This featured article is brought to you by: Taylor Tomanka, Business Attorney For Creatives, Content Creators & Freelancers

“Affiliate marketing is not a ‘push-button’ solution. It takes focus and commitment, and a certain choreography to make it happen the way you want it to.” — Pat Flynn

POV: Imagine you’re a passionate online coach, a dynamic course creator or a brand with a vision. You’ve poured your heart and soul into what you do, and now it’s time to let loyal followers share your craft with the world too. 

But, where do you start? Your answer: Affiliate Marketing. 

Fun Fact: The global influencer market, once a modest $2 billion in 2016, has exploded to an astonishing $21+ billion as of 2023. Post-COVID, retailers and online brands are making serious cash through using content creators for marketing efforts.  

Content creators hold value not only within the content they produce, but also their name, image, and likeness (NIL). If done the right (i.e. legal) way, these rights can be transferred to a brand and used in other marketing efforts. 

A content creator’s content can be purchased, in most cases, for much cheaper than the cost of hiring an entire marketing team like business’ had to do in the past. 

If this resonates with you, then it’s the perfect moment to delve into the world of affiliate programs and kickstart your influencer marketing journey.

So, if you’re reading this, rest assured – you’re not only in the right place but on the path to legally secure and thriving affiliate marketing. Let’s embark on this legal journey together!

BTW – Who Am I? I’m Taylor, a Texas business attorney, and your friendly guide through the legal maze of owning a business. Today, let’s ensure that your new affiliate program isn’t just successful but also operates trouble-free. In this article, I’ll guide you through the legal foundations of influencer marketing, ensuring your program is legally sound so your business can thrive in 2024.

What Is An Affiliate Program?

Broadly speaking, “Affiliate Marketing” encapsulates the strategic collaboration between a brand and individuals with a significant and engaged following that are big fans of the brand, known as affiliates. These affiliates have the power to influence the purchasing decisions of their audience. Affiliate marketing is about harnessing this influence to amplify brand messaging, extend reach, and drive tangible results.

The term “Affiliate” can encompass various arrangements agreed upon by both parties. However, in the realm of business and creative collaborations, Affiliates are often brand representatives who receive commissions (in cash) for each sale generated through their affiliate links. These links find a home on their websites, social media platforms, and blogs, creating a seamless connection between the brand and their audience.

So, why should your brand consider starting an affiliate program?

1. Expanding Reach and Audience Engagement: An affiliate program serves as a dynamic extension of your brand’s reach. With affiliates strategically placing your products or services in front of their audience, you tap into new markets and engage with diverse consumer segments.
2. Cost-Effective Marketing: Rather than spending substantial sums on traditional advertising, affiliate programs operate on a performance-based model. You pay commissions only for actual sales, making it a cost-effective marketing strategy.
3. Authentic Recommendations: Affiliates, often enthusiasts or experts in their niche, bring authenticity to your brand. Their genuine recommendations resonate with their audience, establishing trust and credibility for your products or services.
4. Boosting Sales and Revenue: With motivated affiliates actively promoting your offerings, you’re poised to experience a boost in sales. The commission-based structure ensures that your affiliates are aligned with the goal of driving actual revenue for your business.

The Legal Foundations Of Your Program

Now, let’s get into the not-so-fun nitty-gritty. I’ll do my best to keep this light, but there are a few items on the Affiliate Program set up checklist that need to be taken care of before your Affiliate Program goes live.

AFFILIATE PROGRAM LEGAL PROTECTION CHECKLIST

No. 1. A Formal Business Entity Structure Is In Place

No. 2. Your Online Shop & Site Are Protected 

No. 3. Your Affiliate Program Is Legally Protected

No. 4. Your Website’s Legal Terms Are Actually Binding. 

No. 5. Your Affiliate Program Has FTC Compliant Brand Guidelines.

In the world of affiliate marketing, success isn’t just about dazzling collaborations and soaring sales—it’s also about building a sturdy legal foundation that ensures your Affiliate Program stays out of hot water. These legal protections form the bedrock of your program, providing the structure and safeguards necessary for smooth operations and long-term success.

