This presentation is from Affiliate Summit West 2015 (January 18-20, 2015 in Las Vegas, NV). Session description: Explore affiliate tax nexus legislation, FTC disclosure requirements and trademark protection in this panel discussion that includes a lawyer, a retailer and a trademark protection specialist.

1. AFFILIATE LEGAL
ISSUES:
3 IMMEDIATE ACTION
ITEMS
January 19, 2014

2. PANELISTS
THE LAWYER
Gary A. Kibel
Partner
Davis & Gilbert LLP
THE MODERATOR
Carolyn Kmet
CMO
All Inclusive
Marketing
THE MERCHANT
Gerri-Lynn Becker
President
The California Wine
Club
THE TM SPECIALIST
Sam Engel
Marketing Manager
BrandVerity

3. AGENDA
 Action Item #1: Affiliate Nexus Tax
 Action Item #2: Online Disclosures in Interactive
Marketing
 Action Item #3: Trademark Protection
 Getting It Done
 Moderated Discussion
 Q&A

4. AFFILIATE NEXUS TAX
 What is it?
 History
 Debate
THE LAWYER
Gary A. Kibel
Partner
Davis & Gilbert LLP

5. AFFILIATE NEXUS TAX
PERFORMANCE MARKETING ASSOCIATION v. ILLINOIS
 PMA vs. Illinois Department of Revenue (2011)
 PMA prevailed at Circuit Court
 Illinois Supreme Court upholds Circuit Court ruling –
October 18, 2013

6. AFFILIATE NEXUS TAX
UNITED STATES SUPREME COURT: Overstock.com & Amazon
v. New York State Department of Taxation and Finance
(2013)
 Petition for review of decision from the New York Court of
Appeals
 Appeal rejected – December 2, 2013
 Result - New York law remains in tact
 NY Attorney General – “validates New York’s efforts to
treat both online and brick-and-mortar retailers equally
and fairly by requiring all retailers with a presence in our
state to collect sales taxes”
 Overstock – “[this] functionally abrogates the physical-

7. AFFILIATE NEXUS TAX
STATES WITH ACTIVE LEGISLATION
Arkansas
California
Colorado
Connecticu
t
Georgia
Illinois
Kansas
Maine
» Minnesota
» Missouri
» New Jersey
» New York
» North Carolina
» Pennsylvania
» Rhode Island
» Vermont
» West Virginia

8. AFFILIATE NEXUS TAX
COMMON ELEMENTS IN STATE LAWS
 Manner in which marketing activities are defined
 Annual dollar thresholds
 Prohibition on solicitation
 Work arounds

9. AFFILIATE NEXUS TAX
STATES WITH BILLS PENDING
Florida (withdrawn)
Hawaii
Indiana
Massachusetts
Michigan
South Carolina
Tennessee

10. AFFILIATE NEXUS TAX
CONGRESS – MARKETPLACE FAIRNESS ACT
Status
 Passed Senate – May 6, 2013 (69-27 vote)
 Not voted on in the House
Summary
 States authorized to require all remote retailers to collect
and remit sales and use taxes.
 A single entity in the state is responsible for all state and
local sales and use tax administration; A single audit and
tax return for all state and local jurisdictions; and
Uniform sales and use tax base for all state and local
taxing jurisdictions.
 Remote retailers with less than $1 million in remote
sales in the
preceding calendar year are exempt from collecting the

11. ONLINE DISCLOSURES
DEFINITIONS
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.”

12. ONLINE DISCLOSURES
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

13. ONLINE DISCLOSURES
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 milli
“(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”

14. ONLINE DISCLOSURES
PINTEREST EXAMPLES

15. ONLINE DISCLOSURES
PINTEREST EXAMPLES
 Pinterest board entitled “Real Consumers.
Real Success”
 Consumer testimonials about weight loss
 No disclosures about likely results

16. ONLINE DISCLOSURES
HOW TO MAKE A DISCLOSURE IN SOCIAL MEDIA
 #paidad
 #paid
 #ad

17. ONLINE DISCLOSURES
WORD OF MOUTH MARKETING ASSOCIATION
 #spon, #paid, #samp
 Guide to Disclosure in Social Media Marketing
http://womma.org/ethics/disclosure
 Quick Guide to Designing a Social Media Policy
http://womma.org/ethics/Quick-Guide-to-Designing-a-
Social-Media-Policy.pdf

18. ONLINE DISCLOSURES
FTC v. 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”

19. ONLINE DISCLOSURES
DISCLOSURES AND RIGHT OF PUBLICITY

20. ONLINE DISCLOSURES
DISCLOSURES AND RIGHT OF PUBLICITY

21. ONLINE DISCLOSURES
THE NEW FRONTIER: NATIVE ADVERTISING
 Sponsored Stories
 Promoted Tweets
 Outbrain
 Branded playlists on Spotify
 Huffington Post “brand newsroom”
 Yahoo Stream ads
 BuzzFeed

