© 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, Massachusetts August 22, 2007

© Hogan & Hartson LLP. All rights reserved. 2 What Is Affiliate Marketing? Working with other companies – Ad Networks – Affiliate programs & networks – Third-party 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. 3 How Does Affiliate Marketing Differ From Conventional Marketing? Potentially joint ownership / use of consumer data Multiple privacy and contractual representations Transparency of transactions

© Hogan & Hartson LLP. All rights reserved. 4 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. 5 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. 6 Getting To Accountability New York Attorney General Actions New NY AG Cuomo settles with major advertisers in Jan online promotion of products and services through another’s alleged deceptively installed adware programs – Priceline – Travelocity – Cingular

© Hogan & Hartson LLP. All rights reserved. 7 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. 8 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. 9 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. 10 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. 11 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. 12 Contact Information Mary Ellen Callahan, Esq. Partner Hogan & Hartson 555 Thirteen Street NW Washington, DC Tel: (202) Fax: (202) Quinn Jalli, Esq. Privacy Officer and Vice President of ISP Relations Datran Media 345 Hudson Street, 5th floor New York, NY Tel: (212) Fax: (212)