This presentation is from Affiliate Summit West 2017 (January 15-17, 2017 in Las Vegas, Nevada). Session description: From tax legislation and FTC regulations, to ad-blocking technologies and search algorithm changes, several outside influences have a direct effect on the performance marketing industry.

1. Gary Kibel
PMA General Counsel
Partner, Davis & Gilbert LLP
gkibel@dglaw.com
@GaryKibel
Rachel Honoway
PMA BOD President 2016 - 2017
CEO at FMTC
rachel@fmtc.co
@FMTC_co

2. • Affiliate Nexus Tax
• Ad Blocking
• Influencers
• Native Advertising
• Privacy
Today’s Topics

3. What Is Nexus?
Nexus = connection
States are attempting to create a nexus for
taxes
Real estate
Operating a business
Employees
Resident-specific solicitation
Affiliates or Click-through nexus
3

4. How Does Nexus Affect Affiliate Marketing?
Merchants/Advertisers have dropped
affiliates in states with Click-Through
Nexus laws
Only the “click” has the connection –
consumer is not necessarily in state
Tracking technology
Additional tax filing burden
Affiliates are specifically targeted while other
platforms aren’t
4

5. Who Has Click-Through Nexus?
Arkansas
California
Connecticut
Georgia
Illinois
Kansas
Louisiana
Maine
Michigan
Minnesota
Missouri
Nevada
New Jersey
New York
North Carolina
Oklahoma
Pennsylvania
Rhode Island
Tennessee
Vermont
Washington
5

6. Where else is is / has it been on the table?
Alabama
Colorado*
Indiana
Massachusetts
South Carolina
South Dakota
Utah
Wisconsin
Wyoming
6

7. What’s Being Done About It?
Federal Legislation
Colorado provisions
Grassroots efforts
PMA
7

8. It’s Not Just the
Government…
Consumers want a say in
Advertising as well.
8

9. The Rise of Ad-Blocking
PC Software
Browser-specific extensions
Platform-specific extensions
Mobile apps
9

10. It’s More than Limiting Distribution
Blocking ads from displaying
Disabling tracking
Protecting privacy
10

11. The PMA’s Special Council Study
2015 - 2016
Members from top networks, publishers and advertisers
Determine concerns from all types of industry participants
Study processes ad-blockers use
Determine best approach for optimizing distribution
and tracking to avoid further alienating these consumers
11

12. Findings
One major source for
“whitelisting/blacklisting”
List of ad-serving domains and directories
List of tracking domains and directories
Moderated forum for updates and
discrepancies
12

13. The Approach to Mitigation
Accept
Respect
Report
Maintain
13

14. Resources
The curated lists and moderated
forums referenced in this piece can
be found at EasyList -
https://easylist.to/for the Curious

15. Best Practices for Advertisers & Agencies
Accept that not all consumers want to
participate in advertising.
Do not attempt to circumvent
Work with a compliant affiliate network or
tracking solution provider
ShareASale
Impact Radius
LinkConnector
Rakuten Linkshare
PepperJam
Affiliate Window
Tune

16. INFLUENCERS &
SOCIAL MEDIA
DISCLOSURES

17. Federal Trade Commission Act Section 5
“Unfair methods of competition in or affecting commerce, and
unfair or deceptive acts or practices in or affecting commerce,
are hereby declared unlawful.”
Deception = Misrepresentations or omissions likely to mislead consumers
acting reasonably under the circumstances
Unfairness = causes or is likely to cause substantial consumer injury, not
reasonably avoided by the consumer, and not outweighed by
countervailing benefits to consumers or competition
17

18. 18
Endorsements / Testimonials
Endorsement / Testimonial = Any advertising message which message
consumers are likely to believe reflects the opinions, beliefs, findings, or
experience of a party other than the sponsoring advertiser”
Must be honest and not deceptive
Disclosure of material connections:
“When there exists a connection between the endorser and the seller of
the advertised product which might materially affect the weight or
credibility of the endorsement (i.e., the connection is not reasonably
expected by the audience), such connection must be
fully disclosed”

19. 19
FTC Revisions to Endorsements and
Testimonials in Advertising (Guides) (October 2009)
Big Q – whether, when viewed objectively, is the relationship between
the marketer and the speaker such that the statements are
considered “sponsored”
Marketers can be liable for a blogger’s misleading or unsubstantiated
claims
FTC encourages companies to have social media participation
policies. Existence of such policies considered by FTC in any
enforcement action

