Affiliate marketing is legal and above board (when done properly), but who is in charge? Is there a government body that checks the affiliate programs, payouts, and compliance? Making sure everyone is operating fairly and ethically?
Who regulates affiliate marketing?
Some may say that it is the Federal Trade Commission. But if you think about it, the FTC only has jurisdiction in the United States.
The thing is, there is no single answer to this question. The regulation of affiliate marketing depends on several institutions.
And this is what I will discuss with you today.
1. The Affiliate Program Merchant
The first regulator of affiliate marketing is the merchant. It refers to the company you are working for as an affiliate. Simply speaking, they are the ones responsible for the products they sell. They are also in charge of their respective affiliate programs.
A good example of this is Shopify—it has an affiliate program where the affiliates do not go through a network.
So how exactly do they regulate the affiliate marketing within their business?
Merchants are responsible for the products they sell. They are literally the manufacturers and/or the sellers of the products you are promoting. This means that they are responsible for policies regarding returns, refunds, damages, and so much more.
All these policies are in place in compliance with laws.
For example, if a customer receives a damaged order, he or she will be directed to the customer service of the company, not to you.
However, just because you are out of the equation does not mean you are not entirely affected. This is where regulation comes in. If a customer buys a product because you gave misleading information, the merchant may ban your account.
The government regulates the companies, but the companies in turn regulate their affiliates to make sure they are compliant.
Affiliate Terms and Conditions
The affiliate company you are partnered with is also responsible for setting rules. This may involve policies regarding the use of their marketing resources, method of advertising, possible grounds for termination, etc.
All the things that you need to know are written in the Affiliate Terms and Conditions.
As an affiliate, you have to read these rules—and not just read them but understand and apply them.
I have seen people on YouTube making false promises that if the viewers buy “this product,” they will make money.
When the affiliate company finds out about this, they will likely forfeit all their affiliate income.
Usually, they are very strict with their regulations. This is because it is not only their products that are at stake, but also their reputation and standing with the goverment or industry regulators.
2. Affiliate Networks
The next regulator of affiliate marketing is a network. A good example of this that you may have already heard about is Clickbank.
Companies like Clickbank set up a marketplace between affiliate marketers and merchants. The merchant uploads the product and the commission rate, and the affiliate markets choose what they want to promote.
These companies are huge, and they are in charge of setting up rules. They monitor giving payouts and creating a link for your affiliate program. They also provide you with your marketing analytics.
Here are the things that affiliate networks are responsible for:
Affiliate networks control the connection between an aspiring affiliate and a company. They regulate the rules, commissions, and many more activities. This should help prevent scams and misunderstandings.
In addition, the network also ensures the legitimacy of both parties involved. They require documents from each party. This ensures that the network is not being used for money-laundering or any shady financial transactions.
An affiliate network also creates rules to guide the affiliate. The most common rules you see have something to do with affiliate hi-jacking, making false promises, misleading a customer into buying, and so much more.
This means both merchant and marketer are subjected to online policies such as, but not limited to:
• Data protection
If you apply as an affiliate marketer, some networks will ask you for your domain name. They will check the content of your site and do some background investigation before you get approved. Of course, this varies from network to network, with some being very strict and others having more lax restrictions.
Here are some examples of affiliate networks:
• CJ Affiliate
• Amazon Associates
• eBay Partner
• Rakuten Marketing
You can visit each one and take a look at their terms and conditions. Each affiliate network has its own rules. While some of them share the same rules taken from the government, they also have their own views on how to protect themselves and their partners.
3. Government Policies
Last but not least, we have government policies.
Particularly, we know that the Federal Trade Commission of the United States has an active role in the affiliate marketing industry.
The policies from each country and state vary from each other. But the standard guidelines followed by all come from the Federal Trade Commission or FTC.
Because most businesses sell products to US customers, as such, they are bound by the laws of the US.
The FTC is a department responsible for the consumers’ concerns, specifically in consumer protection. Their guidelines cover the entirety of a buyer’s rights.
Here are some prohibited actions that directly relate to affiliate marketing.
Deceptive advertising refers to an ad that involves false information. It also includes exaggerated descriptions. These things can lead a customer to believe something that the product or service does not actually do. This may include using misleading images of your actual product or results.
This type of advertisement, on the other hand, happens when an ad unfairly favours only one brand. For example, a person may write a product comparison, and yet it subtly implies that one brand is better.
Why would an affiliate marketer do this?
Because he or she wants the reader to buy the product that would give him a commission, and this is what the FTC does not like. All reviews must be objective and factual, not artificially biased towards the favoured brand.
On the whole, the FTC would be fine with such comparisons when they are fair and accurate, but would have a problem if a companies marketing makes statements about competitors in their marketing that are unsubstantiated or flat out lies 🙂
The FTC requires all affiliate marketers to disclose that they are indeed affiliated, and marketing to their audience. Bloggers and YouTubers must make a disclaimer that readers and viewers can easily see. Violators could receive severe fines.
This is why you will observe that many companies also require this. They want you to put affiliate disclaimers every time you link out to them. Should they catch you not following this rule, they may disable your affiliate links.
Just look at Amazon, who run one of the largest affiliate programs in the world. They have very strict rules to make sure their affiliates comply and don’t land them in hot water with the FTC.
Recently, Amazon affiliates started having to have clear disclaimers that their content had paid affiliate links inside above the fold (basically in the top half of the page), for example. Amazon made this change due to pressure to comply with FTC regulations.
FTC guidelines are laws. Do not attempt to ‘wing it’ or get around it in any way. It takes only one violation to put you in enough trouble to severely dent your affiliate career.
Taking this into account, it would help if you become familiar with the FTC’s terms. You may not be a direct seller of a product, but you are still covered by these laws. This should be your bed time reading as an affiliate 🙂
Why? Because you are promoting the product, and you have a vested interest if people bought them.
Just because affiliate marketing is online does not mean you are not bound by laws. There are still a number of things that you are expected to comply with. Specifically, this applies to the guidelines of the regulators stated above.
When making money online was in its early stages, you could get away with a lot more and the regulations were lax or non-existent. Not any more! As online marketing has grown, so has the government’s willingness to regulate it and make sure everyone is ‘doing the right thing’.
Read the guides of FTC and read the rules of the merchant or affiliate network. You can also listen to affiliate marketing podcasts to learn more.
It may seem tempting, especially as a new affiliate marketer, to cut corners and try to get away with tactics not endorsed by the regulators. However, I would recommend you take the long-term approach. Compliance and ethical business practices are the cornerstone of any sustainable and respected business. You don’t want to be a one hit wonder, after all!!