The Jewish Ethicist - Full Disclosure
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The Jewish Ethicist  - Full Disclosure

The Jewish Ethicist - Full Disclosure

Customers deserve to know that a referrer gets a commission.

by
Q. Our website has an "affiliate program" which pays other sites when they refer customers. Is it our fault if some of them use sneaky selling techniques?

A. It's a very common practice for sellers to give percentages to individuals or firms who bring business their way. This is often a "win-win-win" situation: the supplier wins by reaching customers he would otherwise never have access to; the affiliate is able to help out his own customers with a reference to a reliable vendor and make a few dollars along the way; the customer is able to find a vendor recommended by a firm he considers trustworthy.

However, a problem can arise if the affiliate uses unethical selling techniques. This is a problem because you don't have an arms-length relationship with the affiliate. If you merely sell merchandise to a reseller, it is not at all your fault if their selling ethics are lacking. But here you are a partner in the ruse; the affiliate is really your agent, which is exactly why they get a commission.

The most severe problem would be aggressive or misleading selling techniques on the part of the affiliate. As we have pointed out in previous columns, Jewish law strictly prohibits misleading the customer with regard to the characteristics of the product. Even though you are not directly engaging in these practices, you can hardly escape responsibility for them. You are not only benefiting from the sales practices of the affiliates – you are actually paying for them.

However, in my experience this is not actually the most common problem. Most of these sites are not in the business of selling your product; the affiliation is a profitable sideline. A more common issue is where the nature of the referral is hidden. Often these "affiliate" sites are blogs or technical advice sites; the site owner hopes to turn his expertise into money through recognition (which brings clients), through ads, and through commissions on recommended products and services.

The ethical problem arises when the customer does not know about the financial interest. In that case, there is a hidden conflict of interest, which creates an incentive for self-serving advice. The Torah commands: "Don't place an obstacle before the blind." (Leviticus 19:14) In Jewish tradition, this means creating any obstacle to a person's pursuit of his/her own self-interest. Rashi's commentary explains that "blind" means "someone who is blind to the affair" at hand. He gives the following example: "Don't advise your friend, ‘Sell your field and buy a donkey', when your hidden intention is to buy it from him."

The problem is not the conflict of interest per se; a person is allowed to give a recommendation or a testimonial in return for payment and this is a common selling practice. The problem is the hidden conflict; the person is representing himself as an objective advisor when in fact he has a hidden intention to encourage a sale that enriches him.

The ideal situation would be for the affiliate to straightforwardly disclose on his site that he has a financial interest in some of the products recommended. Sometimes people claim that the customer should be able to figure this out, but that's not a good excuse. First of all, many sites do give impartial advice; second of all, if the customer knows anyway, what objection could there be to disclosure?

Assuming the affiliate does not publicize the relationship, the best solution to the problem is for you to ensure that your relationship with the affiliate is not under wraps. One way of achieving this is to print on the customer's receipt "Referred by" and the name of the affiliate. For the sake of your own openness to your affiliates, you should mention this practice anytime you make an agreement with a new affiliate.

It's true that even given this very blunt indication, some customers might not figure out that the fact that the referral is mentioned on the bill means that the affiliate is involved in the money trail. It would be most open if you stated: "Affiliate X received a commission on this sale". But the mere mention should be enough to tip off any thinking customer.

This principle is presented in a passage in the Talmud. The circumstance is a usually kosher butcher store which is compelled to sell non-kosher meat, which happens when a blemish is found in the animal after slaughter. Even non-Jewish customers must be alerted to the fact that the meat is not kosher; evidently even in Talmudic many non-Jewish customers preferred kosher food. But it is permissible to use a euphemism, "Meat for the soldiers", which can be understood by any reasonable customer. It is not necessary to use the more explicit "Carrion today" which would put customers off because of the jarring connotation. (1)

You are in a similar situation. Saying nothing is unacceptable, because customers deserve to know that the recommender has a relationship with the seller that may affect his recommendations. But a very blunt statement like "kickback recipient" is distasteful. The solution is a clearly understandable but neutral-sounding message: "Referred to by affiliate X."

SOURCES: (1) Babylonian Talmud Chullin 94b

Send your queries about ethics in the workplace to jewishethicist@aish.com

To sponsor a column of the Jewish Ethicist, please click here.

The Jewish Ethicist presents some general principles of Jewish law. For specific questions and direct application, please consult a qualified Rabbi.

The Jewish Ethicist is a joint project of Aish.com and the Business Ethics Center of Jerusalem. To find out more about business ethics and Jewish values for the workplace, visit the Business Ethics Center of Jerusalem at www.besr.org.

Published: March 1, 2008


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Visitor Comments: 2

(2) george rot, March 5, 2008 5:56 AM

Is full disclosure needed for Aish's commission?

Excellent article! I notice I can buy Rabbi Dr Meir's new book online through this Aish.com. email. Does Aish.com have to disclose that they, too, also receive a commission from the book's publisher?

Ed. Note:
Aish.com does not receive a commission from Ktav.

(1) Anonymous, March 4, 2008 7:20 PM

Late?

a disclosure on a receipt, after the sale is completed already, seems far too late to notify the customer that his referrer has a selfish interest.

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