As we dive into this section, we’ll navigate through essential elements that demand attention before your Affiliate Program takes its inaugural step. 

From having a business entity set up to crafting your website’s Terms & Conditions (the “Website Terms”), Privacy Policies, Affiliate Program Terms of Service, and Brand Guidelines. Each piece contributes to the overall integrity and legal resilience of your affiliate marketing venture.

So, buckle up for a journey into the intricacies of legalities. It might not be the glamorous side of affiliate marketing, but mastering these foundational elements is the key to ensuring your Affiliate Program not only thrives but does so securely and with confidence. Let’s lay the groundwork for your success!

No. 1. A Formal Business Entity Structure Is In Place

Before diving into the exciting world of affiliate marketing and reaping the benefits of collaborative partnerships, it’s essential for small business owners to lay a solid foundation for their enterprise. One of the first and most crucial steps in this process is the establishment of a legal business entity, such as an LLC or corporation.

Affiliate marketing comes with its own set of risks, including contractual disputes, intellectual property concerns, and potential legal challenges. Having a formal business structure shields business owners from being personally responsible for these issues.

Without a legal entity like an LLC or corporation, business owners in sole proprietorships or partnerships may find themselves directly liable for affiliate-related disputes, putting their personal assets in jeopardy.

In the dynamic world of affiliate marketing, protecting personal assets and mitigating liability risks is paramount. So while most businesses start off as Sole Proprietorships (also called “Doing Business As” (DBA)) or as a Partnership – you’ll know better and you’ll know that these entities lack the legal distinction between the business and its owner(s), unwittingly exposing business owners to unlimited personal liability.

This means that in the event of legal issues or financial setbacks, legal action may be taken against the business that directly impacts your personal assets, including your personal bank accounts, your home, and savings. 

However, a Corporation and Limited Liability Company (“LLC”) both provide a protective barrier between personal and business liabilities. In the context of affiliate marketing, where potential disputes or claims may arise, having this separation is crucial for safeguarding personal assets. 

Most small businesses start up as LLCs due to LLC’s being more cost effective than a Corporation and they paying less in taxes than a Corporation. In addition, LLC’s are generally easier to manage as a business owner. 

By establishing a legal business entity like an LLC, you can confidently embark on your affiliate program journey, knowing that your personal and business interests are securely separated.

If you want to learn more about this specific topic, you can click HERE for details on how an LLC protects you personally and click HERE for more on the differences between an LLC and a DBA.

As a business attorney committed to the success of small businesses, I’ve created the “Ultimate Guide To Starting Your Texas Business” ebook to provide invaluable insights into the legal aspects of business formation. This comprehensive Guide is a must-read for entrepreneurs looking to navigate the complexities of starting and protecting their business in Texas. Explore my Ultimate Guide To Starting Your Texas Business” Ebook to ensure your business is legally prepared for success.

No. 2. Your Online Shop & Site Are Protected 

If you’re thinking about setting up an affiliate program, you’ll need to have a website with an online shop set up for customers to purchase your products and/or services. 

After that’s done – the next steps are (1) crafting comprehensive Terms & Conditions (the “Website Terms”) for your online store; & (2) drafting extensive, yet transparent Privacy Policies that are compliant with current privacy and data laws. 

Let’s get into the first online protection: your site’s Terms.

[1] Terms & Conditions 

Terms & Conditions are nifty little online agreements that create a harmonious relationship between you and your customers, ensuring everyone’s on the same page. Think of them as the “rules of engagement”, if you will, for your online store. 

These Terms serve as a legally binding agreement between you and your customers, covering various aspects such as purchase terms, payment methods, liability limitations, and dispute resolution procedures. 

To be sufficiently protected, you should have, at least, these six (6) terms incorporated into your Website Terms:

1. Payment, Shipping & Delivery Terms;
2. Returns, Cancellations & Refunds;
3. Chargeback Policies & Terms; 
4. Intellectual Property Protections;
5. Limitation Of Liability; &
6. Necessary Disclaimers.

