1. © 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

2. © Hogan & Hartson LLP. All rights reserved. 2 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

3. © 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

4. © 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?

5. © 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.”

6. © 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 2007 --online promotion of products and services through another’s alleged deceptively installed adware programs – Priceline – Travelocity – Cingular

7. © 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?

8. © 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.

9. © 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.

10. © 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

11. © 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.

12. © Hogan & Hartson LLP. All rights reserved. 12 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, 5th floor New York, NY 10014 Tel: (212) 706-4897 Fax: (212) 706-9758 Email: QJalli@datranmedia.com