Bureau of Consumer Protection Business Center
Six online marketers have settled FTC charges stemming from their use of fake news websites to market acai berry supplements and other weight loss products. If you’re an affiliate marketer or you’re thinking about building an affiliate program into your business plan, the cases merit your attention.
First, Affiliate Marketing 101.
There are lots of ways to advertise on the Internet — email, search engine marketing, display ads, social network sites. But most companies aren’t experts in every method or they don’t have the resources to use them all. That’s where affiliate marketing comes in. In its simplest form, affiliate marketing is having a third party market your product for you.
How does that work day-to-day? Say a merchant has a warehouse of products. The merchant sets up a website to sell the item and makes a deal with other marketers: “Bring people to my site and if they buy something, I’ll give you a percentage of the sale.” In that way, affiliate marketing can be a win-win situation. Both the merchant and the affiliate can make money while doing only what’s necessary to make the sale. Assuming the product is advertised truthfully and consumers are treated right, it can be a win-win-win.
But there’s the rub: What happens when affiliates are let loose without adequate direction or supervision to ensure what they’re saying is truthful and non-misleading? Some appear willing to cross the legal line as long as it results in the cha-ching of a sale. They drive as much traffic as possible to the seller’s site by any means — legit or not — that will achieve the goal.
According to the FTC, sometimes those means have included false and deceptive claims about what the product can do. Affiliates also have used fake blogs, bogus news sites, and other deceptive formats that mislead people about the source of the information or that fail to disclose a material connection between the affiliate marketer and the seller, as explained in the FTC Endorsement Guides.
That’s what the FTC says happened in the cases it recently settled. According to the lawsuits, affiliate marketers set up fake news sites that looked like this:
With titles like News 6 News Alerts, Health News Health Alerts, or Health 5 Beat Health News, the sites claimed to document a reporter’s first-hand experience with acai berry supplements, typically touting a 25-pound loss in four weeks. According to the FTC, many of the sites falsely represented that the reports had run on major media outlets — ABC, Fox News, CBS, CNN, USA Today, Consumer Reports. But, as the FTC charged, they were nothing more than ads deceptively enticing people to buy the featured product from online merchants who paid the affiliates for driving traffic to their sites.
The message for affiliate marketers. You can be held legally responsible for the deceptive claims you make — and non-compliance can be costly. The proposed settlements impose monetary judgments in the full amount of the commissions the affiliates got for driving traffic to the sellers’ sites. Due to the defendants’ financial condition, the judgments will be partially suspended, but not before the boat, the Beamer, and other assets are sold in partial payment.
The message for companies using affiliates. When you pay third parties to act on your behalf, you can’t wipe your hands of responsibility for what they do to sell your products. First, take steps to ensure the advertising messages they disseminate on your behalf are truthful. Give them detailed guidance about what should — and shouldn’t — be said about your product. Second, do some quality control on the back end once buyers have been directed to your site through affiliate marketing. Look at the affiliates and the ads that generate the largest number of referrals to see what claims they’re making. If you spot something amiss or hear concerns from consumers, follow up to find out what’s going on and take appropriate action. Reputable marketers can and should play an important role in bringing more order and accountability to the affiliate marketing industry.
First, Affiliate Marketing 101.
There are lots of ways to advertise on the Internet — email, search engine marketing, display ads, social network sites. But most companies aren’t experts in every method or they don’t have the resources to use them all. That’s where affiliate marketing comes in. In its simplest form, affiliate marketing is having a third party market your product for you.
How does that work day-to-day? Say a merchant has a warehouse of products. The merchant sets up a website to sell the item and makes a deal with other marketers: “Bring people to my site and if they buy something, I’ll give you a percentage of the sale.” In that way, affiliate marketing can be a win-win situation. Both the merchant and the affiliate can make money while doing only what’s necessary to make the sale. Assuming the product is advertised truthfully and consumers are treated right, it can be a win-win-win.
But there’s the rub: What happens when affiliates are let loose without adequate direction or supervision to ensure what they’re saying is truthful and non-misleading? Some appear willing to cross the legal line as long as it results in the cha-ching of a sale. They drive as much traffic as possible to the seller’s site by any means — legit or not — that will achieve the goal.
According to the FTC, sometimes those means have included false and deceptive claims about what the product can do. Affiliates also have used fake blogs, bogus news sites, and other deceptive formats that mislead people about the source of the information or that fail to disclose a material connection between the affiliate marketer and the seller, as explained in the FTC Endorsement Guides.
That’s what the FTC says happened in the cases it recently settled. According to the lawsuits, affiliate marketers set up fake news sites that looked like this:
With titles like News 6 News Alerts, Health News Health Alerts, or Health 5 Beat Health News, the sites claimed to document a reporter’s first-hand experience with acai berry supplements, typically touting a 25-pound loss in four weeks. According to the FTC, many of the sites falsely represented that the reports had run on major media outlets — ABC, Fox News, CBS, CNN, USA Today, Consumer Reports. But, as the FTC charged, they were nothing more than ads deceptively enticing people to buy the featured product from online merchants who paid the affiliates for driving traffic to their sites.
The message for affiliate marketers. You can be held legally responsible for the deceptive claims you make — and non-compliance can be costly. The proposed settlements impose monetary judgments in the full amount of the commissions the affiliates got for driving traffic to the sellers’ sites. Due to the defendants’ financial condition, the judgments will be partially suspended, but not before the boat, the Beamer, and other assets are sold in partial payment.
The message for companies using affiliates. When you pay third parties to act on your behalf, you can’t wipe your hands of responsibility for what they do to sell your products. First, take steps to ensure the advertising messages they disseminate on your behalf are truthful. Give them detailed guidance about what should — and shouldn’t — be said about your product. Second, do some quality control on the back end once buyers have been directed to your site through affiliate marketing. Look at the affiliates and the ads that generate the largest number of referrals to see what claims they’re making. If you spot something amiss or hear concerns from consumers, follow up to find out what’s going on and take appropriate action. Reputable marketers can and should play an important role in bringing more order and accountability to the affiliate marketing industry.