You can learn more by clicking HERE for my best practices tips for writing your own Website Terms. 

Having poorly drafted or non-compliant terms and conditions, refund policies, or disclaimers can lead to lost sales and legal disputes. 

In stark contrast, by putting together clear and well-crafted Website Terms will decrease chargebacks, streamline cancellations and refunds and solve common shipping issues in record time. It’s really a no brainer!

[2] Privacy Policy 

In setting up your affiliate program, crafting a robust Privacy Policy is paramount. This essential document not only ensures legal compliance but also safeguards the interests of both your business and your valued users.

The digital landscape has witnessed a significant shift in the importance of privacy and data regulations. In 2017, no state had implemented a statewide privacy and data protection law. Fast forward to September 2023, and thirteen states, including California, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah, and Virginia, have enacted their own versions. Texas, with its Texas Data Privacy and Security Act (TDPSA), is set to implement its law on July 1, 2024.

California, leading the charge in 2018 with the California Consumer Privacy Act (CCPA), continues to set the standard with the California Privacy Rights Act of 2020 (CPRA). These laws are designed to bolster consumer protections, grant individuals control over their personal data, and regulate how businesses handle this sensitive information.

Across states, key obligations imposed on businesses include providing clear privacy notices, offering opt-out mechanisms for data sharing, and maintaining robust security practices to safeguard users’ private information. The laws mandate businesses to:

• Accurately Identify and Classify Private Information: Clearly define what constitutes private information.
• Empower Customers: Allow customers the right to request access, modification, or deletion of their data.
• Secure Data Disposal: Promptly and securely dispose of private information upon user request.
• Breach Notification: Execute breach notification processes efficiently within specified deadlines.
• Information Security: Maintain consistently strong levels of information security.

While these state laws may not match the comprehensive nature of the European Union’s General Data Protection Regulation (GDPR), they indicate a growing trend towards stricter data protection regulations in the United States. 

For businesses operating across multiple states, adapting your Privacy Policy to comply with these evolving standards is crucial for a legally sound and user-centric affiliate program.

No. 3. Your Affiliate Program Is Legally Protected

Creating a rock-solid legal framework is imperative for your affiliate program’s success. Let’s delve into the key components to include in your terms of service, ensuring a legally robust foundation.

In the realm of Influencer Marketing, the legal landscape is grappling to keep pace with the novel concept. In many countries, including the U.S., there are currently no specific regulations governing influencers. Instead, the sector is primarily regulated by intellectual property laws and consumer protection laws.

Under the umbrella of consumer protection, the Federal Trade Commission (FTC) plays a pivotal role in regulating Influencer Marketing in the U.S. The FTC focuses on preventing deceptive ads and safeguarding consumers from misleading marketing tactics. 

In trying to keep with the times and provide businesses’ with some sort of guidelines to follow when it comes to influencer marketing, the FTC has written the Endorsement Guides (the “Endorsement Guides”), which have been codified into federal law. In July 2023, the most recent version of the Endorsement Guides became effective and the law in the states regarding influencer marketing changed.

The latest iteration of the Endorsement Guides has shifted responsibility onto brands with Affiliate Programs. Brands are now accountable for:

• Affiliate Disclosures: Proper disclosure by affiliates, influencers, agencies, and advertisers is crucial. Failure to do so can result in liability for all parties involved. These should be outlined in your affiliate program’s terms (the “Affiliate Program’s Terms”) as well as promotional and marketing materials. 
• Brand Guidelines: Advertisers and agencies bear the responsibility of instructing affiliates and ensuring ongoing compliance. Monitoring and promptly correcting any lapses in adherence to guidelines are essential aspects of this responsibility.

In navigating this evolving legal landscape, your affiliate program’s terms of service must not only protect your business but also foster transparency and compliance.

Brands will also need to clearly outline expectations, responsibilities, and compliance measures for their affiliates, so that brands are monitoring and instructing affiliates properly and in compliance with the law.

