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1. How do we ensure Google doesn't assume it is our company doing posting the spam?
2. What is the best way to handle these affiliates? Simply shut them down or try to contact them?
I appreciate your guidance.
The best option would be to allow them to do it but set rules so that they don't pass themselves off as you and stop using your logos, etc. After all, their sales are why you started an aff program in the first place, aren't they.
A well known florist tried the heavy handed approach in the UK a few months ago and wrote up an exhaustive set of rules for affliates. Their program has now been pulled as no decent affiliates can be bothered to jump through hops for them when there are more flexible options available from other merchants.
Unless you are the only company in your market, there's a cautionary lesson here for you. Affiliates will usually respond very well to companies that say "Well done, we're delighted with your performance but could u make a few changes?" They will usually vote with their feet if you come ocer all Big Brother on them.
They bring you money. You are going to put them down? It does not look like the smartest decision because they will not die. They will go to you competitors. They just change couple of symbols in their codes and traffic will be sent into other sites.
If one of my competitors decides to beat affiliates for this I'll be really happy :) I'll dance and invite all of them to me. I'll allow them to use my copyrights and... I'll glad to see that they are the second in SERPs with your company name :)