Understanding the FTC’s New Guides for Affiliate Marketing Disclosures

The concept of electronic business

Part 1: How to Handle Endorsements and Testimonials

by Jo Ann C. Dearden

Many of us in AWAI are building Money-Making Websites. These websites either sell products directly or through affiliate marketing.

In my particular instance, I’m using affiliate partnerships as my source of income. I advertise a product from another company on my website, and if my customer purchases a product from them, I get a small percentage of the sale.

As a publisher, I am required to follow the Federal Trade Commission Endorsement and Testimonial Guides. Therefore, I must inform consumers of what can generally be expected from the use of the products or services that are being advertised.

However, on December 1, 2009, the FTC created additional new guidelines on endorsements and disclosures. These new guides affect how the endorsements and disclosures are to be used so as to put a stop to misleading and fraudulent testimonials.

The FTC is claiming that the average reader who comes to a website does not know that the endorsements are paid endorsements. They are calling this “deception.” What the FTC is saying is that you cannot assume that the reader knows you are being paid to promote a product or that you received a sample of the product to try for free. If we participate in an affiliate partnership with advertisers, it is our responsibility to clearly disclose that we receive a small percentage of the sale on those products or services we recommend on our websites.

If you are selling products on your website or have developed an affiliate program, you are also responsible for making sure that your affiliates do not violate these guidelines. If any of your affiliates are making claims that are not in compliance with the new FTC Guidelines, both you and your affiliate are liable for misleading the customer. This places a big responsibility on our shoulders.

To understand the changes better, I highly recommend everyone read the text of the guidelines. It contains examples of what the FTC considers deceptive advertising and acceptable advertising.

You can read the guidelines here:

Following the new guidelines by the FTC is relatively easy … As long as you place the disclosures on your site, you should be good as gold.

Part 2: Guideline for Writing Disclosures

by Anu Roots

As Jo Ann pointed out in Part 1, if you’re brand-new to online affiliate marketing, it’s important you know the Federal Trade Commission’s requirements regarding endorsements, testimonials, and disclosures.

New FTC guidelines oblige you to inform your readers that when they click on, or purchase something via your website’s ad links, you may benefit financially from those advertisers. This declaration of potential compensation from your advertisers is called an affiliate marketing disclosure.

From what I’ve learned looking at examples online, how you word your affiliate marketing disclosure is up to you. There is no standard format dictated by the FTC.

That said, let me share a couple of guidelines to help frame your statement:

First, your disclaimer must not mislead. The FTC says, “If you were paid to try a product and you thought it was terrible, you can’t say it was terrific.”

Second, your affiliate marketing disclosure should be simple enough for the average consumer to understand. Be transparent about your financial partnership with the companies you advertise, and leave the legalese to the lawyers. You do not need an attorney to draft your own disclosure statement.

Brand-new to all this myself, I was less than clear in a newsletter I wrote in which I stated my newsletter was based on my first product endorsement. I thought by specifically using the word endorsement (vs. testimonial) it was sufficient declaration of my affiliate status with the product’s manufacturer. It wasn’t.

The FTC contends “ . . . the average reader who comes to a website does not know that the endorsements are paid endorsements.” Because the FTC’s disclosure regulations don’t differentiate between testimonials and endorsements, the distinction is irrelevant to disclosure statements.

Copyblogger founder Brian Clark advises writing your disclosure with the presumption it’s fine for you to be compensated for delivering valuable content to your audience on a regular basis.

Two examples of confident disclosures Brian cites are Rae Hoffman’s snarky “Damn right it’s an affiliate link.” and Chris Brogan’s witty “If you buy this from me, I get some beer money (not enough for a pony).” Both inform without being serious as a heart attack. However, Rae’s may not be as clear as Chris’ to the average consumer.

For a great illustration of a short disclosure, take a look at www.LisaReviews.com. She uses simple blue banners at the end of her articles that state, “I received a gift/sample in preparing to write this review.” Her disclosures are to the point, and fully transparent.

To help get you started writing your own disclosure statement, go to www.disclosurepolicy.org. You’ll find a free template to use as is, or to customize to meet your needs.

