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Legal Issues Associated With Affiliate Marketing For Product Vendors

Posted on August 13, 2019 in Uncategorized

The contract which regulates the legal relationship between Affiliate Marketers and Product Vendors in the online marketing of goods is a critical document. The terms defining the rights and obligations of the parties should be very clear. Perhaps the most important clause to include in the contract is a termination clause, in the event that a Product Vendor needs to take decisive action to put an end to harmful practices engaged in by an Affiliate which are damaging to it’s interests and brand.

When an Affiliate promotes products online they often have a global presence and are doing business in a different jurisdiction than the Product Vendor. Whilst it is helpful to insert a jurisdictional clause stating what jurisdiction and law will govern any disputes which arise, such a clause will not always be conclusive. There may still be uncertainty as to where a relevant act or conduct has occurred which gives rise to a dispute and what law and forum a dispute should be determined in. Where legal action is commenced in the Affiliate’s home jurisdiction, on the basis that this is more convenient in order to facilitate enforcement of a Judgment against an Affiliate, there is a possibility an Affiliate could try to frustrate such proceedings by arguing that there is a clause in the Contract which nominates a jurisdiction to be applied for the resolution of disputes which arise. Therefore there is no clear answer as to whether jurisdiction or forum clause should be inserted into an Affiliate Marketing Agreement to protect your interests.

When a product vendor enters into a contract with a third party Affiliate Service Provider, it is customary for the provider to refer a network of Affiliates to the Product Vendor which may only have access to the physical address of the relevant Affiliate Website, but no information regarding the identity of the Affiliate Marketer. In the absence of reliable whois information, acquiring this information through the use of discovery procedures such as through the use of subpoenas may be difficult and impractical.

A successful Affiliate may invest significant time and effort in understanding the products they are promoting, but may not be familiar with the legal and regulatory landscape in a particular jurisdiction. A Product Vendor who discovers an Affiliate engaged in making misrepresentations regarding their Product may incur vicarious liability for their illegal actions. Careful consideration should be given to addressing these issues in the Affiliate Agreement. A Product Vendor may consider closely pre-screening Affiliates or subjecting them to an approval process prior to appointing them to ensure they are reputable and have the relevant knowledge of the regulatory framework where they will be operating.

Many affiliates employ email marketing and it is important to ensure that an Affiliate promoting your product isn’t purchasing customer lists without ensuring that customers listed have given permission to be contacted in an affiliate email marketing campaign. The only legitimate way to use email marketing is to send offers to targets who have given permission to email them. List building is a challenge faced by Affiliates who are sometimes tempted to use purchased spam lists or email harvesting software which will generally result in them being banned from a marketing network. Illegal email marketing practices may not only incur liability but also tarnish the Product Vendor’s brand and attract significant penalties from regulators depending on the spam laws in the relevant jurisdiction.

Cookie stuffing is an illegal practice used by some Affiliates to gain credit for a sale from a user who has visited their website. The placement of cookies on a user’s computer is done without their knowledge and without any referral to the product vendor’s website. Affiliates have engaged in this practice to ensure they receive the credit for a sale even where there was no referral from them leading to the sale of the product. Adware companies have been prepared to act as Affiliates, resulting in the installation of software on an end user’s computer without their consent. Irritating pop-up ads to promote the vendor’s product not only cause disruption to the end user experience but cause end users to attribute blame to the Product Vendor. The practice may also breach anti-spyware laws, exposing a Product Vendor to legal liability for the Affiliate’s actions.

Affiliates who elicit fake product reviews and make misleading and deceptive claims about products or features are also likely to be in breach of consumer laws. As a matter of urgency, the most pragmatic course of action is to terminate the affiliate’s appointment upon discovery of such behaviour to mitigate damage and exposure to legal liability and sanctions

It is also important to monitor whether the Affiliate is implicated in unauthorised use of trademarks or the registration of domain names deceptively similar to your trademarks or brands. The best way to address this contingency is to ensure trademarks and domain names are registered in the most significant markets in which you trade. This contingency should be addressed in the Affiliate Agreement and if an Affiliate won’t respond to take down requests, Google’s complaint service may be used as a preliminary step to legal action.

Affiliates often promote competing products, placing them on comparison websites. It is advisable to monitor activities to ensure Affiliates aren’t using a Product Vendor’s product to sell a competing product which yields a higher commission. Some Affiliates have been known to use search engine strategies to direct users to advertising for a Vendor Product containing unfavourable reviews for one product they promote, coupled with favourable reviews for a competing product with a higher commission.

It is important to realise that whilst Affiliate Marketing is an excellent way of promoting sales of your product there are legal and practical considerations to be aware of. Most Affiliates are professional, knowledgeable and act with integrity.

However It is recommended that Product Vendors be aware of the dangers associated with Affiliate Marketing and also keep up to date with the latest marketing and advertising laws in the jurisdictions in which they trade. The Federal Trade Commission for instance has updated their Guidelines regarding advertising practices which both Internet Marketers and Product Vendors should familiarise themselves with.

This is the best way to ensure that Affiliate Marketing results in the promotion of both sales and brand and doesn’t expose the Product Vendor to unnecessary legal or commercial damage.