22. ONLINE DISCLOSURES

23. ONLINE DISCLOSURES
SPONSORED STORIES

24. ONLINE DISCLOSURES
PRIVACY DISCLOSURES - DON’T BE CREEPY!

25. THE TM SPECIALIST
Sam Engel
Marketing Manager
BrandVerity
BRAND PROTECTION
WHAT WE DO AT BRANDVERITY:
 Provide brand protection and
compliance solutions
 Goal: more transparency in affiliate
marketing (elevate the industry)
 Monitor and protect hundreds of brands across the web

26. BRAND PROTECTION
AFFILIATES SHOULD ENHANCE YOUR BRAND
 Add value
 Support your brand message
 Comply with regulations and limit your risk

27. BRAND PROTECTION
ENSURING THAT AFFILIATES LIMIT YOUR REGULATORY
RISKS  Industry-specific regulations
 Disclosure
 What are the risks?
 Who’s responsible?

28. BRAND PROTECTION
ENSURING THAT AFFILIATES STRENGTHEN YOUR BRAND
MESSAGE  How do affiliates promote your
brand?
 Is their message consistent with
yours?
 How do you keep track of this at
scale?

29. BRAND PROTECTION
ENSURING THAT AFFILIATES ADD VALUE
 Carefully evaluate affiliates who
apply to your program
 Have a trademark bidding policy
– and enforce it
 Focus on incremental sales

30. BRAND PROTECTION
TAKING ACTION
STEP 1: APPROVAL PROCESS
 Avoid auto-approval at (nearly) any cost
 Ask tough questions
 Understand how each affiliate will:
 Drive traffic
 Represent your brand

31. BRAND PROTECTION
TAKING ACTION
STEP 2: ONGOING PROCESS
1. Develop regulatory and brand guidelines for affiliates
2. Create a reasonable process to support guidelines
-Monitor for changes after affiliate is approved
-Review brand placement on affiliate websites
3. Follow process and enforce compliance

32. BRAND PROTECTION
WHAT’S A REASONABLE PROCESS? —
SMALL/MEDIUM BUSINESS
 Review websites of top-producing
affs at regular intervals (quarterly,
annually)
 Quarterly searches for brand name
variations
 Check on suspicious conversion rates
 Quarterly review of Twitter activity
 Random audits

33. BRAND PROTECTION
WHAT’S A REASONABLE PROCESS? —
HIGHLY REGULATED INDUSTRY
 Review all affiliate websites weekly
 Review every time an offer changes
 Monthly searches for brand name
variations
 Monthly examinations of social media
activity (Twitter, Facebook, etc.)

34. BRAND PROTECTION
HOW DO I ENFORCE COMPLIANCE?
 Affiliate Hijacking: immediate removal from program
 Other Paid Search Violations: 3 strike system
 Inappropriate or Off-Brand Content: depends on severity
 Regulatory Issue: propose a fix, disable aff link

35. THE MERCHANT
Gerri-Lynn Becker
President
The California Wine
Club
GETTING IT DONE
THE CALIFORNIA WINE CLUB
BY THE NUMBERS
 1990: Year established
 161 featured wineries each year
 10,000+ members across the country
 5 on-site customer service and sales reps
 3,261 affiliates
 ShareASale Top 100 Power Rank Merchant

36. GETTING IT DONE

37. GETTING IT DONE

38. GETTING IT DONE
STAYING FTC COMPLIANT:
Affiliate Instructions
 Clear - Language must be specific (i.e. the connection),
and easy to understand
 Conspicuous - The location of the disclosure should be
placed close to your endorsement or review
 Require no action - The user shouldn’t need to click,
hover or scroll to locate or understand the nature of your
disclosure

39. GETTING IT DONE

40. GETTING IT DONE
TERMS OF SERVICE AGREEMENT TO INCLUDE:
 Trademark and Brand Use
 Limitations (if any) on paid search
 Use of coupons and discounts
 Consequences for breach of terms

41. MODERATED DISCUSSION
 How much of a priority should
this be?
 How can retailers stay informed
with latest developments?
 Some tips to get it done?
Enforcement and compliance in
reality
 Sharing information with other
merchants
THE MODERATOR
Carolyn Kmet
CMO
All Inclusive
Marketing

42. Q&A
THE LAWYER
Gary A. Kibel
Partner
Davis & Gilbert LLP
THE MODERATOR
Carolyn Kmet
CMO
All Inclusive
Marketing
THE MERCHANT
Gerri-Lynn Becker
President
The California Wine
Club
THE TM SPECIALIST
Sam Engel
Marketing Manager
BrandVerity

43. CONCLUSION
Drop your card off for more information, and for a chance to
receive:
 3-month membership to The California Wine Club
 30-minute discussion with Gary Kibel
 30-minute consultation with any digital marketing expert at
All Inclusive Marketing
 Culinary treats from Seattle, Vancouver and more!