That $11,000 fine is not true. Worst-case scenario, someone receives a warning, refuses to comply, followed by a serious product defect; we would institute a proceeding with a cease-and-desist order and mandate compliance with the law. To the extent that I have seen and heard, people are not objecting to the disclosure requirements but to the fear of penalty if they inadvertently make a mistake. That’s the thing I don’t think people need to be concerned about. There’s no monetary penalty, in terms of the first violation, even in the worst case.

Liability

The issues that I saw commonly arise throughout the FTC document and not so much in reports is liability. Who is responsible for the misleading/deceptive ad? In one line, page 14, it states:

… if the advertiser initiated the process that led to these endorsements being made –e.g. by providing products to well-known bloggers …. – it potentially is liable for misleading statements made by those customers.

And on page 16 it states:

… that both the advertiser and the blogger are subject to liability for misleading or unsubstantiated representations made in the course of the blogger’s endorsement.

Take a look through the examples that they provide to determine what is appropriate and what is not. It all comes down to substantiation. Can the advertiser prove the claims that are being made beyond a doubt, and are those calms typical?

Cleland also stated:

Our approach is going to be educational, particularly with bloggers. We’re focusing on the advertisers: What kind of education are you providing them, are you monitoring the bloggers and whether what they’re saying is true?

While the fine seems to be a defunct, myth, consequences for the merchant (or advertiser according to the FTC verbage), are what they are going to be focusing on. Merchants need to take a very proactive role in informing and educating your affiliates. Make sure they know what they can and can’t say, and monitor those affiliates to make sure that they stay within the guidelines.

Getting the information out to all affiliates, no matter their size, is going to be key. I don’t believe that affiliates are going to purposely disregard the FTC regulations, but if they don’t know about them or what they mean, how can they become compliant? New affiliates enter our industry everyday that do not understand the complexities that exist within it.

Merchants, here is your checklist to make sure the FTC won’t be knocking on your door:

1. Read the document. Yes, it is 81 pages, and yes some of it does make your eyes start to roll into the back of your head, but having an understanding, or at least as much as you can despite all the gray area is crucial. The actual verbiage of the guides starts on page 55.
2. The very next newsletter that you send out, give a bit of a breakdown of what is going on, make reference to the FTC document. Make sure they know that they need to be in compliance. Make sure your affiliates have the facts about your products, and if they don’t, or you have too many to cover, make sure that they know they can ask you for any information that they need to be compliant.
3. Consider revising the terms of your affiliate program once you have a firm grasp what this means for your program/company, to reflect your actions to those affiliates who are not following the guides.
4. Monitor your affiliates. Check up on them to make sure they are being compliant, and if they aren’t make sure that they are aware of the new guidelines.
5. Most importantly, be there for your affiliates. Help them when they need it, guide them in the right direction, and answer any questions that they have!

Clear as Mud!

While this document, specifically makes reference to blogging, and pay per post marketing channels, it is not specific about affiliate links in general and/or how to disclose.

Within the verbiage of the Act, it makes reference to Network Marketing Program. While this does not make specific reference to Affiliate Marketing, if push came to shove, I would go as far as to assume that Affiliate Networks would be lumped in to that definition.

What is the best way to disclose? Apparently only the FTC knows, and they don’t have any plans of sharing that with us. While they tend to be old school marketing, perhaps they don’t understand the many ways that new school, online, social, ect can disclose. Is putting it in the T&C or the privacy policy enough? Does their need to be an individual disclosure page? Can it be on the about me page? Does it have to be after or with in each post? Does it have to be after each endorsed product (ie. If you endorse 3 products in one post, do you have to get down right redundant, I receive money if you click on this link and make a purchase?)? The questions are endless.

While many bloggers out there give their complete and honest opinion about a particular product or brand one way or the other, there are plenty out there that are not. Remember, this is to protect the consumer from false reviews and lies, when it has become a time that sites are constantly undergoing scrutiny of whether or not they are credible.

Be prepared for the unconstitutionality argument. ‘It is my first amendment right to say what I want.’ Sure it is, but do you really want to use that to lie, and deceive your users? And I’m sure you will not continue that relationship if they refuse to compile which will kill the relationship (money/products), and any liability.

This is very much a subjective matter. An endorsement may look deceptive to one person, and not to another. The FTC is reserving the right to make the call on this, so it is much better to be safe, then to cross the government on this one. After all, for many, this is their livelihood.

Yesterday I had the pleasure of sitting in on a webinar with Melanie Seers founder of AffilaiteVoice.com, and it was very enlightening. Here’s is some of the things that I learned.

• The Hawaii Tax Bill will go in effect July 1st.
• The only safe states are Alabama, Delaware, Oregon, New Hampshire, and Montana because they do not collect sales tax.
• That while you may not hear about the Bill, many states are drafting, or considering similar bills, if not already hearing. Find out what your state is doing!
• SSTP (Streamlined Sales Tax Program), while not the best solution, is a better solution.
• 23 States are already members (or in the process of becoming members) of the SSTP (with several others on the way), and if passed in Congress and signed by the President, these states will immediately will require the collection of Sales Tax.
• SSTP will greatly reduce the complexity of remitting sales tax to states (from over 800+ tax districts to 50? that’s a big drop). It has been proposed that merchants will pay the state, and the state will remit to the counties.
• And most importantly I learned that not every single state defines a nexus the same way. Ie, New York said a merchant has a nexus if affiliates made $10,000 in the 4 previous quarters, while another state (confirming which) says it doesn’t matter if you meet a threshold or not, you have a nexus.

Merchants, this is a very serious issue and should not be brushed under the rug. With soon to be 2 states having this type of law in effect, it is expected to steamroll through the country.

Yesterday, while speaking with a merchant, I was asked, how will they enforce these new laws, which I am sure is a question on many merchant’s minds? Massive Audits, Networks’ & Merchants subpoena’d, ect. Do you want to be held on charges of fraud, tax evasion, or worse?

Merchants, I am writing this to you for several reasons. First, Affiliates are working their hindends off fighting this, while Merchants are sitting back. Merchants, we need you to step up and help in this fight.

• Keep on top of the bills in each state. Watch the language and make sure you know and understand what each states definition of a nexus is.
• Email, write letters, and visit reps, even if they aren’t in your state. Write or meet on the behalf of your affiliates that are local to that state. Level with them and they will level with you.
• Keep your affiliates informed! This is so important. Which do you think is better, letting them know well in advance what is going on, even if you don’t exactly know what that is, or spring your decision on them last minute? Think about it, what if it is appealed? Would your affiliates come back if you were on the level with them every step of the way, or if you just dropped a bomb on them?
• Contact your local reps even though you already collect sales tax in your state. You may be asking ‘why? My competitors will lose there edge that they have over me locally’ Sure, this may or may not be true, but do you want to contribute to squashing small businesses, or do you want to help them and your community?

Merchants, now is not the time to be a part of the problem, but a part of the solution. Very worse case, if fighting these bills fails, instead of removing affiliates as soon as bills are being signed into laws, we should all be working together to devise a plan on how we can collect and remit the sales tax. While collecting the sales tax is not a major issue (a script on your site could solve that problem), it is an accounting nightmare, but not one that is un-doable, whether through lobbying for SSTP, or creating a solution that can be used industry wide.

Thanks to Melanie, AffiliateVoice, and all those that participated on the call.