Some people ask about affiliate marketing and the law, and even wonder, “Is affiliate marketing legal in my country?” The good news is that affiliate marketing is legal in most countries, if you do it right. It’s very important to understand about affiliate marketing and the law.
As with any business, it is important to operate within the law and do affiliate marketing legally. There are some very specific legal issues with affiliate marketing and we’ll explain them on this page.
Firstly, please note that this information is for your reference only, and to give you a “heads up” on some important legal considerations. We are not lawyers, and we cannot advise you on the exact legal requirements in your location and in your situation.
Most of the legal requirements discussed on this page are based on the law in the United States at the time of writing. Even if you are not based in North America, many of your website visitors and customers may be from there and therefore you should be careful to follow the requirements. Of course, you should also check into any special legal requirements for affiliate marketing in your own country.
OK, let’s take a look.
The Difference Between Affiliate Marketing, Multi-Level Marketing and Pyramid Schemes
There is sometimes confusion between affiliate marketing, multi-level marketing, and pyramid schemes. Here is a quick summary.
Affiliate Marketing is a type of performance-based marketing in which a business rewards affiliates for sending traffic, leads or customers. This is a common business practise in both the online and offline business worlds, and is legal in most countries.
With Multi-Level Marketing, also known as MLM, people do sell the company’s products or services to earn commissions, but there is heavy emphasis on recruiting more people into your “downline” to also promote the products or services. MLM organizations are structured in a way that mainly benefits those people at the top of the hierarchy. MLM companies are illegal in some jurisdictions, including in China.
Pyramid Schemes are fraudulent schemes disguised as multi-level marketing systems. One main difference between a pyramid scheme and a lawful MLM program is that there is typically no real product involved. Participants seek to earn money solely by recruiting new participants into the program. Typically, these schemes promise quick riches in return for paying your own fee and then recruiting others to do the same. Pyramid schemes are illegal in many jurisdictions.
As you can see, affiliate marketing is a legitimate business practise for marketing products and services where the person doing the promoting can be rewarded with commissions for their work.
How to Do Affiliate Marketing Legally
So how to do affiliate marketing legally and operate completely within the law? We need to look specifically at the following requirements:
- Affiliate Disclosure
- Amazon’s Associates Program Disclosure
- Privacy Policy
Provide an Affiliate Disclosure
In the United States, you’re required by the FTC (Federal Trade Commission) to disclose that you are using affiliate links on your website.
The reason is that affiliate marketing is a type of advertising.
The FTC wants to protect consumers by making them aware when the people or websites making endorsements or product recommendations may be being financially compensated or rewarded for making those recommendations and endorsements.
The penalties for failing to provide the required disclosure may include being banned by an affiliate program or affiliate network, and possibly having your earnings seized by law enforcement agencies.
Here is an explanation from the FTC’s website:
“If you disclose your relationship to the retailer clearly and conspicuously on your site, readers can decide how much weight to give your endorsement.
“In some instances – like when the affiliate link is embedded in your product review – a single disclosure may be adequate. When the review has a clear and conspicuous disclosure of your relationship and the reader can see both the review containing that disclosure and the link at the same time, readers have the information they need. You could say something like, “I get commissions for purchases made through links in this post.” But if the product review containing the disclosure and the link are separated, readers may not make the connection.
“As for where to place a disclosure, the guiding principle is that it has to be clear and conspicuous. The closer it is to your recommendation, the better. Putting disclosures in obscure places – for example, buried on an ABOUT US or GENERAL INFO page, behind a poorly labeled hyperlink or in a “terms of service” agreement – isn’t good enough. Neither is placing it below your review or below the link to the online retailer so readers would have to keep scrolling after they finish reading. Consumers should be able to notice the disclosure easily. They shouldn’t have to hunt for it.”
Source: FTC
What Should Your Disclaimer Say?
You already saw one example suggested by the FTC above:
“I get commissions for purchases made through links in this post.”
Here are some additional examples of disclosures (as of the time we were writing this):
ThoroughlyReviewed.com uses this:
“ThoroughlyReviewed is reader-supported. When you buy through links on our site, we earn a small affiliate commission at no additional cost to you.”
