Affiliate Marketing How To Ensure Your Third Parties

Affiliate Marketing: How To Ensure Your Third Parties Are Meeting Privacy Obligations Mary Ellen Callahan, Hogan & Hartson Quinn Jalli, Datran Media Cambridge, Massachusetts August 22, 2007 © Hogan & Hartson LLP. All rights reserved.

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 © Hogan & Hartson LLP. All rights reserved. 2

How Does Affiliate Marketing Differ From Conventional Marketing? • Potentially joint ownership / use of consumer data • Multiple privacy and contractual representations • Transparency © Hogan & Hartson LLP. All rights reserved. of transactions 3

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? © Hogan & Hartson LLP. All rights reserved. 4

Getting To Accountability 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. ” © Hogan & Hartson LLP. All rights reserved. 5

Getting To Accountability 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 © Hogan & Hartson LLP. All rights reserved. 6

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? © Hogan & Hartson LLP. All rights reserved. 7

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. © Hogan & Hartson LLP. All rights reserved. 8

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. © Hogan & Hartson LLP. All rights reserved. 9

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 © Hogan & Hartson LLP. All rights reserved. 10

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. © Hogan & Hartson LLP. All rights reserved. 11

Contact Information Mary Ellen Callahan, Esq. Partner Hogan & Hartson 555 Thirteen Street NW Washington, DC 20004 Tel: (202) 637 -6406 Fax: (202) 637 -5910 Email: mecallahan@hhlaw. com Quinn Jalli, Esq. Privacy Officer and Vice President of ISP Relations Datran Media 345 Hudson Street, 5 th floor New York, NY 10014 Tel: (212) 706 -4897 Fax: (212) 706 -9758 Email: QJalli@datranmedia. com © Hogan & Hartson LLP. All rights reserved. 12