Affiliate Marketing: Learning from F.T.C.’s Paid Placement Disclosures

Earlier this March, department store retailer Lord & Taylor agreed to settle U.S. Federal Trade Commission civil charges that it deceived consumers by paying for blog and social media placements. This settlement impacts how retailers work with bloggers and other affiliates.

First, some background. In March 2015, Lord & Taylor launched a social media campaign to promote its new private-label clothing line, Design Lab, which was targeted to women 18 to 35 years old. The campaign included branded blog posts, photos, video uploads, online endorsements, and paid editorial posts in online fashion magazines.

One such post was a Lord & Taylor-edited article that ran in Nylon, a pop culture and fashion publication. Nylon also posted an Instagram photo of one of the dresses from the line. The F.T.C.’s concern was that neither the article nor the post contained any indication that it was paid advertising.

On the same promotion, Lord & Taylor gave 50 fashion influencers a free dress, and paid them between $1,000 and $4,000 each to post a photo on social media wearing it. While the influencers could style the dress however they wanted, they were contractually obligated to tag the photo with “@lordandtaylor” and to use a “#DesignLab” hashtag.

The overall campaign reportedly reached 11.4 million Instagram users in just over two days and led to 328,000 brand engagements with Lord & Taylor’s Instagram account. The dress quickly sold out. However, I imagine it would have been just as successful, and more credible, with the advertising disclosure in place.

This Design Lab dress was the subject of the Lord & Taylor social media campaign.

Ecommerce merchants should note that the F.T.C. did not charge Nylon. It charged Lord & Taylor for failing to require the influencers to disclose that they were compensated for their posts.

While the case did not involve affiliate marketing, the business model — payment in exchange for placement — can be easily applied affiliate marketing. Retailers that work with bloggers or social media influencers through an affiliate program should ensure that consumers can easily identify advertisements and paid promotional messages.

In an F.T.C. press release, Jessica Rich, director of F.T.C.’s Bureau of Consumer Protection said, “The FTC’s policy applies time-tested truth-in-advertising principles to modern media. People browsing the Web, using social media, or watching videos have a right to know if they’re seeing editorial content or an ad.”

4 Ways to Ensure Compliance, for Affiliates

So how can merchants with affiliate marketing programs ensure compliance with the F.T.C.’s rules on disclosure? Here are four guidelines.

1. Include disclosure language in content distributed to affiliates.
If you distribute content to your affiliates to use in their promotional activities, be sure to include a sentence that states that the content contains affiliate links.

For example, Carrie Rocha publishes the Pocket Your Dollars financial blog. When a post on the site contains affiliate referral links, Rocha includes this sentence at the top of the post: “This content uses referral links. Read our disclosure policy for more info.” Note that she links to her full disclosure policy that outlines various ways that she may get compensated in her posts.

2. Educate your affiliates about disclosure rules. The F.T.C. disclosure rules help affiliates, not just consumers. A blogger’s biggest asset is her credibility. Disclosing any paid placements make the site more credible. Many vloggers now will disclose immediately if a product was sent for review, and in the same sentence, they also reassure viewers that their review was not influenced by the fact they received the product for free. Refer your affiliates to the F.T.C.’s document “.com Disclosures: How to Make Effective Disclosures in Digital Advertising.”

3. Include disclosure requirements in your terms and conditions. One of the F.T.C.’s main points against Lord & Taylor was that it did not require disclosure in any of the posts related to the Design Lab campaign. The F.T.C. even stated that Lord & Taylor reviewed all posts before distribution, and allowed publication without disclosure.

As such, retailers should not only be aware of the F.T.C.’s stance, but to actively include and enforce disclosure within affiliate terms and conditions. As a starting point, retailers can reference the F.T.C.’s “Native Advertising: A Guide for Business.”

4. Monitor disclosures. It is not enough to just include disclosure requirements in the terms and conditions. Retailers must enforce the process, as well. Monitor posts from your primarily bloggers and social media influencers regularly. Create Google Alerts to know whenever these affiliates post about your company so you can check for disclosure. Then, set up regular spot checks for other, lesser bloggers in your affiliate program.