 [1] Affiliate Program Terms: Your Affiliates’ Roadmap to Success

Embarking on the thrilling journey of affiliate marketing requires a roadmap, and that’s where your Affiliate Program Terms of Service steps into the spotlight. While it may not be as exhilarating as the journey itself, these terms serve as the unsung hero preventing your Affiliate Program from becoming the wild west of marketing.

Imagine sending your affiliates on a road trip without a map—it’s chaos waiting to happen. Your Affiliate Program Terms of Service acts as the GPS, guiding affiliates through the twists, turns, and detours of your program. Without these terms, confusion reigns, and wrong turns become inevitable.

Affiliates are the sidekicks to your business, and every dynamic duo needs ground rules. Your Terms of Service establishes expectations, aligning you and your affiliates on the same page. It’s the pre-road trip chat that eliminates the “Are we there yet?” moments. Without these terms, you risk leaving your affiliates in the dark, and let’s face it, nobody likes feeling lost.

Moreover, a lack of clear terms opens the door to non-compliance, jeopardizing adherence to federal and state laws and regulations.

So, do you need a contract with your business’ affiliates? The short answer is yes, but fear not! I’ll guide you through the essential types of terms to include in your Affiliate Program’s Terms (“Affiliate Program’s Terms”).

The following eight (8) inclusions (at a minimum) will help protection your Affiliate Program:

1. Brand Guidelines: Affiliates must adhere to your brand’s guidelines to maintain brand integrity.
2. IP Rights & Ownership: Clearly define how intellectual property rights work, especially regarding content created and posted by affiliates on platforms like Instagram.
3. Work For Hire Clause: Address copyright issues, considering moral rights where applicable.
4. Scope: Define the eligibility and scope of the affiliate program.
5. Affiliate Representations & Warranties: Affiliates must provide assurances regarding third-party infringement of IP rights, false statements, etc.
6. FTC Guidelines: Keep affiliates informed about FTC guidelines, including hashtag and disclaimer requirements, emphasizing your role in guiding compliance.
7. Reasons for Termination: Clearly outline reasons for immediate termination, especially in contravention of FTC and Brand Guidelines.
8. Disclosures: Specify disclosure requirements, emphasizing the need for proximity to claims, appropriate placement above the fold, and adherence to social media hashtag guidelines.

In essence, your Affiliate Program’s Terms not only protects your business but also fosters a collaborative and compliant environment. It’s the key to a successful affiliate marketing journey for both you and your valued affiliates.

No. 4. Your Website’s Legal Terms Are Actually Binding. 

What good are legal terms on your website if they aren’t legally binding. Am.I.Right?  

In the digital realm, binding customers to your Affiliate Program’s Terms is an art, and the key lies in the often underestimated, yet powerful Clickwrap Agreement. This online method ensures legal adherence to your terms, safeguarding both your business and customers.

A Clickwrap Agreement is a legal pact customers must accept before completing a purchase on a website—the familiar “I agree to the Terms of Service” checkbox before hitting “buy.”

Why The Clickwrap Matters

Placing Affiliate Program’s Terms in your website’s footer won’t cut it legally. To ensure enforceability, your agreement must have drafted terms, notify customers of their existence, capture their affirmative assent, and present a clear design.

Enter the Clickwrap: a contract accepted by clicking “I agree to the Terms & Conditions” with linked terms. It’s a digital handshake, ensuring compliance with established rules. In 2020, Clickwrap agreements boasted a 70% success rate in court (compared to the 64% with sign-in wraps and the 14% with browsewraps), making the Clickwrap the best form of electronic approval you can have.

For small business owners, Clickwrap agreements offer crucial benefits. They set clear expectations, prevent disputes, and establish trust efficiently. The convenient and efficient nature of Clickwrap agreements aids in creating a legally binding agreement that protects both parties.

Contact your IT professional to have your Terms of Service installed as Clickwraps on your website today!

No. 5. Your Affiliate Program Has FTC Compliant Brand Guidelines.

