FTC Endorsement Guides for Referral Programs

Starting December 2024, the FTC will fine companies $51,744 per violation for not properly disclosing referral relationships. Here's what you need to know:

Quick Facts:

• You MUST tell people about ANY business connection
• Both companies AND partners can get fined
• Hidden disclosures = Big trouble
• Each violation = $51,744 fine

Where to Put Disclosures:

Bottom Line: The FTC wants zero confusion about paid relationships. Tell people upfront about ANY rewards or business connections. Keep proof. Check everything. No exceptions.

This guide covers:

• Writing proper disclosures
• Tracking referrals legally
• Staying compliant
• B2B program rules
• Required records
• Managing reviews

FTC Endorsement Rules Explained

The FTC keeps it simple: endorsements must be honest and clear. Let's break down what this means for your referral program.

Core Requirements

Program Guidelines

Your referral program needs three things:

1. Tell people about connections: Money, free stuff, rewards? Say it.
2. Clear automated messages: Every message needs disclosure text.
3. Watch what users say: Keep user reviews and claims in check.

Who's On The Hook?

"An endorsement must reflect the honest opinion of the endorser and can't be used to make a claim that the product's marketer couldn't legally make." - Federal Trade Commission

New in 2023:

• Don't just say "affiliate link" - write "paid link"
• Yes, social media tags count as endorsements
• Platform disclosure tools might fall short

Here's the bottom line: The FTC can come after both you AND your referral partners if you break these rules. No exceptions.

Disclosing Business Connections

Here's what you need to know about sharing your business relationships with your audience.

What to Disclose

You MUST tell people about ANY business connection that might influence your referral program. Here's a breakdown:

How to Make Disclosures

The FTC doesn't want fancy language. They want you to be CLEAR and DIRECT:

"Ensure that disclosures are clear and conspicuous, meaning they are unavoidable for people engaging with the content." - Matt Wool, CEO, Acceleration Partners

Where to Put Disclosures

Put your disclosures where people will actually see them:

The numbers show why this matters:

• 92% of customers trust recommendations from friends (Nielsen)
• Referred users stick around 18% longer
• Being upfront about relationships can boost your conversion rates

Real-World Examples:

• Forbes puts FTC disclosures right at the top
• Smart Bark starts blogs with affiliate notices
• Airtable says "$10 credit per verified signup" in their messages

Here's the bottom line: The FTC looks at EVERYTHING - social posts, automated messages, and even temporary content. If you're not sure whether to disclose something, just disclose it.

Legal Duties and Tasks

The FTC doesn't mess around with endorsement rules. Both companies running programs AND their participants need to follow specific guidelines.

Core Responsibilities

Here's what each party needs to handle:

How to Check Everything

You'll need these specific checks:

"The FTC expects advertisers to be responsible for and monitor the actions of their endorsers." - FTC Official

Running a Tight Ship

The FTC's recent actions show they mean business:

1. Make Rules Crystal Clear

Look at Sunday Riley Modern Skincare - they got in HOT water when their employees posted fake reviews without telling anyone. Don't make that mistake.

2. Document Everything

Keep these records handy:

3. Move Fast on Problems

Teami learned this the hard way - $930,000 worth of "hard way" - when they dragged their feet on fixing misleading endorsements.

Here's the bottom line: The FTC sent warnings to over 700 companies about breaking these rules. They're not playing around.

Key Parts of Disclosures

The FTC wants disclosures that hit two main points: they need to be easy to spot and simple to understand. Let's break this down:

Making Clear Disclosures

Here's what makes a disclosure work:

The FTC puts it straight: "A disclosure is clear and conspicuous if consumers notice it, read it, and understand it. Clear and conspicuous is a performance standard, not a font size."

Required Words and Phrases

Don't get fancy with disclosure language. Here's what works:

Skip vague terms like "sp", "spon", or "collab" - they don't cut it.

Disclosures Across Platforms

Each platform needs its own disclosure style:

Look at Smart Bark and Forbes - they nail it. Smart Bark puts clear disclosures up front in blog posts. Forbes adds FTC text that spells out how commissions don't sway their editors' picks.

For videos and podcasts? Double up with both spoken and written disclosures. The Wirecutter shows how it's done - they put disclosure statements where you can't miss them and spell out their commission structure.

Common Questions Answered

Social Media Rules

Here's exactly how to handle endorsements on social media:

"Companies can't dodge responsibility for deceptive marketing by using affiliate marketers instead of in-house teams." - Federal Lawyer

Auto-Message Rules

When sending automated referral messages, do this:

Rules for Global Users

Here's what you MUST do for international programs:

"People need to know about any connection when they look at endorsements." - Federal Trade Commission

Track everything across borders:

Required Program Records

Here's what you need to track and store for your program:

What to Document

The FTC wants to see that you're keeping tabs on EVERYTHING. That means tracking every disclosure, every participant, and every piece of content.

Record Keeping Basics

Your records need to cover three main areas:

"The final element of a reasonable monitoring program is documentation, which includes retaining all compliance-related correspondence." - Federal Trade Commission

Program Agreements

Every agreement needs these parts:

Here's what you MUST keep:

1. FTC Guidelines

Save copies of the "Disclosures 101" guide you send to users.

2. User Records

Track when people join and confirm they've read the rules.

3. Check-up Reports

Document your content reviews and what you found.

"The FTC can fine both the endorser and advertiser for not properly disclosing their relationship in a product review or sponsored post, with fines potentially exceeding $11,000 per infraction." - Federal Trade Commission

Storage Rules:

• Keep everything for 2+ years
• Use digital storage
• Back up your files
• Update when rules change

For SaaS referral programs, track:

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Managing Reviews

Paid Review Rules

Here's the bottom line: The FTC isn't messing around. Starting October 21, 2024, they'll hit you with fines up to $51,744 for EACH fake or misleading review.

