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Thursday, February 18, 2016

Pre-existing Business Relationships in Affiliate Marketing

QUESTION
We have an affiliate marketing program. Recently, we had it evaluated by a risk management firm such as yours. In the findings, we learned that our policies and procedures did not account for how to establish and identify pre-existing business relationships. What is a pre-existing business relationship in an affiliate marketing program?

ANSWER
A “pre-existing business relationship” with a consumer is given an exemption in an affiliate marketing program, where the parties to the relationship are a person (i.e., entity) or a person’s licensed agent and a consumer, based on the following requirements:

1)    A financial contract between the person and the consumer that is in force on the date a solicitation covered by the affiliate marketing provisions is sent to the consumer;

2)   The consumer’s purchase, sale, or lease of the person’s goods or services, or a financial transaction (including holding an active account or a policy in force or having another continuing relationship) between the person and the consumer during the eighteen-month period immediately preceding the date a solicitation covered by the affiliate marketing provisions is sent to the consumer; or

3)   An inquiry or application by the consumer regarding a product or service offered by the person during the three-month period immediately preceding the date a solicitation covered by the affiliate marketing provisions is sent to the consumer. [16 CFR § 680.3(j)]

Take note, also, that affiliate marketing program rules of the federal financial regulators, as well as the FTC, contain examples of when there is and when there is not a pre-existing business relationship. [Idem]

Jonathan Foxx
President & Managing Director
Lenders Compliance Group