20. 20
FTC’s Revised Endorsement Guides
A blogger/word-of-mouth marketer has a duty to disclose any
“material connections” with an advertiser (e.g., payments or free
products that the consumer would not expect)
Celebrities have a duty to disclose their relationships with
advertisers when making endorsements outside the context of
traditional ads, such as on talk shows, blogs or in social media
Employees who promote their employer’s products or services in
social media should clearly and conspicuously disclose their
employment relationship

21. 21
FTC FAQs – 2015
Clicking “Like” – Some platforms – like Facebook’s “like”
buttons – don’t allow you to make a disclosure. Advertisers
shouldn’t encourage endorsements using features that don’t
allow for clear and conspicuous disclosures. However, we don’t
know at this time how much stock social network users put into
“likes” when deciding to patronize a business, so the failure to
disclose that the people giving “likes” received an incentive might
not be a problem. An advertiser buying fake “likes” is very
different … they are clearly deceptive.

22. 22
How to Make A Disclosure in Social Media
How should a disclosure be made?
There is no special language but goal is to effectively communicate your
relationship with the marketer
Acceptable:
“Company X gave me this product to try ...”
“I work for Company X, so ...”
Not acceptable:
Button that says DISCLOSURE or LEGAL
ABOUT US or GENERAL INFO

23. How to Make A Disclosure
in Social Media with A Hashtag
Suggested:
#paid ad
#paid
#ad (at the beginning of the post)
#sponsored (but not just #spon)
#contest or #sweepstakes (but not just #sweeps)
But the FTC now seeks longer disclosures:
“Making the word “contest” or “sweepstakes” part of the hashtag should be enough.
However, the word “sweeps” probably isn’t, because it is likely that many people would
not understand what that means”
23

24. Hot Topics in: Advertising, Social Media and Consumer Privacy Law
24
Hot Topics in Social Media and Mobile Marketing Law24 Social Media and Privacy Law24
#SPONSORED

25. How To Manage The Legal And PR Risks In
Social Media
25

26. 26

27. FTC FAQs
Contest hashtags – It’s likely that many readers would not
understand such a hashtag to mean that those posts were made
as part of a contest or that the people doing the posting had
received something of value (in this case, a chance to win the
contest prize). Making the word “contest” or “sweepstakes”
part of the hashtag should be enough. However, the word
“sweeps” probably isn’t, because it is likely that many people
would not understand what that means.
27

28. FTC vs. Cole Haan (March 2014)
#Wanderingsole
Contest - $1,000
FTC – “We believe that participants' pins
featuring Cole Haan products were
endorsements of the Cole Haan products,
and the fact that the pins were incentivized by the opportunity to win a $1000
shopping spree would not reasonably be expected by consumers who saw the
pins”
28

29. Sweepstakes and Contest Disclosures
29

30. FTC – Machinima (September 2015)
Machinima paid a wide array of influencers to produce and upload
endorsement videos of Xbox One to YouTube
The FTC charged Machinima with engaging in deceptive
advertising for failing to have the influencers disclose that they
were being paid for their seemingly objective opinions
FTC – “when people see a product touted online, they have a
right to know whether they’re looking at an authentic opinion or
a paid marketing pitch. That’s true whether the endorsement
appears in a video or any other media.”
30

31. FTC – Lord & Taylor (March 2016)
Retailer hired influencers to post photos of themselves wearing its Design Lab
paisley dress
Influencers required to include @lordandtaylor and #DesignLab in posts
FTC charged that influencers did not disclose they were compensated to post
photo
Result: 20-year consent order with extensive disclosure, monitoring and reporting
obligations on retailer
31

32. FTC ACTION –
LORD & TAYLOR
32Recent Updates to the FTC’s Regulatory
Guidance

33. 33

34. 34

35. FTC Enforcement – Warner Brothers (July 2016)
Warner Bros. hired an advertising agency, Plaid Social Labs, to
coordinate a “YouTube Influencer Campaign” for its video game
Shadow of Mordor
Plaid Social Labs hired individuals who had earned reputations as
video game enthusiasts on YouTube to post positive videos
promoting the game in exchange for free access to a pre-release
version of the game and cash payments
Warner Bros. required that Plaid instruct the game enthusiasts to
place in the description box: (1) information about the game and
(2) an FTC disclaimer disclosing that the post was sponsored
35