Finally, check out the FTC’s comprehensive Question and Answer page dedicated to disclosure policy at www.ftc.gov/bcp/edu/pubs/business/adv/bus71.shtm.

Part 3: Making Sure Your Money-Making Website is FTC Compliant

by Bonnie Pecka

In the past year, changes to the FTC Endorsement Guidelines have been responsible for creating a bit of a stir in the affiliate marketing community.

Research has been conducted by anxious affiliate marketers who are trying to find the best way to implement changes in a way that will comply with the new requirements without taking the sales impact out of their marketing efforts.

As Jo Ann Dearden explains in Part 1 of this article, providing disclosure statements in your written marketing material is now a mandatory part of our marketing message.

To take the mystery out of the new requirements, the Federal Trade Commission has published a useful fact sheet at http://www.ftc.gov/bcp.edu/pubs/business/adv/bus71.shtm that answers some of the most common questions and concerns regarding these new guidelines.

In Part 2, Anu Roots tells us that disclosure can be as simple or as complex as you choose to make it. She illustrates this with various disclosure examples to consider as well as a great link to a free website that will help you get started.

The Upside of Compliance

A marketer or affiliate in compliance with these guidelines will present websites, landing pages, and other written promotions in a way that explains their financial connection to the product in a clear and concise manner. This willingness to embrace transparency in marketing will go a long way in developing trust with customers as well as meeting the FTC guidelines.

Your disclosure can also be expanded to make a statement that professes an ethical standard that you adhere to in your business. I saw an effective example in a new website draft from my Circus of Success colleague Penny Thomas. Her disclosure states, “I make money from this site — through advertising, affiliate programs, and selling products. However, I am scrupulous about my endorsements — if I don’t like the product, the service, or the publication, I won’t advertise or review it.” This promise of professional integrity is a powerful way to connect with new customers and remind your old customers why they began doing business with you in the first place.

While there have been some arguments that customers don’t care if an affiliate marketer makes a few bucks off a product, the fact remains that the customer has a right to know if your endorsement has a financial interest. As a customer researching a product before I buy, I look for articles and reports that don’t have a connection with the manufacturer. Or I search for reviews from an entity that has no financial interest in that product. If I find out that there is a connection, I digest the data with a certain amount of skepticism. The right kind of disclosure can diminish that skepticism.

Repercussions of Non-Compliance

The FTC clearly states that there will not be a fine for not complying with the FTC guidelines. However, if violations are brought to their attention, each violation will be evaluated on a case-by- case basis.

With this in mind, I would rather make the effort to remain in compliance and ensure that all of my business practices remain ethical and above reproach.

As a compliance consultant, it has been my observation that it usually takes a while for issues and precedents to be set after a rule or law comes into effect. To keep in touch with what is happening in the business world with these guidelines, I recommend keeping your eye on the FTC Public Comments section at http://www.ftc.gov/os/publiccomments.shtm. There, you’ll find discussions about ongoing investigations and issues stemming from complaints.

For me, understanding the new guidelines and the underlying rationale for them helped to relieve my initial anxiety. With all the examples available, incorporating a simple disclosure statement will be an easy fix for existing sites and for the development of new ones. I hope this article has also helped you to be more comfortable with them.

Freelance copywriters Jo Ann Dearden, Anu Roots, and Bonnie Pecka are members of mastermind peer review group Circus of Success. Each has experience launching and running a Money-Making Website.

Jo Ann is the author of her own website, www.sewithjo.com, dedicated to helping people have fun — and save money — through the art of sewing.

Crazy about dogs, but not the high costs of raising them, Anu launched www.MoreBarkForYourBuck.com. With money-saving tips and resources, her website helps fellow dog owners save money without compromising the care of their pets.

Bonnie Pecka is registered nurse with over 30 years of health care experience and is a nationally certified medical coder. She is currently a health care compliance consultant and a freelance copywriter. Bonnie is author of a website for her compliance business, Health Care Compliance Enterprise, LLC at www.nyshealthcarecompliance.com and also for her copywriting business at www.bonniepeckacopywriting.com.

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