Compliance in Affiliate Marketing

Affiliate marketing is a popular marketing strategy for online businesses, and it’s not hard to see why. From the relative ease of setting up to the ability to pay for performance, it seems like a fast and profitable way to increase sales and brand recognition. However, businesses looking to utilize affiliate marketing as a part of their strategy need to be aware of and mitigate the risks that come along with it.

What is Affiliate Compliance?

Affiliate marketing compliance is the set of regulatory practices that businesses and affiliates need to follow to market ethically and legally, while creating and upholding a good reputation. Through affiliate compliance, businesses maintain transparency, protect consumer rights and avoid deceptive practices, which protects their reputations and keeps them out of trouble with regulatory agencies. 

One of the difficulties about affiliate marketing is that you realistically have no way to track what affiliates are saying or doing about your content. Despite that, you (as a brand), are still ultimately responsible for affiliate activity if they are marketing your products.

Why is Affiliate Compliance Essential for Businesses?

Without managing affiliate compliance risk, businesses make themselves vulnerable to malicious fraud on the part of bad actors and illegitimate affiliates, as well as non-compliant human error in content produced by actual affiliates.

There are several broad categories of noncompliance (by no means an exhaustive list):

• Misrepresentation of Brand and Product: Some affiliates willfully misrepresent the brand and product if they think it will improve their conversion rate. However, this can be unintentional too. For example, affiliates might use outdated logos or make changes to some trademarked identifier of the brand that the business did not approve
• Non-transparent Sub-Affiliate Partners/Networks: Publishers might work with partners who could be promoting products on sites that the business never approved
• Failure of Disclosure: Affiliates fail to display their affiliate disclosure that informs users that they are getting paid for their services. This is quite literally in the law; affiliates need to be transparent in their disclosures‍
• Human Oversight: Affiliates might publish incorrect information, such as providing a wrong annual fee for a card or misspelling a product name

How Noncompliance Affects Businesses

Affiliate noncompliance has several consequences if not addressed appropriately:

• Reputation: If the content published by affiliates is misleading or inaccurate, the brand of the business can be damaged
• Legal Issues and Fines: Behavior that violates advertising regulations, through fraud and other means, can cause legal issues for both the affiliate and the business, resulting in potential termination for affiliates and significant legal costs or fines for businesses. For example, in 2020, affiliates of a business coaching and investment scheme, My Online Business Education, paid more than $4 million after misleading customers with false and misleading claims about how much money customers could make with the service
• Dissatisfied Customers: Customers who were deceived or misled by content published by affiliates might complain, return the product, or write negative reviews of the business and product

Given the legal ramifications, it's probably worth keeping an eye out on your affiliates. With a bigger affiliate program comes exponentially more compliance concerns.

Tips On Maintaining Compliance in Affiliate Marketing

There are several ways you can ensure affiliates are staying in compliance with your brand's and the FTC's regulations:

• Clear Terms of Services (TOS): Outline all the rules and standards that affiliates are expected to follow in your TOS, including proper use of brand assets. Make sure that the language is concise, precise, and simple enough for the average person to understand. For example, in accordance with the guidelines published by the FTC, affiliates must display an affiliate disclosure—no matter what industry you're in‍
• Enforce Rules and Regulations: Conduct periodic audits and have a clear process for addressing non-compliance, including warnings, corrections, and potential termination‍
• Open Communication: Be communicative with affiliates about policy and regulation changes. This can be in the form of newsletters, webinars, etc.‍
• Vetting and Monitoring Affiliates: Especially for businesses in the early stages of affiliate marketing, personally vetting affiliates and managing their content is a good way to ensure that they maintain compliance. However, be warned that this is a resource intensive method. Alternatively, you can explore compliance/monitoring tools like what we offer here at Affil (book a demo call)

Conclusion:

While you might be tempted to begin onboarding affiliates right away, remember that your brand is responsible for your affiliate's activities.

By ensuring compliance in your affiliate marketing program, you can keep your brand respectable, prevent issues with regulators and stay one step ahead of malicious and fraudulent affiliates.