What is the FTC’s Affiliate Disclosure Requirement?
As a consumer protection agency, the FTC’s goal is to help consumers make informed decisions and protect them from potentially misleading advertising. To do so, it has mandated affiliate disclosures in situations where content creators receive compensation for promoting products or services. These affiliate disclosures promote transparency of relationships between businesses and the content creators they engage with. Simply put, the disclosures are statements that content creators must publish to inform their audience that they are receiving compensation (financial or otherwise) for endorsing brands’ products or services. Such compensation can come in various forms, including commissions, free products, or other similar incentives.
Affiliate disclosures go beyond legal requirements; they are ethical principles integral to digital marketing. By openly disclosing partnerships, brands and content creators build trust with consumers, ensuring that their recommendations are based on genuine experiences and preferences, rather than solely financial incentives.
Who Needs to Make Disclosures?
Any individual or entity engaged in affiliate marketing or the endorsement of products in exchange for compensation must disclose this relationship. This includes influencers on social media platforms, celebrities, bloggers, YouTubers, podcasters, and anyone else who promotes products to an audience, as well as the businesses and brands with which the creators are partnered.
How Should Disclosures Be Made?
Disclosures must be clear, conspicuous, and easily understandable to the average consumer. They should be displayed where consumers are likely to see them before they make a purchasing decision. For example, in an Instagram post, the disclosure should be prominently displayed within the content of the image or video, or in the related caption of the post, and should indicate an incentivized relationship between them and the brand they are promoting.
What are the Consequences of Non-Compliance?
Failure to comply with the FTC’s disclosure requirements can result in penalties, fines, reduced credibility, and damaged reputations. The FTC continues to actively monitor and enforce its guidelines, with celebrities such as Kim Kardashian, Kylie Jenner, and Cardi B, as well as brands including Calvin Klein, Estée Lauder, and Fit Tea coming under scrutiny over recent years for the lack of affiliate disclosures in their partnership marketing strategies.
What Should the Disclosures Say?
The FTC does not mandate specific disclosure language. However, the following disclosures are likely adequate: “This video is sponsored by [brand]”, and “This post contains affiliate links”. The FTC requires disclosures to be clear, conspicuous, and easily understandable to the average consumer, so the use of terms such as “affiliate link”, “advertisement” or “sponsored”, would also likely be more appropriate than the vague use of a term like “ad”.
Burden of Compliance
The FTC provides resources and guidelines on its website to help content creators understand their obligations regarding disclosures. Despite this, the burden of compliance lies largely with the advertising companies and brands themselves. That said, businesses need to ensure that their content creators comply with the FTC’s requirements. The FTC has stated that it “expects advertisers to be responsible for and monitor the actions of their endorsers.” With that, companies must document their monitoring activities and compliance actions continuously. Also, it should be expected that contract negotiations between brands and their affiliated creators will include discussions of FTC disclosure laws as well as related indemnification provisions.
Closing Thoughts
In summary, whether you’re a business owner or a content creator in the ever-evolving world of digital marketing, understanding and implementing FTC’s required affiliate disclosures is crucial for building a credible and trustworthy online presence, while also avoiding exposure to penalties and fines.
Disclaimer: This post is not intended to constitute legal advice. Please consult legal counsel for personalized advice.
