I just want to add that the cannibalization can take many forms:
It’s also the fact that you generate and pay for traffic, by the affiliate program, that can be generated any way by other traffic sources such as SEO.
In this case it’s recommended to create different campaigns, each one will be adequate to a specific offer or create different landing pages so that every landing page tend to satisfy a specific aim from leading the campaign. For example, if your link in the search engine lead to the home page, it’s unreasonable to set an affiliate program that serve the same aim. It would be better that your affiliate link lead to a page of a specific product convenient to your target.

Another problem of cannibalization is that your affiliates bid on the same keywords that you are bidding on. They become your adwords competitors.
So for this matter that certain merchant forbid in their program that affiliates adopt paid search. But, I think you can communicate with them and see what they can do for you, in other terms tell them what words they can bid on?

(I hope I’m clear, I use to write in French).

Thank you Shawn for the hot topics.