There is quite a bit of concern in the online advertising industry right now around the subject of incentivized offers. Several large companies, including some that are publicly traded, generate large portions of their revenues in the incentivized offer space. Last week’s column generated a lot of interest in the industry, and seemed to raise a lot of questions in the minds of Internet marketing professionals. And as a professional in the affiliate marketing industry, now more than ever, you need the answers to those questions. Though the answers are not what you might like, and certainly aren’t clear, I received enough requests that I’m going to try to provide some guidance here.
It’s important to know some basics about how the FTC works when looking at incentivized offers, or any area of regulation. At its core, the FTC is here to enforce the law. That part is quite simple, and something all of us can understand. As citizens in a society based on the rule of law, we’re used to knowing the laws that affect our daily lives. Usually those laws are clear and straight forward. For example, we all know that when driving a car, it’s “illegal” to fail to stop at a red light. We know it’s illegal to exceed the posted speed limit. These things are very clear. Fail to stop and you’ve broken the law. If you’re caught, you can expect a ticket, and possibly a court date and a fine. The line is bright, and you are very clear if and when you’ve crossed it, and exactly what your offense will be if you get caught. The difficulty with the FTC and the laws, rules and regulations surrounding advertising, is that the rules aren’t so clear.
The FTC’s authority to regulate Internet advertising in general comes from “the FTC Act’s prohibition on ‘unfair or deceptive acts or practices,’ which broadly covers
advertising claims, marketing and promotional activities, and sales practices in general. The Act is not limited to any particular medium. Accordingly, the Commission’s role in protecting consumers from unfair or deceptive acts or practices encompasses advertising, marketing, and sales online, as well as the same activities in print, television, telephone and radio.” (Dot.com Disclosures introduction.)
The difficulty or confusion comes in determining exactly what constitutes “unfair or deceptive practices” in the eyes of the FTC. In 2000, the FTC issued a document called Dot.com Disclosures. This was a staff working paper which was intended to examine how the FTC’s own consumer protection rules and guides (many developed long before the Internet was pervasive) applied to sales and advertising on the Internet.
The problem arises for online marketers in determining what an “unfair or deceptive practice” actually is. While the Dot.com Disclosures document was intended to help provide clarification, and there is definitely some solid guidance provided, unfortunately it isn’t clear and definitive. The document doesn’t provide absolute clarity, and leaves a lot of room for continuing FTC “interpretation” of the meaning of “unfair or deceptive practices.”
The current issue which is attracting so much attention, and has potentially serious consequences in the incentivized advertising space, is in regard to how much disclosure is required up front when making incentivized offers. In other words, if you’re running an offer which asks people to fill out surveys in order to win a free iPod, where and how do you need to disclose all the details, such as how many surveys, how much time it will take, etc?
Previously, industry professionals were generally in agreement that as long as the disclosures provided were not hidden away, but were obvious, clearly related to the offer, and easily accessible, it would constitute reasonable disclosure under the Dot.com Disclosures. However, it appears from recent actions of the FTC that they are pushing towards a much more radical interpretation of disclosure requirements, possibly ruling out the use of hyperlinks, asterisks, etc. which lead consumers to appropriate disclosures. Instead, the FTC appears to be taking the position, at least in some current actions, that disclosures must be immediately contiguous to the offer, in the same font color and size as the offer, and must disclose all details about the offer.
While many can, and will, argue the reasonableness of this position (and reasonable people will differ), the fact remains that it is widely believed by Internet marketers, that inserting such legal disclosures in the midst of a marketing piece will dramatically affect conversions, and potentially render this method of advertising obsolete.
So what’s it all mean? In the end, it means that you absolutely need to read and absorb the Dot.com Disclosures. (PDF Version) While that document isn’t 100% clear, it will put you well on your way to making sure your pages aren’t obviously and egregiously out of compliance. I also recommend your disclosures are as physically close to your offer as possible, and that you make it obvious what they are and how to get to them. Exactly where and how you place them, and exactly what you should say is a matter to discuss with counsel.
In general, I’d direct you back to one of my early columns here in Digital Moses entitled “The Grandma Standard.” If your (or anyone’s) grandmother might not understand what they are getting into when they enter their name and email and head down the incentivized path, then your disclosures are probably not in compliance. For more nuance than that, you’ll need to consult with counsel of your choice.
I appreciate the email questions and comments I receive, and do my best to answer them all. If there are particular subjects you’d like to see discussed in the iLegal column, please let me know. Also, feel free to comment here, directly under this column. I’m happy to engage in open dialogue here as well.
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Come back to the iLegal column every week as we get specific about the rules, regulations, laws and trends that affect the online advertising industry. Each week we discuss important legal issues, talk about how to avoid the pitfalls, and cover the breaking legal and regulatory advertising industry news.
Legal Disclaimer: Information conveyed in this column is provided for informational purposes only and does not constitute legal advice. These materials do not necessarily reflect the opinions of Digital Moses, and is not guaranteed to be complete, correct, or up-to-date. The column is provided for "information purposes" only and should not be relied upon as "legal advice." This information is not intended to substitute for obtaining legal advice from an attorney. No person should act or rely on any information in this column without seeking the advice of an attorney.
Mark Meckler is the General Counsel for UniqueLeads.com, Inc., and Unique Lists, Inc.
Copyright 2007 Mark J. Meckler
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