Federal Court says Advertisers liable for deceptive affiliates

sennin436

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just saw this. basically says Federal Court can hold advertisers liable for deceptive affiliates. wondering if this means stricter rules and policing from affnetworks. prob no need to worry if you ain't using fake news sites.
Online advertiser denied immunity under Section 230 of the CDA for permitting use of fake news sites by affiliate marketers - Lexology

Online advertiser denied immunity under Section 230 of the CDA for permitting use of fake news sites by affiliate marketers

March 19 2015

A federal court recently agreed with the Federal Trade Commission (FTC) that an advertiser should be held accountable for the deceptive acts and practices of its affiliate marketers, and ordered that the advertiser disgorge the entire $11.9 million in payments it received. The court held that the advertiser violated Section 5 of the Federal Trade Commission Act (FTC Act) as a matter of law because its affiliate marketers used “fake news sites” to promote products sold online. According to the court, “no reasonable jury could deny” that the advertiser “both participated in, and had the authority to control, the affiliate marketers conduct in so far as it related to the fake news sites.” The court also held that the advertiser was not entitled to immunity under Section 230 of the Communications Decency Act (CDA).Federal Trade Commission v. LeanSpa, LLC, No. 3:11-CV-1715 (D. Conn. Mar. 5, 2015).

The advertiser, LeadClick Media, Inc. (LeadClick), “fiercely disputed” that it had the authority to control the affiliate marketers, and that it was responsible for creating or developing the deceptive content provided on the fake news sites. Even though LeadClick did not create the fake news sites, the court denied LeadClick Section 230 immunity because LeadClick knew that its affiliate marketers used fake news pages, had communications with these affiliate marketers regarding what products to advertise, screened advertisements according to merchants’ preferences, and provided affiliate marketers with a way to direct consumers from genuine news sites to fake news sites.
 


Wasn't LeadClick the affiliate network and not the advertiser?

here's more from that article. looks like ftc is going after both the advertiser (LeadSpa) and the affnetwork (LeadClick).

Weight-loss products marketed and sold online

LeanSpa, LLC, NutraSlim, LLC, and NutraSlim, U.K., Ltd. (collectively, LeanSpa) sold purported weight-loss and colon-cleanse products under various product names. LeanSpa marketed and sold its products through websites it owned and operated.

LeanSpa also hired LeadClick so that LeanSpa’s products could be advertised on LeadClick’s affiliate marketing network. LeadClick’s affiliate marketing network consisted of various “affiliates” (also known as “publishers”) who would market the goods or services of online retailers such as LeanSpa and drive Internet traffic to those retailers’ websites. The affiliates would promote the retailers’ goods and services in various ways, including email marketing, banner advertisements and search-engine placement. The affiliates also would create their own websites.

LeanSpa paid LeadClick a set amount — between $35 and $45 — each time a consumer enrolled in LeanSpa’s free-trial program after having been directed to LeanSpa’s website by a LeadClick affiliate. From September 2010 through June 2011, LeadClick billed LeanSpa for $22 million and collected on $11.9 million of the amounts billed. LeadClick kept between 10% and 20% of the money collected and paid the rest to its affiliates.

FTC lawsuit

The FTC and the state of Connecticut brought suit against LeanSpa, LeadClick and certain individual defendants and successors in interest. The FTC and Connecticut alleged that the defendants participated in deceptive acts and practices in violation of Section 5 of the FTC Act and the Connecticut Unfair Trade Practices Act (CUTPA) by deceptively enrolling consumers into plans for purported weight-loss and colon-cleanse products, and using the fake news sites to promote LeanSpa’s products.
 
Reading between the lines, FTC went after affiliate(s), affiliate(s) rolled over and showed stomach, offered up a bigger catch upline, FTC went fishing.

"but...they approved my fake news splogs...and they actually have monies"
 
Can the FCC actually do anything if the network is in Canada, UK ect. If a European affiliate is promoting a shady offer and the network is European does the affiliate still have to disclose that they are receiving compensation?
 
No matter how you spin it, this is bad news for the industry.

A few networks in the US have already stopped promoting US diet offers. I expect some other networks to follow.

Advantage is definitely to the non-US networks.
 
Can the FCC actually do anything if the network is in Canada, UK ect. If a European affiliate is promoting a shady offer and the network is European does the affiliate still have to disclose that they are receiving compensation?
The only good answer to that would be to check with a lawyer if you are in that group.