatever they want without retribution?

    The whole issue that has come up because of Mommy blogs having an opinion or recommending a product is ridiculous. Too many people in America are just sue-happy and looking for a way to make a quick buck.

    When are people going to start taking responsibility for their own actions and quit blaming others?

    Perhaps FCC regulations will make for better American marketers, but I don't think so. Black hats will always find a way around any regulation, while the already ethical marketers will get their hands tied over some stupid bureaucratic ruling made by politicians that don't have a clue other than their own greed. I am afraid that BoatGirls predictions are prophetic.

    Well, that was my 2 cent rant.

  • Reply rocketdocket3442 days ago

    Great post and excellent reader comments.

    Those who have worked in Internet or traditional marketing and advertising have long realized that TRUST is the most compelling element of any marketer. Lose your prospects' or customers' trust and you're finished.

    Internet scammers may get away with one or two product launches, but word spreads quickly among bloggers and others in the Internet community. Scammers who over-promise and under-deliver don't last long.

    The blog post and comments remind me of current attempts by bankers to return TARP funding to the U.S. Treasury. At first, those who caused our global economic crisis were quite willing to accept bail-outs. With the proposed Fed restrictions on executive compensation and closer scrutiny, however, many bankers want to return the money to avoid government regulation.

    Do bankers who want to "have it their way" realize they're further raising the public's negative views of bankers who care only about their next paycheck and corporate profit statement? Why don't they realize they're cutting their own throats by putting the interests of their institutions ahead of the general welfare of the American economic system?

    Trust was also a key element in Obama's ascendancy to leader of the free world. Last October, I wrote a blog post on MarketingBeyond called: "Standing Beneath the Buttonwood Tree: A Letter to Senators Obama and McCain." (http://tinyurl.com/dkohj6)

    When Wall Street trading started in 1792, buyers and sellers stood beneath a buttonwood tree adjacent to the present location of the Stock Exchange. In the blog post, I wrote, in part:

    "When traders in the late 1700's met under the buttonwood tree, we would imagine they wheeled-and-dealed as forcefully as today's traders. The major difference: traders exchanged securities of real value, representing ownership in growing American companies--not trumped-up CDO's, credit swaps, sliced-and-diced sub-prime mortgage and other equities, invented by financiers whose self-interest was their own profits, not the betterment of society and our economy."

    Let's hope the proposed FTC regulations affecting affiliate marketers, fostered by Internet marketers of high integrity, will sell their products honestly and openly. Those that do stand the best chance to benefit financially from their efforts and not destroy the system that feeds them.

  • Reply Chris Goddard3442 days ago

    It's great to see some good discussion going on!

    In many ways this very quickly digresses into a political debate, and whether you believe in more or less regulation.

    It's a difficult question, one that has been debated for many years by politicians, academics, business-owners and the general public. The problem is, all those parties I just mentioned have their own specific interest which of course affect how they see the issue.

    As for only affecting only US affiliates, as I stated earlier, given the concentration of services and providers that affiliates rely on being based in the US, I think it will be possible for this regulation to extend beyond only US affiliates.

    You are right though that there will always be backhats and people doing bad stuff. That said, we shouldn't use that as justification to not try to hold ourselves to a higher standard.

    As for imposing restrictions on free speech - I don't see how this legislation could be used to target the average person stating their opinion. This is targeted as paid endorsements and word of mouth advertising. And there have been regulations on advertising for generations; it's just now the regulations are catching up to the technology.

    Either way, I hope that many affiliates and affiliate programs alike use this regulation as an opportunity to hold each other to higher ethical standard rather than engage in the vicious circle of "but I'm not as bad as the other guy".

    Great comments everyone!

  • Reply Mark Southgate3436 days ago

    Well most of the products on Clickbank are grossly overhyped and overpriced and some of them not much more than scams. Pretty much the same thing on the CPA networks. Plenty of affiliates willing to sell this crap though.

  • Reply The Mad Webmaster • 3380 days ago

    Great Post!

    I'm curious as to how the FTC is going to regulate websites in Russia or any other nation other than the U.S.

    The Internet is still "The Wild, Wild West" and no one really knows how to regulate or even tax it. Scammers have been around on the web for 12 years or more and the FTC just now wants to regulate scammers? How long have infomercials been around? Internet Poker is suppose to be illegal in the U.S. also. Right!

    I still believe in the old saying "if it sounds too good to be true... don't buy it". No government has ever been successful at regulating morality or ethics.

    Just my .06 cents (adjusted for inflation)

    Paul

  • Reply Shalisha Alston3371 days ago

    I think the upcoming FTC regulation is a very good idea. Too many hyped up claims go unpunished. Personally, if I don't like a product, I have a difficult time promoting it. Also, it helps me give an honest review about a product I have purchased in the past, rather than give my opinion on it based on what the product seems like it could do. However, that is not always feasible.

    For instance, I was a member of WA for a year trying to promote their product but I had a hard time doing it because I was not having success with the product, nor was the customer support any good! However, when I switched over to Affilorama, I now have something to compare WA to and I can give an honest review once I put my work at home niche site.

    Great job Mark. Thanks for keeping us in the loop.

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