User Content Rules

Let's make this simple.

You can remove reviews that:

• Break the law
• Harass others
• Use vulgar language
• Are proven fake

But you cannot remove reviews just because they:

• Give you 1 star
• Say negative things
• Point out actual issues
• Hurt your bottom line

Rules for Testimonials

"Endorsements must reflect accurate consumer experiences." - FTC Guidelines

2024's Big Changes:

1. Material Connections

Every review MUST show:

• If you got free stuff
• If you got paid
• Any company connections

2. Platform Rules

Your platform needs:

• Clear ways to disclose
• Ways to track everything
• Content checking systems

3. Documentation

Keep records of:

• Your review rules
• Why you removed content
• How you handle disclosures

Here's a real example: UrthBox learned this the hard way in 2019. They hid the fact that reviewers got free snack boxes. Result? FTC came knocking, and they faced penalties and had to change everything.

Checking and Enforcement

Here's what you need to know about monitoring and enforcing your program:

Setting Up Checks

You need 3 main types of tracking:

Basic Oversight Steps

Here's how to stay on top of everything:

"If law enforcement becomes necessary, our focus usually will be on advertisers or their ad agencies and public relations firms." - Federal Trade Commission

The FTC wants you to:

• Save ALL program records
• Watch participant posts
• Document when you take down content

When Rules Get Broken

Here's what to do when things go wrong:

The Stakes Are High: Williams-Sonoma got hit with a $3.17 million fine. Now, the FTC can charge up to $50,120 per mistake.

"Today's record-setting civil penalty makes clear that firms committing Made-in-USA fraud will not get a free pass." - Lina Khan, FTC Chair

Do These Things Now:

• Check content every day
• Save proof when you fix things
• Take screenshots of problems
• Write down all warnings

The FTC sent warnings to over 670 companies about claims. Starting October 2024, each mistake could cost $51,744. Get your monitoring system ready NOW.

SaaS-Specific Rules

Here's what you NEED to know about FTC rules for B2B referral programs:

B2B Program Rules

Software Setup Rules

Your SaaS platform needs these specific features:

"More than half of B2B buyers check third-party sources before talking to sales teams. Your referral program must show all business connections clearly." - Federal Trade Commission

Digital Reward Rules

Here's how to handle online rewards:

Let's look at HubSpot's program:

• They show commission info upfront
• Their leads jumped by 50%
• Customer retention went up 20%

The numbers don't lie:

• 84% of B2B decisions begin with referrals
• Referred customers stick around 37% longer
• Dropbox's growth hit 3900% in 15 months with proper disclosures

"The buying process starts with a referral for 84% of B2B decision makers. Clear disclosures build trust and drive growth." - Federal Trade Commission

Here's the bottom line: Starting October 2024, each disclosure violation costs $51,744. Get it right from day one.

Reducing Legal Risks

Here's how to keep your affiliate program on the right side of the law:

Safety Steps

The FTC doesn't mess around with disclosure violations. Starting October 2024, each violation costs $51,744. But here's the good news: 84% of companies that write down their rules run better programs.

Teaching Your Team

Your affiliates NEED to know these basics:

• Show they're getting paid
• Put disclosures next to content
• Write honest reviews (no copy-paste!)
• Keep records of everything they post

"Knowing about the connection is important information for anyone evaluating the endorsement." - Federal Trade Commission

Check, Check, and Check Again

Smart Bark and Forbes show how it's done:

• Disclosures at the TOP
• Simple words
• Clear message: "We get paid, but our opinions are our own"

Bottom Line:

• 15-30% of online sales come from affiliate marketing
• Keep ALL records for 3 years
• Train your team every month

"The FTC emphasizes that a disclosure is clear and conspicuous if consumers notice it, read it, and understand it. This is a performance standard, not just a matter of font size." - Federal Trade Commission

Remember: It's WAY cheaper to follow the rules than to pay fines. Keep it simple, keep it honest, keep it documented.

Wrap-up

The FTC's message boils down to one point: tell people about business connections. Starting December 1, 2024, each violation comes with a $51,744 fine.

Here's what your referral program needs:

1. Keep It Clear

The FTC wants zero confusion. Take Dropbox's approach: They spell out the reward (storage space) right when someone joins their referral program.

2. Track Everything

Save these documents:

• Affiliate contracts
• Payment details
• Marketing content
• User posts
• Program guidelines

3. Check Your Program

Look for:

• Hidden disclosures
• Wrong claims
• Secret rewards
• Stolen content

"The FTC says a disclosure works when people notice it, read it, and get it. It's not just about font size - it's about results." - Federal Trade Commission

Key Numbers:

• Affiliate sales make up 15-30% of online purchases
• Rules apply to ALL programs
• Both companies AND partners must follow rules

The bottom line? Size doesn't matter to the FTC - honesty does. Make it obvious, make it simple, make it right.

FAQs

What are the FTC endorsement guides?

The FTC endorsement guides show how Section 5 of the FTC Act works in marketing and advertising. They're not laws by themselves, but ignoring them can get you in legal trouble.

Here's what you NEED to know:

"The Guides are intended to give insight into what the FTC thinks about various marketing activities involving endorsements and how Section 5 might apply to those activities." - Federal Trade Commission

If you're running a referral program, here's how to handle disclosures:

Breaking these rules isn't just about the guides - it's about violating Section 5 of the FTC Act. And that comes with penalties.

What you MUST do:

• Tell users about business connections
• Make disclosures clear and visible
• Keep endorsements honest
• Save proof of compliance

Here's the BIG one: Starting December 2024, each violation costs $51,744. The FTC runs spot checks and follows up on consumer complaints, so they WILL catch violations.

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