LeadClick Media who closed their doors in 2011 and its parent company, CoreLogic, Inc (NYSE: CLGX) have been ordered to turn over $16 million in revenue that they received through a weight-loss marketing scam. The marketing that was used was determined to be deceptive by the US district courts. The court granted the FTC’s request for a summary judgment that said LeadClick was responsible for the false claims made by the affiliate marketers that it recruited on behalf of LeanSpa, LLC. LeanSpa sold acai berry and ‘colon cleanse’ weight-loss products.
In the FTC complaint they said that LeanSpa was using a ‘free trial’ ploy to bring consumers into their recurring purchase program. The program cost $79.99 per month, and was overly difficult to cancel, costing the consumers a significant amount of money.
The affiliates working on behalf of LeadClick’s network brought consumers to the LeanSpa store through a variety of methods including fake news sites that were designed specifically to deceive consumers. The fake news sites made it seem as if the products being sold were confirmed to be effective by third party labs and others.
The director of the FTC’s Bureau of Consumer Protection, Jessica Rich, commented on the case, saying, “The ruling is good news because it takes ill-gotten gains out of the hands of companies who knew they were promoting a scam and gives them back to the consumers who lost millions of dollars. It also makes clear that a parent company cannot retain ill-gotten gains of its subsidiaries.”
This case has been ongoing since December of 2011 when the FTC and the State of Connecticut sued LeanSpa and its principal, Boris Mizhen. That specific case was settled in January of 2014 when the defendants agreed to end their deceptive practices and surrender their assets to redress their consumers. It was in this summary judgment that the court held that LeadClick’s affiliates were using fake news sites specifically to deceive consumers.
This began the case against LeadClick and the parent company. The FTC claimed (and is now shown to be correct) that affiliate networks have the ability and the responsibility to recruit honest affiliates as well as approve or reject marketing techniques used by those affiliates.
In this case, the court also rejected LeadClick’s claim that they should be immune from liability under Section 240 of the Communications Decency Act because they were responsible, at least in part, for the fake news sites that were created to help promote the LeanSpa products.
The funds that are being recovered from the defendants will be used to give redress to the consumers affected by the scam.
