Affiliate marketing compliance best practices to remain privacy-compliant and combat fraudulent tactics

Affiliate marketing can be a highly effective customer acquisition strategy because it leverages the power of word-of-mouth recommendations. Consumers often seek product advice from trusted independent sources like YouTubers, bloggers, other social media influencers, and publishers.

To harness this potential, it’s essential to establish an affiliate program that’s trustworthy from the start.

In addition to knowing how to create a compliant affiliate marketing program, whether you’re launching or expanding your affiliate efforts, it’s important to prevent key issues that could jeopardize even well-established reputations and customer loyalty.

What is affiliate marketing compliance?

Affiliate marketing is a performance-based marketing strategy where businesses reward affiliates for driving traffic or sales of their products through the affiliate’s marketing efforts. Affiliates typically earn a commission for each sale or action generated via their unique referral links.

Affiliate marketing compliance simply means following the rules and guidelines that govern the affiliate relationship and how affiliate marketing works.

To do this, people and/or companies must follow four best practices.

1. Understand and follow relevant laws

Affiliates — people or companies promoting products for a commission — must obey laws relating to advertising, consumer protection, and data privacy. For example, they need to clearly state when they’re earning money from promoting a product and respect audiences’ consent choices about personal data use.

2. Transparency about relationships

Affiliates should provide truthful information about the companies and products they promote. Misleading customers can lead to legal trouble and damage trust and personal brand reputation.

3. Prevent fraud

There can be dishonest practices in affiliate marketing, like impersonating a brand or using fake clicks to earn commissions. Compliance requires taking steps to avoid these bad practices.

4. Respect privacy

Handle customer data responsibly and follow privacy laws, ensuring that personal information is protected and used according to user consent and legal requirements.

How do global privacy laws impact your affiliate marketing program?

Global privacy laws significantly impact affiliate marketing programs by often imposing strict requirements on data collection, usage, sharing, and security.

For instance, the General Data Protection Regulation (GDPR) applies to any company processing personal data of EU residents, regardless of the company’s location. The GDPR requires businesses to obtain explicit consent for data collection, provide data access and deletion rights, ensure data security, and notify users about data use, their rights, and data breaches. Consequently, affiliates must be transparent about data usage to comply with GDPR and marketing best practices. Companies need to have data processing agreements (DPAs) in place with third parties that will access and process personal data on the company’s behalf, which can include affiliates.

Similarly, the California Privacy Rights Act (CPRA) affects businesses collecting personal data of California residents. This law mandates that companies inform consumers about their data collection practices; enable them to opt out of data selling, sharing, targeted advertising, and profiling; and provide access and deletion rights. Affiliate programs targeting California residents need to update their privacy policies and data handling practices to align with CCPA/CPRA requirements.

Other global privacy laws also play a crucial role. Brazil’s LGPD, which is similar to the GDPR, requires consent for data processing and grants data access and deletion rights. Canada’s PIPEDA mandates businesses to obtain consent for data collection and ensure data security. Australia’s Privacy Act requires transparency in data collection and gives individuals the right to access and correct their data.

What are common affiliate marketing program violations and fraudulent tactics and how to best combat them?

Affiliate marketing programs have the potential to add great value to a company. However, there are risks associated with affiliate marketing, as some scammers try to take advantage of a situation, which can reduce a company’s profitability.

Below is a list of the most common issues companies can face when it comes to affiliate marketing violations.

Paid search policy violation

Paid search policy violations are one of the most common and problematic forms of affiliate marketing fraud.

Paid search policy violations in affiliate marketing occur when affiliates break rules regarding bidding on a merchant’s branded terms in search ads. Many affiliate programs explicitly prohibit this practice because it can divert traffic away from the merchant’s own ads and undermine brand control.

However, some affiliates may engage in trademark bidding to gain cheaper clicks and higher conversion rates, increasing their commissions at the merchant’s expense. Some even use tactics like geotargeting, dayparting (showing ads at specific times), or cloaking (displaying different content to users versus search engines) to hide their violations.

To combat these issues, merchants should:

• Establish clear policies: Clearly outline paid search rules in affiliate agreements.
• Monitor search results: Regularly check for unauthorized trademark bidding.
• Use detection tools: Employ specialized tools to identify cloaking and other deceptive practices.
• Enforce policies: Take action against violating affiliates, including warnings or termination.

Forced clicks and cookie stuffing

Forced clicks and cookie stuffing in affiliate marketing refer to a deceptive practice where affiliates create clicks on their affiliate links without the user’s knowledge or consent. This is often done by using hidden scripts or invisible elements on a website that automatically load affiliate links when someone visits. As a result, the affiliate’s tracking cookies are placed on the user’s device, allowing them to claim credit for any future purchases, even if the user never actually clicked on their link.

This practice harms the integrity of affiliate programs by unfairly attributing sales and diverting commissions away from legitimate affiliates. It also erodes trust with users who may be unaware that their browsing is being manipulated. For merchants, forced clicks can lead to paying commissions for sales that were not legitimately generated, which can damage relationships with honest affiliates.

To combat forced clicks, merchants and affiliate networks need to implement monitoring systems and fraud detection tools. These can help identify suspicious click patterns and unusual traffic behavior. Clear policies against such practices, along with strict enforcement and penalties for violations, are also crucial.

While it can be difficult to eliminate forced click fraud entirely, proactive oversight and advanced tracking technologies can significantly reduce its occurrence in affiliate marketing.

Malware and adware

Malware and adware violations in affiliate marketing are extremely harmful practices. Unethical affiliates use malicious software or intrusive advertising to generate fraudulent commissions.

