Affiliate Marketing in the Regulators’ Cross-Hairs – By Thomas A. Cohn

by FeedFront Staff on December 1, 2009

Advertising claims by merchants have long attracted the attention of state Attorneys General (AG) and the Federal Trade Commission (FTC), but recently these regulators have signaled a willingness to pursue advertising cases against a new target: online affiliate marketers.

Until recently, affiliates have operated anonymously and attracted little scrutiny, because they do not sell the goods/services featured in their published content. But affiliate-published pages have always been vulnerable: if they contain misleading claims about a product, or fail to disclose connections with sellers, the affiliate may face liability for deceptively driving online sales.

Recently, the FTC and AGs have stepped up scrutiny of online claims. Regulators have attacked a variety of questionable practices, from misleading product claims, to deceptive trial offers with unauthorized charges, to falsely implied celebrity/expert endorsements and fake consumer blogs.

Affiliate-created blogs, review sites and other pages have proliferated, filled with claims that drive traffic to merchants. When this content contains suspect claims or fails to disclose connections with sellers, there may be liability for deceptively inducing sales.

It is no surprise that the FTC shows increased interest in affiliates. It has long held that it is not just advertisers who are liable for deceptive advertising. Anyone who plays a promotional role, be it ad agencies or shopping channels, is liable for its role in allegedly deceptive advertising.

Now the FTC may apply this expanded liability principle to affiliates. It is revising its Endorsement Guides to clarify that both advertisers and endorsers could be liable for the endorsers’ false advertising claims, and for failing to disclose material connections between advertisers and endorsers. But it has not confronted this issue – until recently.

In May, the FTC sued affiliates who pretended to operate “MakingHomeAffordable.gov,” the official Web site of a federal program providing free mortgage assistance. The defendants purchased links on results pages when consumers searched for “making home affordable.” A sponsored link displaying the official site’s full URL appeared in the search engines’ results.

Consumers clicking on the ads were directed to sites that sell paid loan modification services. Although the FTC did not sue those Web sites, it alleged the affiliates were attempting to defraud homeowners by falsely implying through search results that visitors were being sent to the government’s Web site.

Also, state AGs have cited the role of affiliates in their latest actions against online promotions, and these may be followed by other AG and/or FTC actions against merchants, affiliates, and/or networks that either engage in deceptive advertising, or knowingly assist and facilitate it.

In addition, affiliates’ unauthorized use of celebrity and news images and marks is subjecting them (and the merchants they link) to charges of trademark infringement, false endorsement and related allegations, under state and federal law.

Now that the FTC and AGs have brought cases, affiliates should consider themselves on notice: any affiliate who engages in or assists with fraud might end up in the crosshairs of law enforcement. Affiliates must be careful to publish truthful content that is not deceptive and contains the proper disclaimers and disclosures.

Mr. Cohn, of counsel with Venable LLP in New York, advises clients on the legal and practical aspects of compliance with state and federal consumer protection regulations and industry self-regulation programs, and represents clients during investigations and enforcement actions; he can be reached at tacohn@venable.com.

Download the entire FeedFront issue 8 here – http://www.scribd.com/doc/20220412/FeedFront-Magazine-Issue-8
FeedFront issue 8 articles can be found here as well: http://feedfront.com/archives/article00date/2009/10

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