Affiliate Endorsement Disclosure Guidelines

Review sites are a time-tested method of making a buck online via affiliate programs. While there is nothing wrong with these sites per se, it is vital to understand that the FTC requires disclosure to visitors of the relationship between the site and any companies putting out the products being reviewed.

Typical Scenario

You run across a product that seems pretty stellar, perhaps a treadmill. You go online to find out if it is any good. A search for “the treadmill name” plus “review” produces a number of sites reviewing the one you have in mind. You read a few positive reviews, click on a “save 10 percent” link and buy one.

Four to six weeks later the treadmill appears. It turns out to be flimsy and essentially a piece of junk. What’s going on? What about all those positive reviews?

The problem, of course, is review sites are not acting as neutral evaluators. Instead, the person running the site has a relationship with the company producing the product – typically an affiliate relationship for which they received a commission for each sale produced.

There is nothing illegal about such a relationship. In many ways, it is the backbone of the small business internet community. This is not the end of the discussion, however.

There is a problem when we look at things from the consumer perspective. The consumer is being sold a bill of goods to some extent. Most consumers assume a review site is going to be neutral. If a product stinks, they expect the reviewer to note as such. This is clearly not what is happening in our example. Instead, the reviewer has a vested interest in producing a positive review. The more positive the review, the more likely a sale occurs. Each sale, of course, puts money in the pocket of the reviewer!

FTC Response

The FTC has always maintained that parties acting as reviewers must disclose to consumers any relationship they have with the party producing the product. This guideline existed long before the internet. Why haven’t you heard of it? Enforcement was pretty low on the “to do” list of the FTC. After receiving a massive number of complaints from consumers related to dubious product review sites, this is no longer the case.

The FTC is now getting aggressive regarding the disclosure requirements. As Rob correctly notes in the comments below, the FTC is not issuing a direct fine for such violations. However, the agency is pursuing unfair competition claims resulting in large monetary civil penalties by arguing the failure to follow these guidelines is a violation. In my view, such actions essentially act as a “fine” because the vast majority of online businesses do not have the financial resources to fight the FTC and end up settling. In the case against Legacy Learning Systems, Inc, mentioned by Rob below, for example, the company settled FTC claims in this regard for $250,000 and was required to provide the FTC with access to the going-ons in its affiliate program including the identity of its top 50 affiliates and how those affiliates are marketing the Legacy products.

 

Your Response

So, how should you respond to these guidelines? The natural tendency of most site owners is to try to find a way to comply while doing as little as possible to alert visitors that a financial relationship exists.

I would encourage you to take the time to think through whether this is really the best approach. Why? Well, let’s use politicians as an example.

The one thing I hate about politicians is they will rarely just state the truth. I’m not a fan of George W. Bush. When he was running for re-election, he did an interview in which he dropped the politician act and admitted that we could never truly stop terrorism completely because any idiot could make a pipe bomb and blow something up. You might remember the uproar that occurred and he ended up backtracking on the comments.

I actually respected him for finally telling the truth on the issue. Politics aside, he gained credibility with me for doing it and with many others that I spoke of about it. Unfortunately, we’ve subsequently seen he was correct given the developments in Boston.

Perhaps you should take the same approach with your site. What if you made it very clear that you were making a buck off any sales? You could point this out and then indicate that you were recommending these products because you actually believed in them. You could also note there were other products that you didn’t believe in and were not recommending. Telling the blunt truth just might help you gain credibility with visitors to your site. In fact, I bet it would.

Most people are sick of the amount of obfuscation and spin in modern society. The FTC endorsement guidelines might seem an unfair burden, but perhaps they really present an opportunity to redefine the relationship between sites and visitors.

What opportunity? The chance to be honest with your visitors and, in doing so, build priceless credibility with them.