As we embark on this legal journey, we’ll navigate the ins and outs of the FTC Act, ensuring that your affiliate marketing complies with transparency and consumer protection regulations.

Understanding your legal responsibilities as an affiliate marketer is crucial. We’ll discuss liability issues and your obligations to maintain a legally sound affiliate program.

Brand Guidelines 

Building a strong brand requires guidelines. I’ll walk you through creating brand guidelines for your affiliates, ensuring consistency and legal compliance.

In this section I’ll discuss what information you should provide to your affiliates to ensure they understand their legal responsibilities.

The brand itself is responsible and liable for training and monitoring its affiliates to abide by the law when conducting any affiliate activities on the brand’s behalf. 

Brand Guidelines:

• If the posting platform has a disclosure tool, require affiliates to use it. 
• Require the hashtag #ad or #paidlink be listed prior to the rest of the post’s copy. 
• Explicitly lay out what the Affiliate can and can’t do or say in promoting your products or services and your IP. 
• Disclosures must be made as close as possible to the claims being made and on each page containing a sponsored link or reference to [the brand]. A single statement on the site, or a separate page with your general disclosure statement is not an adequate disclosure. In general, disclosures should be placed above the fold and scrolling should not be necessary to find the disclosure. Social media posts must include appropriate hashtags as outlined in the Brand Guidelines. 

Disclosures:

Not only is transparency the linchpin of trust in affiliate marketing, it’s also now the law.

As of 2023, a new legal standard mandates that brands with affiliate programs must actively train their affiliates on providing proper disclosures. It’s not just a nicety—it’s a legal imperative.

Let’s navigate the intricacies of disclosing affiliate links properly, building credibility with your audience while adhering to legal requirements.

• Empower Your Affiliates to Disclose: Informing your affiliates about the necessity of disclosing their relationship with your brand is not only ethically sound but also a legal requirement. This proactive step builds a foundation of transparency and trust.
• Stress the Importance of Truthfulness: Accuracy is paramount. Ensure that your affiliates and ambassadors represent their roles truthfully. Key points to emphasize include:
  • Content creators should refrain from discussing their experience with a brand’s product or service unless they have personally tried it.
  • Honest reviews are a must when affiliates receive payment for promotion.
  • Claims about a product or service treating health conditions, such as CBD curing ailments, should be avoided.
• FTC Compliance for Affiliates: In alignment with FTC regulations, affiliates must “clearly and conspicuously” identify themselves as “Affiliates” wherever their affiliate link is posted or when endorsing a product or service. This includes situations where affiliates receive:
  • Free or discounted products (even if unrelated to the endorsed product).
  • Other benefits, such as early access to a product, the possibility of payment, chances to win prizes, or opportunities to appear on television or in other media promotions.

That means that when making your required disclosure, content creators must ensure people will see and understand said disclosure, and now, place it with the endorsement message itself, if at all possible. Disclosure effectiveness will be evaluated based on the target audience of the endorsements (e.g. children or elderly).

But, if you’re like me — you need some real-life examples of disclosures that are “clear and conspicuous” vs. ones that don’t make the cut. 

Clear & Conspicuous

• The Disclaimer is placed at the top of blog posts;
• The Disclaimer is placed first in the caption before the user has to click “…more” on a social media post; &
• Use the hashtag #PaidLink or #Ad as the disclaimer.

NOT Clear & Conspicuous

• The Disclaimer is placed at the bottom of any blog posts or hidden on a Terms & Conditions or Disclosure page;
• The Disclaimer is placed somewhere that requires the user to have to click to read the Disclosure;
• Pop-Up Disclaimers; &
• Disclaimers on About Me or your profile page.

So what counts? Examples

By ensuring that your affiliates adhere to these disclosure practices, you not only meet legal standards but also build a transparent and trustworthy affiliate marketing ecosystem. It’s a win-win—compliance with regulations and enhanced trust with your valued audience.

