Is it legal to have a free banner ad on a website, advertising the
goods or services of another company, without their permission?

Now why would they mind you sending business their way?

Maybe because they have no control over it? And it may *appear* as
though they paid for the advertisement. Say I have a KKK newsletter (I
don't) and I put a free ad for Walmart inside. That makes Walmart look
bad. Is it legal? I'm not sure.

I am thinking 'trademark infringement' as a possibility if they really
wanted to come after you about the matter, but that is just a guess.
This comes from knowing that Wal-Mart, to use your example, has
repeatedly (and usually unsuccessfully) attempted to shut down
websites that parody the Wal-Mart stores - and their legal reasoning
is trademark infringement (dilution).

Yeah, that's possible. I mean, if I was doing a little magazine, and I
put free ads for Mercedes-Benz in the magazine, it would make the
magazine seem a lot more important than it really was, since Mercedes
doesn't advertise in just anything. So I would actually be using
*their* trademark to help sell my product (or at least more
advertising), which makes me think it might be against the rules, but
I'm just not sure.

hello sir

well as far as i understand.. if the product which that company
selling and you dont have resale rights or master resale rights.. than
you cant sell product.. but if u just want to get affiliate commission
and want to derived customer to their site than you can place banner
ads anywhere without their permission as you are already affilate of
them.

There is another (related) problem, as I see it. Advertising campaigns
are also the product of a particular designer, agency, etc. Using the
same graphic without permission might be infringing those rights. And
using another, "invented" banner , might be against the company's
policies, since it contradicts their marketing scheme.