Malware can infect users’ devices, potentially stealing information or hijacking browsers, while adware displays unwanted and often aggressive advertisements. These tactics can install programs on users’ devices without consent, track online activity, launch hidden windows, or redirect users to affiliate links involuntarily.

This not only compromises user security and privacy but also generates false commissions, steals from legitimate affiliates, and damages the reputation of associated merchants.

To combat these violations, affiliate programs need to implement strong monitoring systems, carefully screen potential partners, and maintain clear policies with strict enforcement. Educating affiliates about ethical practices and considering specialized fraud detection services can also help.

Typosquatting

Typosquatting is a tactic where affiliates register domain names that are slight misspellings of a merchant’s legitimate website.

For example, an affiliate might register “amazom.com” instead of “amazon.com”. When users accidentally type these misspelled URLs, they land on the affiliate’s site rather than the intended merchant site. The affiliate then either redirects users to the correct site while placing their tracking cookies or displays ads and competitor offers. This tactic enables unethical affiliates to claim commissions for sales they didn’t genuinely generate, harming both merchants and honest affiliates.

Typosquatting can damage a merchant’s brand reputation and potentially expose users to malware or phishing attempts. To combat this, merchants can:

• implement monitoring systems to detect typosquatted domains
• maintain clear policies against typosquatting with strict enforcement
• consider registering common misspellings of their domain(s)
• use SSL certificates to help users identify the legitimate site

Incentive Marketing

Incentive marketing in affiliate programs refers to offering rewards or incentives to users for taking certain actions, like making purchases or signing up for services.

While incentive marketing can be an effective tactic, it can also lead to violations if not implemented carefully. This can include using toolbars that automatically apply affiliate cookies, cash-back programs that divert existing customers through affiliate links, or social games that encourage users to take actions like requesting quotes.

While incentive marketing can be effective, these practices can lead to merchants paying commissions on sales they would have gotten anyway, or stealing commissions from legitimate affiliates. They may also result in lower-quality leads or mislead users about the nature of the rewards.

To avoid violations, affiliate programs should:

• have clear policies on allowed and prohibited incentive marketing tactics
• carefully vet affiliates using incentive marketing and understand their methods
• monitor key metrics to identify any negative impacts from incentive affiliates
• ensure proper disclosures are made to users about incentives and rewards
• consider different commission structures for incentive-based traffic

What are the penalties for noncompliance in affiliate marketing?

Noncompliance in affiliate marketing can lead to serious penalties, including financial losses and legal issues. Affiliates may lose commissions earned through improper methods, face reduced commission rates, or incur fines from the affiliate program. In more serious cases, accounts can be suspended or permanently terminated, cutting off a vital source of income.

In extreme situations, affiliate programs may take legal action against non-compliant affiliates, which can result in lawsuits and hefty financial penalties. This can also harm the affiliate’s reputation, making it difficult to join other programs or work with different brands. Some affiliates may even find themselves blacklisted across multiple networks, effectively ending their affiliate marketing careers.

Financial penalties can also include demands for repayment of commissions earned through fraudulent means, known as clawbacks. Additionally, non-compliant affiliates may face increased scrutiny and restrictions on their activities, even if they are not immediately terminated.

To avoid these consequences, affiliates should carefully read and understand each program’s terms, stay informed about policy changes and industry regulations, use proper disclosures, and follow ethical marketing practices. Additionally, regularly checking for compliance and addressing any issues quickly is crucial for maintaining a successful affiliate marketing program.

How to keep your affiliate marketing program compliant?

To keep your affiliate marketing program compliant, consider implementing the following strategies.

Develop clear terms of service

Create a comprehensive agreement that outlines permitted and prohibited practices, disclosure requirements, and consequences for noncompliance. Ensure it’s written in plain language and easily accessible to affiliates.

Implement an approval process

Carefully vet potential affiliates before allowing them to join your program. Consider interviewing applicants or contacting them after their first sale to understand their methods and ensure they align with your brand values.

Monitor affiliate activity

Regularly track and review affiliate statistics, looking for red flags like sudden spikes in sales or unusually high conversion rates. Stay in contact with top-performing affiliates to ensure ongoing compliance.

Provide clear guidelines and training

Educate your affiliates on relevant laws and regulations, proper disclosure practices, and your specific program requirements. Offer resources and support to help them stay compliant.

Regularly review and update policies

Stay informed about changes in laws and regulations affecting affiliate marketing. Update your policies and communicate changes to affiliates promptly.

Enforce consequences for noncompliance

Take action against affiliates who violate your terms, including reducing commissions, suspending accounts, or terminating partnerships when necessary.

Protect customer data

Implement data protection measures, such as data minimization and consent management, to comply with privacy regulations like the GDPR and CPRA. Ensure affiliates understand and follow data protection requirements.

By implementing these strategies, you can maintain a compliant affiliate marketing program that contributes to growing revenue while protecting your brand reputation, building consumer trust, and avoiding potential legal issues.

Strengthen your affiliate marketing program through compliance

Ensuring compliance in affiliate marketing is critical for protecting your brand, maintaining trust with consumers, and avoiding legal repercussions.
Businesses can safeguard their affiliate programs and reputation by being aware of global privacy laws and remaining vigilant against common fraudulent tactics. Additionally, implementing clear guidelines, actively monitoring affiliate activities, and taking swift action against noncompliance are strategies companies can incorporate to maintain the integrity of their affiliate program.

By prioritizing compliance, companies mitigate risks and foster long-term, sustainable partnerships that drive growth and customer loyalty.