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I send a lot of quality traffic to through CJ but only get a small number of conversions, so I was wondering if I should be paranoid.
However, without the affiliates making a decent conversions and ROI they will not push the program and so the merchant will not see more sales and have a lousy ROI on their investment into CJ. Therefore, simply merchants must be honest about sales for the program to help grow sales. You will actually find the reverse to be true sometimes, some merchants will give spotenous bonuses and also credit publishers who may claim missing sales, just so that the program doesn't loose its reputation and heart and mind of its affiliates.
On the other hand, they have no incentive to stop malware that rewrites links and steals commissions, because they still get their cut.
As for allowing malware and the like, I think you'll find that in the past networks have being fairly relaxed about such activity but are now much more vigilant about stamping it out. There is a feedback loop which means that if networks allow malware, other affiliates will move over to competing networks or drop out of the program. Additionaly, malware generally produced poor quality leads/customers and so if a network allows for the majority of sales via this channel then the merchant may leave the network also.
CJ has been increasing their efforts to clean up the network. They gave 180, Shopathome and some others the boot. They still have a few left though. I think they still have a spider that checks sites for compliance on the affiliate side. Would make sense if they did on the merchant side too but I'm not sure if they do. Like kmander said though if affiliate don't make sales they won't stay and if the program does not perform at a certain level for the merchants it's too cost prohibative to even keep it running on CJ.