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Overview of the Legal Issues of Affiliate Marketing: How to Make Sure You Aren’t Breaking the Law

By Nate McCallister / a couple of weeks ago

This is a dry topic, but if you're an affiliate marketer, this short article could help you avoid steep fines and even jail time!

If you're new to affiliate marketing or have never taken a serious look into the legality of the practice, I highly recommend you read this article before promoting anything else. 

Like it or not, federal laws and merchant contracts regulate affiliate behaviors, and you could face serious legal consequences if you violate these rules.

Follow these best practices to ensure your affiliate marketing efforts remain within the guidelines of the law.

The last thing you want is to earn a bunch of money just to lose it in an ugly class action lawsuit!

Know Your Merchants

Choose the merchants you affiliate yourself with wisely.

Programs promising the world may be too good to be true, and signing up for these without doing your research could leave you in a bad place when payout time comes. 

Even sticking only with well-known brands doesn’t guarantee an affiliate program is a good investment of your time.

When investigating affiliate opportunities, consider these questions:

  1. What kind of reputation does the company have?
  2. What other business endeavors is the company involved in?
  3. Is the company financially stable?
  4. Have other affiliates had favorable experiences?

Avoid brands with shady pasts, questionable business dealings and poor track records with customer service.

A quick search of the company in the Better Business Bureau database can give you good insights into the track record of the companies you are looking to work with. 

I did a quick search of Etison, LLC (the umbrella company for one of my big affiliates, Clickfunnels) and was reassured that they have a history of sound business practice. 

Etison LLC


Affiliating yourself with these companies can shed a negative light on your own reputation, and you’re not likely to be able to convince people to make purchases when the overall impression of the brand is negative.

Research the Products

When it comes to the law and affiliate marketing, you should always try the products from the companies with which you wish to affiliate.

Many bloggers opt for this approach by accepting offers for samples before entering into official agreements with brands. I know affiliates who refuse to pay for things that they promote and frankly, that is messed up. Yes, it's always appreciated to get something for free (it's a smart move by the merchant in most cases to give their affiliates freebies) but If something isn't worth paying for, it isn't worth promoting. 

When you've paid your own money for something it becomes more authentic when you promote it. Your promotions will be more natural and your followers will notice.

By giving products a trial run, you can be sure your marketing messages are honest and based in personal experience instead of relying solely on a brand’s own information to create your campaigns.

If it’s not possible to try products, take time to read reviews. See what previous customers have to say about quality, performance and how well products follow through on the promises made by the manufacturers or distributors. Choose only products you’re comfortable promoting and you feel you can market in an authentic way.

Understand the Agreement

Review every affiliate agreement from your chosen merchants before signing. This makes sense not only from a legal perspective but also from a practical one. If you’re planning to make affiliate marketing a consistent income stream, you need to understand the terms to which you’re agreeing.

Look carefully through the agreements for information on:

  • Whether you’ll be paid per click or per sale
  • Any minimum earning requirements before payouts are made
  • Consequences for early termination of an agreement
  • The limitation of liability for the merchant if a legal issue arises

It’s important to understand the payment structure so that you can work out the feasibility of meeting requirements during the given time frame. If you can’t hit the threshold for a payout, it’s better to find a merchant without these restrictions

Liability limitations dictate how much a merchant is required to reimburse or compensate you in the event of a lawsuit relating to the affiliate program. Be sure you understand your responsibilities in these situations to avoid getting a nasty surprise in the future.

You are responsible for following the terms of the affiliate programs. Failing to follow the terms and conditions of an affiliate program can easily lead to removal from the program but it could also lead to legal ramifications and lawsuits of you violate terms in a way that is seen as damaging to the merchant you're promoting. 

Be Careful When Marketing to Kids

Some affiliate programs include products geared toward children, and it’s fine to promote these if they’re good fit for your audience. However, the FTC enforces the Children's Online Privacy Protection Act (COPPA) in relation to marketing aimed at young consumers in an effort to prevent the unlawful collection and use of the personal information of minors.

Marketing to kids

If you market products to a young crowd, you’re required to obtain parental permission before collecting any kind of personal information. This not only applies to the initial gathering of data but also to the use of this data in future marketing campaigns and to whom the data is disclosed after it’s on file.

Disclose Your Affiliate Relationships

As of 2013, bloggers and social media influencers involved in affiliate marketing have been required to disclose their relationships with merchants. This means every post in which you refer to, link to or talk up a product must include an announcement identifying your participation in the associated affiliate program. Even if someone sent you a product for free with no obligation to review it or promote it, you still need to let your readers or followers know the product was supplied by the brand.

The law requires such announcements to be “clear and conspicuous,” meaning you can’t hide the information in the middle of a blog post or put it in small print at the bottom. The best way to stay in compliance with the law and affiliate marketing is to either disclose the information at the top of a post or to have a general site-wide disclaimer announcing your relationship with one or more merchants. 

Engage in Ethical Marketing

As an affiliate, you’re just as obligated to be honest in your advertising as the merchants with whom you work. In addition to not making claims you can’t verify about products or services, it’s also your responsibility to:

•Use only the images and content to which you have rights
•Not siphon traffic from other affiliates
•Adhere to keyword bidding rules
•Use a merchant’s brand in compliance with your affiliate agreement

Violating these rules or going against the terms of your contract with a merchant could result in losing your affiliate income, being targeted with a lawsuit or having to pay hefty fines.

Don’t Spam

Ethical marketing includes not sending email a recipient could consider to be spam. According to the CAN-SPAM Act put in place in 2003, spam is far more than sending out mass emails to people without their permission. The law is meant to control the distribution and, to some extent, the content of marketing messages, and violations carry fines of up to $16,000 per email.

Spam is defined by the FTC as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service.” Affiliate marketing emails fall into this category and must include specific information, such as the email address and domain from which they were sent, the physical address of the sender, a clear opt-out option and identification of the email as a promotional message.

Understanding legal issues for affiliates allows you to run legitimate campaigns in line with merchant agreements and federal guidelines. Maintain compliance in all affiliate relationships to enjoy a lucrative income stream from your blog, social media presence or email list. Remember to keep an eye out for changes in regulations or the terms of your affiliate contracts so that you continue to stay on the right side of the law.

About the author

Nate McCallister

Nate is the founder and main contributor of EntreResource.com. He is a lifestyle entrepreneur who spends his time building businesses and raising his two kids Sawyer and Brooks with his beautiful wife Emily. His main interests include copywriting, economics and piano.

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