One of many ways to grow your business is to start utilizing affiliate marketing. This is a great tactic to increase traffic to your site, drive sales, and connect with people in your industry. However, there are a few rules and regulations that come along with working with affiliates. This is a closely regulated marketing tactic that the Federal Trade Commission monitors. It is critical to follow the guidelines set out by the FTC on affiliate marketing otherwise you can run into severe legal consequences. Let’s dive a little deeper into affiliate marketing and all the things you need to know before working with an affiliate!
What Affiliate marketing and how does it work?
Affiliate marketing is when you work with other entrepreneurs or influencers that agree to share your products with their audience. Businesses can choose whoever they would like to be an affiliate but most likely it will be professional influencers, or well-known persons, with a large social media following. You will usually issue an affiliate link, which is specialized to each person you are working with to increase the amount of traffic going to your site. In return for that person promoting your business, the affiliate receives some sort of compensation on the sales they send your way. This may be a certain commission from the sale, free goods, a flat rate, or maybe a trade of services. Whatever you and the affiliate decide on is at your discretion, however, that transactional exchange and business relationship needs to be made apparent to all consumers.
What are the FTC rules?
Disclose your relationship to consumers!
The FTC is tasked with the prevention of fraudulent or deceptive advertising and this includes monitoring deceptive affiliate marketing.
According to the Federal Trade Commission’s guidelines under Fair and Accurate Credit Transactions Act (FACT Act), all commissions made from affiliate links and transactions need to be clearly stated to the consumers. Likewise, the affiliate must clearly state that their post is a promotion of your brand or product and that they have a working relationship with you. Basically, if your consumers don't know if your affiliate is benefitting from endorsing your business then you may be in trouble with the FTC. These rules apply across the board with twitter, facebook, instagram, twitch, and TikTok. The name of the game is to be clear and conspicuous with your affiliate relationships with your audience! An easy way to keep this clear is for your affiliates to put the word “Ad” or “Advertisement” at the beginning of every post or story. Additionally, the Affiliates should be letting their audience know that they are an ambassador or partner by putting the hashtag #partner, #ambassador, or #affiliate on every post. These are simple ways for you to keep off the radar and in compliance with the FTC. The FTC has created a really easy-to-follow guide HERE for disclosing affiliate links on social media. If you want to read the Act specifically, check out this link of the FACT Act!
Keep it Private!
The FTC also sets out a guideline in the act that gives the consumer the right to restrict any personal information obtained by you or the affiliate to be kept private. This ensures that the consumer’s personal information is not being given to third parties or being used for solicitation. Similar to your website privacy policies, all visitors of your site need to be informed of any information that is being used that they may not be aware of. If you are gaining a commission from a transaction that was initiated by another entrepreneur/affiliate, consumers need to know who exactly they are buying products from and where their personal information is going. Remember, transparency is key when it comes to using affiliate marketing.
All good business practices come along with detailed legal guidelines; that is the trick of the trade when running a successful business. It may seem complicated, but for consumer protection purposes all consumers need to understand exactly what product they are buying, who is the owner of said product, that the affiliate is sharing to get a commission, and if any information is being shared to other unrelated third-parties. Just make sure that you are being transparent with everyone clicking that it's a special affiliate link.
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.