Are you a marketer or affiliate in Finance, Retail, Education or Pharmaceuticals? If you answered yes, then this five-part series is for you.
Did you know that online marketing activities for these industries are heavily regulated by various government organizations? Governing bodies like the FTC or CFPB (Consumer Financial Protection Bureau) publish hundreds of pages of regulations that apply to both advertiser and affiliate marketing activities like email, blogs and web pages.
Did you also know that your marketing partners are regulated as thoroughly as your direct advertising efforts? If you are like our regulatory clients, then your partner relationships are probably very lucrative to both you as the advertiser and your affiliates.
My goal with this five-part series is to help online advertisers and their partners navigate the complex regulatory environment and hundreds of pages in regulations (in 5,000 words or less).
After you complete this series, you will have a high-level understanding of the regulations governing your particular industry and how to foster healthy partner marketing efforts to thrive, not languish, in highly regulated industries. We will cover four heavily regulated industries:
Finance (e.g., insurance, banking, investment)
Retail (e.g., food, beauty, health)
Education (e.g., universities, especially for-profit and online)
Pharmaceuticals (e.g., drug companies)
Advertising challenges in regulated industries
Let’s start by explaining the advertising challenges specific to these industries:
Rules are complex. Government regulations are rarely simple and succinct. The FTC’s Truth In Lending Act, for example, is a 317-page document — and the part which explains FTC rules concerning affiliate endorsements and testimonials alone is 6,500 words long. Regulations apply to all of your online marketing activities, no matter what channel you use, and can change without you knowing. It’s daunting.
Teams of lawyers. In order to cover the regulatory environment, you likely have a team of lawyers at your company that help you to interpret and understand the mounds of regulations. On the flip side, most of your partners will not have access to expensive legal resources, and therefore, it is up to you to educate and assist your partners with compliance.
Partners are the advertiser’s responsibility. Regulations treat partners’ activities as if they were conducted directly by the advertiser. It’s the advertiser’s butt on the line if they fail to educate, monitor and halt a partner’s bad behavior. This applies to any affiliate, re-seller, manufacturer or designated broker or agent.
Partner reviews need disclosures. Partners who recommend an advertiser’s product must disclose this relationship, according to a 2013 FTC decision. The disclosure cannot be 8-point type in the footer of a blog, however. Partners need to know when, where and how to provide these disclosures.
Native advertising can be tricky. This increasingly popular ad format deserves extra vigilance in regulated industries. Its ability to blend in with scientifically backed stories, for example, makes it easier for bloggers to mislead consumers and get their advertisers in trouble.
Lawsuits happen. The penalty for rule-breaking is much higher in regulated industries. Repercussions range from cease-and-desist orders and small fines to multi-million-dollar lawsuits and negative publicity at the national level.
The challenges are hardly trivial. The subsequent articles will dive into greater detail about our four industries, including examples of good and bad ads, plus tips on how to monitor ads run by your partners. To prepare you for what’s to come, this article will give you important highlights for each industry
Advertising regulations in finance
The two big watchdogs for financial advertisers are the Consumer Financial Protection Bureau (CFPB) and the Financial Industry Regulatory Authority (FINRA). While Sarbanes-Oxley does control disclosures in public material, it’s less focused on consumer advertising.
The CFPB was created to protect consumers following the 2008 financial crisis and focuses on finding and stopping “unfair, deceptive, or abusive practices.” They collect consumer complaints, send them to the companies, and then publish them on their site to help educate consumers. Their site reports that financial companies have responded to more than 577,000 complaints so far.
Here’s what the most common CFPB advertising regulations for financial companies cover:
Deceptive statements about the benefits of financial services. A recent example involving partners was a 2014 lawsuit of Amerisave Mortgage Corporation for $19 million dollars. The suit found that the company ran misleading interest rates on the website of a third-party rate publisher.
Lack of advertising disclosure on fees or other rules affecting consumers. Examples include not disclosing APR rates or setup fees, failing to mention how fees rise in the future and not mentioning how a consumer can cancel their services.
FINRA, meanwhile, is the financial industry’s self-regulatory agency, though it does have oversight from the Securities and Exchange Commission (SEC). According to FINRA, they “review firms’ advertisements and other communications with the public to ensure they are fair, balanced, not misleading and comply with the standards of the SEC, MSRB and SIPC advertising rules.”
