$1.1 Billion Dollar Judgments Against Affiliate Marketers - More To Come
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Dennis Yu, writing at Zac Johnson's blog talks about affiliate marketing and the FTC.
"You may have been reading how the Attorney Generals of most states, as well as the FTC are bringing down folks peddling Acai, Google Cash, IQ Quiz, Cash for Clunkers, and other scams.
Sanford Wallace was nailed for judgments of $873 million and $234 million for spamming Facebook and MySpace- that's over a billion dollars against just one guy.
I recently sat down with Steve Richter, who is President of affiliate.com, as well as the sharpest lawyer in Internet marketing, to get his thoughts.
- You're not safe because you're just an affiliate
- If anything you claim is false, you're guilty
- Your pages must have a privacy policy and terms of service
Now, Steve Richter might be the sharpest lawyer in Internet marketing, but if so, he certainly hasn't passed on his wisdom to Zac.
There are several looming legal traps in affiliate marketing, and I want to discuss one of theme - the disclaimer clause.
Virtually, every online business opportunity, or what is now being called affiliate marketing, contains an income or earnings disclaimer.
Legally, something is a business opportunity, covered by business opportunity and franchise laws if, very roughly, you are spending more than $500 in the anticipation that you will get in return a realistic economic opportunity to make more than you spent. These biz ops are covered by the FTC's Business Opportunity Rule.
How do the two fit together: the earnings disclaimer and being covered by the FTC Business Opportunity Rule?
Well consider this earnings disclaimer given by the Lazy Marketer, who claims that it took only 6 short months to make his first $100,000 in affiliate marketing.
Only 6 short months, hmm. And what does the disclaimer say:
"Income Disclaimer: This website and the documents it sells contains business strategies, marketing methods and other business advice that, regardless of my own results and experience, may not produce the same results (or any results) for you.
I make absolutely no guarantee, expressed or implied, that by following the advice below you will make any money or improve current profits, as there are several factors and variables that come into play regarding any given business.
Primarily, results will depend on the nature of the product or business model, the conditions of the marketplace, the experience of the individual, and situations and elements that are beyond your control.
As with any business endeavour, you assume all risk related to investment and money based on your own discretion and at your own potential expense."
Obviously, some online marketers think that is all there is to it: make outrageous earnings claims, and then disclaim their typicality on another page and you are safe.
Well, that is how it just to be. No longer.
The latest from the FTC on disclaimers.
When it promulgated the Endorsement Guides, the Commission clearly intended that advertisers usually would accompany atypical result testimonials with disclosure of the generally expected results.
However, as documented by the 2002 report, this has not been the practice.
The testimonial of a slim individual in a bathing suit that "I lost 50 pounds in 6 months with X's weight loss pills" likely conveys to the consumer that other users of the product will achieve similar results.
If the advertiser cannot substantiate that claim, a fine print or fleeting superscript disclosure of atypicality is unlikely to cure the deception - as demonstrated by the Commission's research.
For this reason, the Commission has proposed removing the "safe harbor" for disclaimers of typicality.
However, the proposal does not bar the use of these disclaimers - as some comments have suggested - but merely makes the advertiser responsible for ensuring that consumers are not misled by the ad in its entirety.
In other words, advertisers who use such disclaimers would be subject to the same standards, under Section 5 of the FTC Act, as advertisers making similar claims without use of testimonials.
As might be expected, this was one of the most controversial of the proposed revisions.
If you don't have evidence to substaniate what the general expected income is of those people following your marketing methods, then you had better not make claims on the front page and then disclaim them on some other page.
Anyone who is making serious coin ought to have a legal strategy about disclaimers that is onside with the FTC. Or you could simply gamble that the FTC won't show up on your doorstop, shut you down, and fine you into purgatory. Your call.
