Protecting Yourself From Your Affiliates’ Bad Actions

Many search marketers work with affiliates but fail to ask the question: Can your affiliates’ bad actions cause you legal trouble? The answer is probably. Among other things, your affiliates might get you into trouble for bidding on competitors’ brand name trademarks or making false offers, claims or endorsements without complying with FTC guidelines. Let’s take a look at both of these scenarios in more detail.

Bidding on competitor trademarks

Trademark bidding is the act of bidding on paid search listings for keywords that contain a trademark. Trademark bidding on a competitor’s trademarks could result in legal action for trademark infringement or for breach of contract if one exists.

Legal action. If an advertiser sponsors a keyword that contains the trademark of a competitor, which is allowed on some search engines including Google, the advertiser could be liable for trademark infringement. There are several tests applied by the legal system of the USA to determine if the action is trademark infringement, which include:

• Use of the mark in commerce which leads to the question “is advertising on a search term considered use in commerce?” Some courts have ruled yes; others have ruled no.
• Is a normal, typical consumer is likely to get confused as to the origin of a good or service?

I am not going to go into the case law and legal nuances here as there are cases that have ruled that trademark bidding is a bad thing, and some that say it isn’t, depending on individual facts and circumstances. For our purposes, let’s just say it is a bad thing for the moment.

Contractual agreement. Outside of trademark law, if there is a specific agreement not to trademark bid between advertisers, then doing so would be breach of contract. There are some industries and even some competitors who have entered into prohibition agreements where they all agree never to trademark bid on sponsored search accompanied by specific financial penalties if it is done.

Even if you are in complete compliance, and have a strict policy of never trademark bidding, you could still find yourself liable if your affiliate marketers are doing it. The scenarios in which affiliate marketers could cause you liability include:

Direct linking. Direct linking is where an affiliate uses your display URL in its ads, the destination URL is the affiliate tracking link, and the landing page is your on website. Most affiliate programs prohibit direct linking, although that doesn’t mean affiliates aren’t going to do it. Programs that allow direct linking typically only prohibit the practice on a merchant’s own trademarks, but allow it on all other terms, including keywords that contain marks owned by competitors. Meaning you are tacitly saying that direct linking is OK on competitors trademarks. If your affiliate advertises on a competitor’s marks, using your brand name in the display URL, the ad looks like it’s you. This means that any legal action taken by the competitor will be taken against you!

You have to protect yourself from this behavior as it could wind up costing you more than the affiliate program is worth. First, be sure to prohibit direct linking on competitor’s brand terms in your affiliate agreements. Second, be sure to monitor your competitors branded keywords to ensure that your affiliates’ ads are not showing up on your competitors terms. If they are, take swift action to pull the ad down.

Landing pages that exclusively promote you. If your affiliates are trademark bidding using their own website as the landing page and display URL, you are in better shape than a direct linking scenario but could still face liability if the ultimate landing page promotes only one advertiser: you! If the affiliate’s landing page only has you on it, then you will not be off the hook for trademark bidding violations.

You must monitor this activity as well to ensure that if the affiliate is going to trademark bid, that the trademark owner is also promoted on the landing page.

Ad copy that mentions you. If your affiliates are trademark bidding using ad copy that exclusively promotes you, you might be on the hook as well. While you are not doing the marketing, the ad certainly looks like you are. Watch-out for this behavior as well.

Decide if you will allow this activity to occur. If you determine that it is against your rules, then make sure to list it in your affiliate program agreement.

Offers, claims and endorsements

The Federal Trade Commission (FTC) is the arm of the government that keeps things fair with regard to what can or can’t be claimed about a product in advertising. The big picture is that any offer or claim must be true. More recently, on December 1, 2009, the FTC enacted an extended interpretation of their guidelines which requires anyone endorsing a product who receives financial gain from it to disclose that financial relationship.

This means that offers and claims in search listing text/ad copy must be truthful, that offers and claims on landing pages must be truthful, and finally any web site such as a reviews site, flogger or blogger who is endorsing your product and is also an affiliate of yours must disclose this relationship. Failure by your affiliates can cause you as the business owner to find yourself facing down the FTC.

Here are your to do’s to C.Y.A.:

Educate your affiliates.Educate your affiliates on the FTC rules and guidelines. You may be able to satisfy this just by publishing a guidelines brochure that is sent to every new affiliate who signs up for your program.

Monitor your affiliates. You don’t need to monitor every day or every week, but you should have a process in place by which you do monitor your affiliates. For example, visit their websites once a year (or more often if you like) to ensure that if you are being endorsed, there is disclosure somewhere that states that this web site owner is your affiliate. Another example is to monitor the ad copy / search listings of your affiliates and review the text to ensure that all claims and offers are accurate and true.

Note: This article is not meant as legal advice. The advice I give is that you determine a process and policy for each of the circumstances laid out above, be sure to communicate your policies clearly to all of your affiliates via your affiliate agreement, and then monitor it all just to be safe.