The agency says it reviews more than 100,000 communications each year and, in some cases, has fined its members for issues with advertising compliance.
Advertising regulations in retail
The main regulatory agency governing retail is the Federal Trade Commission. They created the Truth In Advertising laws, which say that “when consumers see or hear an advertisement, whether it’s on the Internet, radio or television, or anywhere else, federal law says that ad must be truthful, not misleading, and, when appropriate, backed by scientific evidence.”
They acknowledge that they pay special attention to retail advertising that:
promises health benefits, such as claims about food, weight-loss products and dietary supplements;
makes “high-performance” claims related to computers, ISPs and other high-tech products; or
makes “environmentally friendly” claims.
Their response to fraudulent advertising is powerful. It involves federal-level actions to stop scams, prevent future scams, freeze advertisers’ assets, secure compensation for the victims, and even force advertisers to run corrective advertising to address the deceptive claims.
Recent legal actions can be found in the FTC’s pressroom and include filing suits with:
An affiliate marketing operation using emails and websites to pitch bogus weight-loss products.
Skin care marketers for deceiving consumers with risk-free trials.
This blogger for failing to disclose her relationship with an advertiser when recommending the company’s dietary supplements.
Advertising regulations in education
Regulations governing educational advertising also fall under the watchful eye of the FTC.
A common violation on the FTC’s radar is an educational institution misleading consumers about its legitimacy, typically using false accreditations or associations with recognized equivalency programs.
Recently, the FTC brought two separate lawsuits against operators of online “high schools” offering essentially worthless diplomas. The companies used bogus website names and misleading site meta tags to deliver their fraudulent claims to consumers.
The FTC also monitors educational advertising for claims about a student’s chances of securing employment or specific income levels after graduation. Similar to the retail industry, advertising must not promise any benefits to consumers that are misleading or not backed by evidence.
Advertising regulations in pharmaceuticals
The US is one of only two developed countries allowing direct-to-consumer advertising by pharmaceutical companies (New Zealand is the other), so the temptation is ever-present to promise health benefits that science does not support.
The FTC is responsible for regulating advertising for over-the-counter (OTC) drugs, while the Food & Drug Administration (FDA) covers prescription drug advertising. Both agencies look for ads whose claims are not supported by evidence, misrepresent data, overstate benefits or downplay risks and so on.
The FDA reports that it does not require ads to be submitted for approval before going to market, but they do work with advertisers before they release TV ads. For drug ads, the FDA requires that product claims include a major usage of the drug, its generic name and all risks.
Recent FDA fines have been for drug makers promoting their medicines for off-label uses, including a $3 billion fine paid in 2012 by GlaxoSmithKline. There are few FDA examples so far involving partner claims in partner advertising.
Monitoring your partners
I’ve summarized the regulations and potential for violations from partner advertising in four highly regulated industries. So, how does an advertiser manage their partners to avoid these admittedly scary scenarios?
The plan looks like this:
Educate partners. Share the knowledge discussed in this article with your partners and repeat often. Make it abundantly clear how serious their compliance is and what the repercussions are for violations.
Monitor partners. There can be thousands of locations where content is published, such as email, landing pages, blogs, social, mobile and video. Monitoring all of these marketing channels is tricky to do manually, but it becomes quite efficient if you deploy an automated rules-based monitoring solution like The Search Monitor (Disclosure: my employer) or Corsearch.
Optimize partner relationships. If you’ve found partner violations of federal rules and have given sufficient warning, it’s time to remove them from your program and identify new partners. An affiliate network can help with this. Or get access to a database of affiliates scored by their compliance history, offered by some content monitoring platforms.
This is just a summary, and I’ll provide much greater detail in the articles to come.
Final thoughts on advertising in regulated industries
I created this series to simplify some of the regulatory complexities and help advertisers understand and thrive in regulated industries. Yes, advertising in these industries is challenging due to the extra rules, the extra eyes watching you and the potential for federal-level violations.
These challenges should not create fear and hesitation to act. My goal is to arm you with the knowledge needed for peace of mind while working with partners and your own internal departments.
With the groundwork laid in this article, I will deliver Part 2 of this series on the financial services industry in two weeks. I will share content monitoring data from The Search Monitor showing the good, bad and ugly of managing partner relationships in this highly regulated industry. Stay tuned. Your Master’s Course in this complex topic has just begun. :)
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