Wirecutter uses this:
“Wirecutter is reader-supported. When you buy through links on our site, we may earn an affiliate commission.”
An example from Aweber reads:
“This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.“
How About Social Media Posts?
On social media, such as Facebook and Twitter, the FTC allows you to use a hashtag phrase (instead of a full statement) in your posts to indicate that it is an advertisement (this applies to links to affiliate products too).
Examples of FTC-compliant disclosure phrasing and hashtags include:
- Promotion
- Sponsored
- Ad
- (promotion)
- (sponsored)
- (ad)
- (paid ad)
- (paid link)
- sponsored by [Brand]
Further Reading on Affiliate Disclaimers:
https://termly.io/resources/articles/amazon-affiliate-disclosure/
https://www.termsfeed.com/blog/affiliate-disclosure/
Amazon’s Associates Program Disclosure
If you are an affiliate of Amazon’s Associates Program then you need to add another disclaimer to meet Amazon’s requirements, in addition to the FTC disclaimer above.
Note: There are thousands of affiliate programs, and some of these will have their own special requirements too. Since Amazon’s Associates program is very popular among affiliate emarketers, we thought it best to specifically mention their disclosure requirements here.
Section 5 of Amazon’s Associates Program Operating Agreement requires you to clearly and prominently state the following (or any substantially similar statement previously allowed under their Agreement), on your website:
“As an Amazon Associate I earn from qualifying purchases.”
Until October 2019, the statement was:
“[your name or your website name] is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.”
Reveal Your Privacy Policy
If your website uses the personal information of your visitors (e.g. collecting names, email addresses, or credit card information) then you will be required (in most legal jurisdictions) to have a privacy policy.
Find our more about the requirements of a Privacy Policy:
https://termly.io/resources/templates/privacy-policy-template/
Also, here are two very important pieces of legislation you should be aware of… there may be others depending upon your country and where you operate.
The General Data Protection Regulation (GDPR)
The GDPR is the European Union’s data protection law designed to give individuals more control over their personal information, and the opportunity to interact safely with online platforms. It applies to (and will be enforced upon) any business that collects personal information from EU residents, anywhere in the world.
In essence, complying with the GDPR is all about treating people’s identifying data with respect. This involves:
i) asking for their permission to collect their data
ii) only collecting the information you need
iii) making sure your data is accurate
iv) keeping it secure.
Consent is critical. This means asking users for permission to process their data. You must explain your data collection practices in clear and simple language, and then your visitors or customers must explicitly agree to them.
The penalties for non-compliance are fines of up to €20 million or 4% of your global turnover.
We strongly recommend that you explore the following web pages which have extensive detail on the requirements of GDPR:
https://termly.io/resources/articles/gdpr-for-dummies/
https://www.privacypolicies.com/blog/gdpr-digital-marketing/
CAN-SPAM Act
In 2003, the Federal Trade Commission (FTC) introduced the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM).
The CAN-SPAM Act “sets the rules for commercial email, establishes requirements for commercial messages, gives recipients the right to have you stop emailing them, and spells out tough penalties for violations.”
https://www.ftc.gov/tips-advice/business-center/guidance/can-spam-act-compliance-guide-business
In essence, this Act requires you as an email marketer, to:
- Use a relevant subject line
- Use a real “sender’s email address, not a fake one
- Label message as an ad, unless the recipients have actively opted in to receive advertising and solicitation emails from your company.
- Warn of adult-explicit content
- Include your address
- Make it easy to opt out
This law also requires companies to accept responsibility for email messages sent out on their behalf, e.g. email messages sent by affiliate marketers to promote the companies’ products.
Keep Your Affiliate Marketing Legal!
We hope that this information helps you to be aware of the main pieces of legislation which you need to be aware of as an affiliate marketer. We’ll endeavor to try to keep this page up to date, but it is important for you to take responsibility for your own business practises. Keep an eye out for any changes to the laws, particularly around affiliate disclosures, privacy and email marketing.
Please bookmark this page so you can refer to it later!