Affiliate Marketing:

© Hogan & Hartson LLP. All rights reserved.

Affiliate Marketing:How To Ensure Your Third Parties Are

Meeting Privacy Obligations

Mary Ellen Callahan, Hogan & Hartson Quinn Jalli, Datran Media

Cambridge, MassachusettsAugust 22, 2007

© Hogan & Hartson LLP. All rights reserved. 2

What Is Affiliate Marketing?

• Working with other companies

– Ad Networks

– Affiliate programs & networks

– Third-party e-mail marketers

– Offline direct marketers

• Various payment approaches

– Pay Per Click /Action

– Pay Per Lead

– Shared Revenues

– Pay for delivery

• Way to leverage own database more effectively

• PII often necessary to share for affiliate monitoring, but also as part of the leverage


How Does Affiliate Marketing Differ From Conventional Marketing?

• Potentially joint ownership / use of consumer data

• Multiple privacy and contractual representations

• Transparency of transactions


Getting To Accountability

• Regulatory framework to be accountable for acts of affiliates

– CAN-SPAM: obligations imposed on advertiser, additional obligations on initiators

• Implicit need to monitor actions of affiliates

– Gramm-Leach-Bliley: financial institutions must also require compliance by its vendors and service providers

– Section 5: prohibits unfair and deceptive trade practices. Application to affiliates?



FTC Actions• Cases brought by the FTC in several areas have suggested

that marketers, leveraging affiliates, should monitor affiliate behavior

– TJ Web – Jan 2007 settlement includes obligations on affiliate review, based on CAN-SPAM

– Optin Global

– Cleverlink Trading Ltd.

– Zango

– Cart Manager – March 2005• Director of Bureau of Consumer Protection’s press release statement

of monitoring activities: "Companies and [vendors] must make sure that their privacy policies are in sync. A [vendor] cannot secretly collect and rent consumers' personal information, contrary to a merchant's privacy policy. At the same time, merchants have an obligation to know what their [vendors] are doing with consumers‘ personal information.”



New York Attorney General Actions

• New NY AG Cuomo settles with major advertisers in Jan 2007 --online promotion of products and services through another’s alleged deceptively installed adware programs

– Priceline

– Travelocity

– Cingular


In what circumstances do companies have a legal obligation to monitor

affiliates?

What affirmative actions should your company take to avoid any law

enforcement action?


Policies & Procedures

• Establish necessary and reasonable policies and procedures, depending on the level of relationship.

– It’s your playground, make the rules.

– Know thy affiliate.

– Don’t turn a blind eye.


Playground Rules

• Establish standard operating procedures for the relationship.

– Keep standards consistent.

– If company doesn’t meet standards, don’t bend rules late then in – could be weak link.

– Develop deployment strategies.

– Rules for marketing: channels, media, frequency.


Know Thy Affiliate

Develop monitoring techniques to detect abuse

• Utilize seeds

• Leverage brand-monitoring solutions that identify brand abuse

• Ensure marketers are honoring channel representations

• Verify /contractually require affiliates to use reputable partners

• Understand data collection and use policies (and get contractual representations re: same)

• Review applicable privacy policies as appropriate (PII in particular)

• Monitor suppression list and complaint activities


Blindness

The recent enforcement activities indicates that if you have a close relationship with purportedly bad actors, you could be held liable for their actions, even if you did not dictate them.


Contact Information

Mary Ellen Callahan, Esq.Partner

Hogan & Hartson555 Thirteen Street NWWashington, DC 20004

Tel: (202) 637-6406Fax: (202) 637-5910

Email: [email protected]

Quinn Jalli, Esq. Privacy Officer and Vice President of ISP Relations

Datran Media345 Hudson Street, 5th floor

New York, NY 10014Tel: (212) 706-4897

Fax: (212) 706-9758Email: [email protected]

Affiliate Marketing:

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