Retail marketers have to tread carefully to avoid running afoul of the Federal Trade Commission. We are laying out what you need to know so you can move forward building partner and affiliate relationships with confidence.
Let’s start by discussing the federal agency that rules the roost for retail advertisers, The Federal Trade Commission (FTC), whose mission is to “protect consumers and promote competition.”
The advent of digital advertising has led the FTC to update its rules to account for more complex forms of advertising. In general, the FTC pays special attention to retailers that:
- promise health benefits, such as claims about food, weight-loss products and dietary supplements;
- make “high-performance” claims related to computers, ISPs and other high-tech products;
- make “environmentally friendly” claims; or
- use paid endorsements in a potentially deceptive way.
How it’s applied in retail advertising
The FTC also pays attention to certain ad formats and elements. One area is native advertising (aka sponsored content) which has the potential to deceive consumers by blending into a website’s editorial content. The FTC released a special enforcement policy statement for native advertising (PDF) in December 2015. Check it out to get the full detail.
In a nutshell, this relatively new ad format must abide by Section 5 of the FTC act (PDF), which prohibits “unfair or deceptive acts or practices in or affecting commerce.” In addition to the policy statement above, the FTC released a guide on how to properly use native advertising, along with 17 examples. Share this with your affiliates ASAP, as you are responsible for their actions!
This is a critical topic for your affiliates. The FTC created a Guide Concerning Use of Endorsements and Testimonials In Advertising that I suggest you review. It includes 35 examples of advertisers using endorsements — both the good and the bad — including several involving social media and personal blogs.
The guide shows how the rules apply to the three major types of endorsements: consumers (often called testimonials), experts and organizations. A few important highlights:
- Content: Must be truthful and not misleading. Unsubstantiated claims are prohibited, as are claims that do not represent the typical results expected after product usage.
- Connection: Must disclose any connection between the endorser and advertiser that would affect consumers’ opinions of the product (e.g., endorser is part owner of the brand).
- Compensation: Must tell readers if they were compensated in some form by the advertiser. Tricia Meyer, an affiliate marketing consultant, explains that the “compensation to a blogger means anything of value, including commissions, free products, or special treatment that other consumers or bloggers are not receiving.” Further, Tricia explains that even without any payment, just the fact that the “advertiser asks for the blogger’s endorsement would create a connection between the two, and any future activity between the two would be closely scrutinized.”
- Language: As stated in this guide by the Performance Marketing Association (PMA) (PDF), “there is no magical disclosure language.” Language must be used that any “reasonable consumer” (an important phrase for the FTC) would know that an affiliate is getting paid for their endorsement.
- Location: Endorsement disclosures must appear above any review or affiliate link, not in the footer or on a separate page. For video endorsements, disclose all important connections before the endorsement begins.
- Space-limited disclosures: These still apply to small spaces like Facebook and Twitter. The PMA recommends putting “AD:” at the beginning of a tweet, for example, rather than just adding a hashtag at the end.
Product claim disclosures
In addition to policing the use of endorsements, the FTC wants to improve how advertisers disclose important claims about a product’s performance. The FTC takes product claim disclosures very seriously, having issued a 53-page FTC guide to disclosures (PDF). I recommend grabbing an espresso and a comfy chair and reviewing the guide. Here are a few highlights in the meantime:
- Proximity: List the disclosure as close as possible to the claim, for both text and image claims. Do not simply link to a disclosure elsewhere
- Prominence: It’s all about being “clear and conspicuous.” Make sure you use the appropriate size, colors, contrast, and even supporting graphics/icons if they help. Don’t bury it with less important copy. Further, make sure the prominence is consistent across all devices, especially mobile.
- Distractions: Make sure other factors do not distract the viewer from the disclosure, including links, buttons or unrelated graphics.
What should retail advertisers do?
- Train your affiliates. Share this article and its links, and follow up with training. Get confirmation that the rules are understood.
- Monitor your bloggers. Use ad monitoring technology to alert you if your affiliates’ ads do not contain required disclosures or are making unsubstantiated claims. Let the technology do the heavy lifting, since it’s impossible to do a thorough job manually. Also, require your affiliates to monitor their own ads as a backup.
- Enforce FTC rules. Don’t stand for repeat violations. Remove affiliates who break your rules.