36. Twitter Examples
50 Cent (Curtis Jackson) Tweeted (Jan. 2011) –
“HNHI is the stock symbol for TVG. there (sic) launching
15 different products. they are no joke get in now”
Curtis Jackson owns 7.5 million shares & warrants for 22.5
million more
“(My) own HNHI stock thoughts on it are my opinion. Talk
to (a) financial advisor about it. HNHI is the right
investment for me it may or may not be right for (you)!
Do ur (sic) homework”
36

37. RIGHT OF
PUBLICITY RISKS

38. Rights of Privacy / Publicity
The right of publicity is the right of every person to control the
commercial exploitation of their identity
Violations: A person’s right of publicity is violated by an
unauthorized commercial exploitation of that person’s identity
Pursuant to state law
Limitations: Commercial vs. Editorial
38

39. Rights of Privacy / Publicity
• Post Mortem Rights
• Allows claims by heirs and estates
• Tennessee - As long as continuously used
• California - 70 years after death
39

40. RIGHT OF PUBLICITY

42. Michael Jordan vs. Jewel Food Stores
Ad in 2009 Sports Illustrated
Jordan sues for $10mm
Lost, appealed, trial
Aug. 2015 – Jury trial = $8.9mm in damages
Nov. 2015 – Settled

43. 43

44. Hot Topics in: Advertising, Social Media and
Consumer Privacy Law
44

45. Heigl v. Duane Reade, Inc.
Katherine Heigl sued Duane Reed for violation of her right of
publicity and for false association / endorsement
Lawsuit sought $6 million in damages
After tons of press, parties reached a private settlement
“beneficial to both parties”
45

46. Social Media and Native Advertising Rules of the 46
Did They Join the Online Conversation?

47. Disclosures and Right of Publicity
47

48. Sofia Vergara vs. Venus Concept (Jan-2016)
Sofia Vergara used Venus Concept’s Legacy
skin tightening massage treatment in August
2014
She posted a selfie to WhoSay
Also appeared in EXTRA regarding using the
product
Venus Concept has used the selfie in its
advertising and at trade shows
She is suing for $15,000,000
48

49. Hot Topics in: Advertising, Social Media and
Consumer Privacy Law
49

50. NATIVE
ADVERTISING

51. Blurred Lines No More: Native Advertising in
2016
51
https://www.youtube.com/watch?v=IVfslRsNXUc

52. Law Applicable to Native Advertising: FTC
FTC advisory opinion, 1968:
• A newspaper article reviewing several restaurants had been paid
for by the advertisers but did not disclose that it was advertising
• “The column uses the format and has the general appearance of
a news feature and/or article for public information which purports
to give an independent, impartial, and unbiased view”
• Newspaper needed to clearly and conspicuously disclose that this
was an advertisement
52

53. Examples of Native Advertising
Sponsored Stories
Promoted Tweets
Branded playlists on Spotify
Huffington Post “brand newsroom”
Yahoo Stream ads
BuzzFeed
53

56. FTC Enforcement Policy and Business Guidance
(December 2015)
FTC has issued specific formatting and disclosure advice on the heels of NAD
decisions:
• Disclosures should be placed in front of or above a native advertising
headline and/or be accompanied by visual cues such as shading or borders
• “Advertisement” or “sponsored advertising content” should be used instead
of ambiguous terms such as “promoted” or “more from the web”
• “Presented by Advertiser” may not be sufficient if the advertiser created or
influenced the content as opposed to simply funding it
• Echoing the eSalon case, disclosures must be made when content is
shared or re-posted
56

57. Making Disclosures Based on the FTC Guidance
• In general, disclosures should be
• In clear and unambiguous language (logos alone are not
sufficient)
• As close as possible to the native ads to which they relate
• In a font and color that’s easy to read
• In a shade that stands out against the background
• For video ads, on the screen long enough to be noticed, read,
and understood
• Consumers must be aware content is sponsored before making
the decision to view it
57

58. • Due diligence on influencers
• Have policies and an approach in place
• Contracts / Terms
• Educate your influencers on your policies
• Monitor, monitor and more monitoring
Final Tips
58

59. QUESTIONS?
Gary Kibel
PMA General Counsel
Partner, Davis & Gilbert LLP
gkibel@dglaw.com
@GaryKibel
Rachel Honoway
PMA BOD President 2016 – 2017
CEO at FMTC
rachel@fmtc.co
@FMTC_co