Hashtags:

• RULE: Using certain hashtags may not be adequate for disclosure, such as “affiliate link,” “Affiliate,” “Commissionable Link,” or “Buy Now.”
• SOLUTION: Employ more explicit hashtags like “Paid Link” or “Ad” as they align with FTC regulations and provide clearer disclosure.
• EXAMPLE: Instead of using #affiliate, opt for #PaidLink or #Ad to ensure compliance with the FTC Act.

Pictures & Graphics:

• RULE: Superimposing the disclosure over the photo is effective, but it’s crucial to ensure viewers have sufficient time to see and read it.
• SOLUTION: Integrate the disclosure seamlessly into the image, prioritizing visibility and readability for your audience.
• EXAMPLE: If you share a graphic promoting an affiliate product, overlay it with a clear disclosure like “Paid Partnership.”

Video:

• RULE: The disclosure should not only be in the video description but also within the video itself. Best practice involves both oral and written disclosure.
• SOLUTION: Incorporate a visible disclosure within the video content, ensuring it is both spoken and displayed on-screen.
• EXAMPLE: In a video promoting affiliate products, verbally state and display on-screen, “This video contains paid promotions.”

Live Stream:

• RULE: Similar to video content, disclosures in live streams should be reiterated periodically to ensure awareness among viewers who join at different times.
• SOLUTION: Repeat the disclosure periodically during the live stream to cater to viewers who may only catch parts of the stream.
• EXAMPLE: In a live stream featuring affiliate products, periodically remind viewers verbally and with on-screen text that it includes paid promotions.

Limited Text:

• RULE: On platforms with character limitations like Twitter and IG Threads, generic terms like “[Brand] Partner” or “[Brand] Ambassador” may not provide sufficient disclosure.
• SOLUTION: Be more explicit, using terms like “[Brand] Paid Partnership” or “[Brand] Ad” to clearly communicate the nature of the collaboration.
• EXAMPLE: Instead of using “[Brand] Ambassador” in a Twitter post, opt for “[Brand] Paid Partnership” for enhanced transparency.

Adhering to these rules and solutions across various social media platforms ensures compliance with the FTC Act, providing your audience with transparent and accurate disclosures in line with the regulations.

And that’s it! 

As we conclude this enlightening journey through the legal landscape of affiliate programs, I trust you’re feeling more confident, informed, and ready to embark on your affiliate program adventure.

Remember, the world of affiliate marketing is about sharing, connecting, and growing together, and now, you’re well-equipped to do just that.

Keep sharing your passion, and remember, I’m here to ensure that your legal foundation is as strong as your vision! With specialized tools designed for affiliate program legal guidance, I’ve got your back to make your journey smoother and more legally sound, putting you on the path for unstoppable growth.

Your journey to confidence in your affiliate program awaits, and I’m here to support you every step of the way. If you ever need me – just reach out: Hello@TaylorTheAttorney.com or visit www.taylortheattorney.com. 

I offer a hands-on, personalized approach to ensure that your business’ Affiliate Program is set up and protected correctly, providing you with the peace of mind and legal protection necessary for a successful affiliate marketing venture. You can set up a complimentary discovery call with me when you’re ready. 

 

Cheers to your legal success and the exciting road ahead!

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This featured article is brought to you by: Taylor Tomanka, Business Attorney For Creatives, Content Creators & Freelancers

Taylor the Attorney is a boutique law firm that caters to female creatives, content creators and freelancers. After years of working in a traditional law firm, Taylor The Attorney, was created with the intention of breaking the mold and providing accessible + approachable legal services that are tailor-made for female entrepreneurs.

Through her boutique law firm, Taylor The Attorney, PLLC, Taylor provides her clients with the tools, knowledge and support to not only navigate the legal landscape but to transform their businesses into legally secure and thriving enterprises with easy-to-understand legal guidance, delivered judgment and jargon-free. Taylor will be your business’ newest online BFF with expert legal guidance that not only saves you time (and belly aches), it brings you from a confused business owner to a confident CEO.

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>>>>>> Contracts confusing you? Grab Taylor’s FREE Contract Confidence Guide HERE to help you master client agreements, establish credibility, and gain peace of mind without overwhelming confusion or complex jargon.

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