Who regulates affiliate marketing? Shady business practices litter the internet so it pays to know the legal side of your affiliate online business.
As with any industry, affiliate marketing has its ups and downs. While plenty of people are selling reputable products and services through affiliate networks, some bad actors are trying to make a quick buck by promoting "scammy" items.
Because there's a lot of information about affiliate marketing, some people may be wary of entering the industry. Fortunately, I'm here to put those fears and doubts to rest. This article will discuss rules and regulations, specifically who regulates affiliate marketing and what it takes to become an affiliate legally. Here is everything you need to know...
Who Regulates Affiliate Marketing?
On a macro scale, no one entity is in charge of overseeing this industry. Instead, it falls to each country to regulate businesses and marketers online, whether they're affiliates or not. For advertising in the United States, the Federal Trade Commission (FTC) is in charge of regulating affiliate marketing.
However, since the internet connects people from everywhere, marketers must recognize that their customers may come from different parts of the globe.
Overall, as a marketer, your responsibility is to follow FTC rules and guidelines for promoting your product links from the merchant. Thankfully, you don't have to be well-versed in e-commerce laws from every country, so don't worry too much if your visitors come from the U.S. or elsewhere.
Instead, that responsibility falls to the vendors since they're the ones selling the actual products. That said, you do have to follow some strict regulations, which we'll discuss later on.
Is Affiliate Marketing a Pyramid Scheme?
The simple answer is no, but we're not going to dive too much into this question here. Instead, you can read this article about why affiliate marketing is not a pyramid scheme. Basically, since you don't have to pay into an affiliate program, nor are you actively recruiting new members, this business model is fully legit. Again, some bad actors can taint the industry's image, but the foundations of affiliate marketing are strong...and legal.
Why Affiliate Marketers Should Care About FTC Rules
The FTC does have a few rules that affiliate marketers have to follow. If you don't, you could get shut down and hit with a fine. The primary rule all marketers must follow is disclosure, meaning that you have to tell readers that you are being compensated for your recommendation.
All affiliate marketers have to disclose their relationship with vendors - no exceptions. The FTC breaks down this law into various parts, including:
Do You Need to Register as an Affiliate?
While you may have to set up an account on a platform with an affiliate network to make money as a marketer, you do not need to register yourself or your business (i.e., website) with a government agency. There is no "affiliate registry" or anything.
Similarly, if you work directly with vendors and avoid affiliate programs, you still don't have to register anywhere to earn money legally.
Can Affiliates Be Sued if They Break the Law?
The answer to this question depends on a few factors. Let's break them down:
How to Stay Compliant on Social Media
The same FTC rules apply for social media posts as they do for emails and blogs. The best way to disclose your relationship is to put it in the post itself. While you may be able to get away with placing the hashtag "#ad" and nothing else, you should go beyond a single tag since they can be easy to miss.
Some other factors to consider with disclosures include:
What Qualifies as an "Endorsement?"
Technically speaking, any public declaration regarding a specific product or service qualifies as an endorsement. However, if you're endorsing something without receiving compensation (or having a close relationship with the vendor), you don't need to disclose anything. You also don't have to announce that you aren't getting paid on a purchase, either.
Do You Need a Business License to Be an Affiliate?
If you're working with an affiliate network that connects you to various vendors, you do not need a business license. However, if you're contracting with vendors directly and earning money from them, you have to get a license. Realistically, you will register as a sole proprietor, but you could choose to license your affiliate marketing business as an LLC or corporation if you plan on expanding and hiring more people.
Bottom Line: Affiliate Marketing is a Smart and Safe Business Model
Affiliate marketing is an excellent way to earn a passive income stream, and the bigger your business, the easier it is. Although some bad actors may use unscrupulous tactics, they do not represent the internet marketing industry as a whole. Since the FTC is who regulates affiliate marketing, just follow their guidelines and promote products authentically, and you don't have to worry.