By March 2012, a total of eight out of ten affiliate marketers (including Intermark/Copeac, sued for its conduct as both network and affiliate) had settled actions by the Federal Trade Commission (FTC) and were ordered to stop using fake news sites to market dietary supplements and other products. In these settlements, the affiliates also had to agree to stringent substantiation provisions for weight loss and other health-related products, and onerous requirements to monitor other affiliate marketers, should they ever operate as an advertiser or a network. These settlements followed the filing in 2011 of court complaints and preliminary injunctions that shut down their webpages and restricted their assets.

I previously (in FeedFront, Issue 18) reported on how the FTC has not limited its efforts to just affiliate marketers, and how it also has been going after online advertisers (like LeanSpa, Central Coast Nutraceuticals and Jesse Willms) who use deceptive continuity marketing, deceptive affiliate marketing, and/or make allegedly false or unsubstantiated product claims. These advertisers’ settlements likewise impose tough claim substantiation requirements, and stringent monitoring provisions that make it difficult to almost impossible to work with affiliate marketers. How stringent? Serving the order on affiliates and networks; obtaining their signed statement acknowledging receipt of, and agreeing to comply with, the order, and even reviewing and approving every piece of affiliate content before publication.

So what are the FTC’s next steps? In addition to even more actions against advertisers and affiliates, the FTC may begin pursuing third parties who allegedly “assist and facilitate” the advertisers’ and affiliates’ deceptive practices. This could mean advertising or affiliate networks; payment processors; list brokers; lead generators, call centers, and others. In short, any person or entity in the advertising “chain,” from ad creation to alleged consumer injury, is potentially liable, if they knowingly help out others’ deceptive practices, or provide the “means and instrumentalities” for them.

Regulatory scrutiny just keeps ratcheting up, so affiliates, advertisers, networks and others must clean up their act or risk enforcement. Everyone in the chain will be held to the same basic standards:

  • claims must be truthful and substantiated;
  • all “material connections” (between affiliates, networks, endorsers and advertisers) must be disclosed, and
  • any fake or deceptive formats will substantially up the enforcement risk.  Also:
  • continuity/rebill/trial offer disclosures must be clear and conspicuous, and consumers must give their express informed consent before payment.

And these days, if/when the FTC comes calling, they often push to take from defendants every last cent they can of “ill-gotten gains,” for purposes of consumer redress or disgorgement. And if defendants have prior law enforcement orders, the FTC frequently seeks outright bans on certain types of marketing or verticals. The price of non-compliance is thus higher than ever, and all participants must take these risks into account, before launching any campaign.