Attention digital agencies: Regulatory issues you need to monitor

As the online marketing industry evolves, more money is entering the space, leading to greater regulatory and consumer scrutiny. Digital marketing agencies and brand marketers need to be aware of the various legal and regulatory restrictions explicit in the industry, as well as those implicit guidelines that ensure online marketing’s integrity and value.

Three of the most important considerations are detailed below.

Privacy and piracy issues. Online privacy and piracy have become perhaps the greatest issues affecting digital marketing. Last year witnessed a tense battle between major media companies and consumers over the Stop Online Piracy Act and the Protect IP Act. Even Microsoft has gotten into the act. Its forthcoming Windows 8 Operating System and Internet Explorer 10 browser will include default “Do Not Track” settings.

Agencies and marketers need to have a compliance team in place that monitors the usage of their brand’s proprietary content, particularly from foreign-owned websites. Furthermore, marketers must be prepared to update their online tracking systems or use platforms that can support “cookie-less” tracking down to granular levels. While some of these items may not come to fruition, they are a sign of deeper measures to come.

FTC and FDA regulations on testimonials. The FTC held a workshop in late-May that examined proposed revisions to its Dot Com Disclosure guidelines, which illustrate how to provide clear and conspicuous disclosures in the online and mobile advertising environment. From the longstanding days of infomercials to modern online advertising, dubious claims about product results are ubiquitous. The FTC is cracking down on deceptive online ads and websites, levying heavy penalties, as evidenced by billions of dollars in judgments in the last year.

Agencies and advertisers need to ensure they can substantiate all product claims with research and written approval from the individual providing a testimonial. Additionally, if there is any money or other tangible benefit exchanged for such testimonials, a clear disclaimer is necessary on the website landing page to let consumers know it is a paid endorsement.

Affiliate nexus tax laws (a.k.a. the “Amazon tax”). An increasing number of states are passing and proposing “nexus tax” laws. These laws create a pseudo-sales tax that must be collected for affiliate sales on products purchased online. These laws will have a significant impact on agencies that operate within the affiliate network space. They will mean the loss for agencies of millions of dollars each year in products being sold on a revenue-sharing basis.

Digital agencies and brand marketers need to ensure their legal team understands these laws by state before conducting any online affiliate marketing efforts. This is a highly effective brand-marketing channel and will impact marketers’ and agencies’ spending and budgets drastically if implemented nationwide.

Peter Klein is senior vice president of media services at MediaWhiz.

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