A federal court has recently sided with the FTC, stating that advertisers should be held accountable for any deceptive or otherwise illegal acts and practices that are performed by affiliate marketers. This is related to a case involving LeadClick Media, INC, which is a well-known affiliate marketing network. They were ordered to return $11.9 million in payments that it received as a result of deceptive practices that were performed by their affiliates. The FTC argued that they were in violation of section 5 of the FTC act because the affiliates that worked on their behalf were using fake news sites to help promote products.
The courts stated that ‘no reasonable jury could deny’ that the advertiser participated in and had the authority to control the affiliate marketers’ conduct. The courts also denied the argument that they were entitled to immunity under section 230 of the Communications Decency Act.
The specifics of this case were that LeanSpa, LLC, NutraSlim, LLC and NutraSlim, UK Ltd (all under the collective name of LeanSpa) sold weight-loss and colon cleanse products. They marketed these products on their own websites, but also hired LeadClick to promote products. For each product that was sold through the efforts of LeadClick, they would be paid $35 to $45. As with most affiliate networks, they would then pay their network of affiliates to generate the traffic, which would lead to sales.
The problem came in that some of the affiliates that were working for LeadClick were using fake news sites to build credibility. They would list claims of independent testing, analysis and statements from supposed experts. None of this was legitimate, of course, but consumers were deceived into believing it was, which lead to increased sales.
The FTC as well as the state of Connecticut brought a suit against LeanSpa, LeanClick and some individual defendants. LeanSpa and the individual defendants entered into stipulated orders for permanent injunctions and money judgments. The FTC and Connecticut went after LeadClick for summary judgments.
This case is obviously quite significant for anyone who uses any type of affiliate marketing for their business. It may even lead to a crackdown by affiliate network on the type of advertising that is performed by affiliates. We will have to see how affiliate networks respond to this suit.
You can read the court documents from this case, HERE.
