Affiliates can be liable for fraud
An article popped up on LinkedIn about a recent 2nd court of appeals ruling that I thought was interesting.
Back in 2011, the FTC and the state of Connecticut filed suit against a company called LeanSpa and their affiliate marketer called LeadClick. LeanSpa sold various diet products through negative option marketing. LeadClick was the affiliate company they used to help drive traffic and customers to their websites.
LeadClick and their parent company was included in the suit because the FTC alleged that they were aware of and facilitated the false claims made by their affiliates. The case went to court and LeadClick lost. They appealed to the 2nd Circuit court. Last week the 2nd Circuit Court upheld the trial court’s finding of liability for LeadClick.
In its press release for the case, the FTC says:
the court ruled that LeadClick was responsible for the false claims made by affiliate marketers it recruited on behalf of LeanSpa, LLC, a company that sold acai berry and “colon cleanse” weight-loss products. According to the FTC’s complaint, LeanSpa used a “free trial” ploy to enroll consumers into its recurring purchase program that cost $79.99 a month and that was difficult to cancel.
LeadClick’s network lured consumers to LeanSpa’s online store through fake news websites designed to trick consumers into believing that independent news outlets and independent customers, rather than paid advertisers, had reviewed and endorsed LeanSpa’s products.
LeanSpa was owned by Boris Mizhen, and we briefly mentioned this lawsuit back when it was filed
More legal problems for Boris. The FTC’s assertion was that the affiliates were “under the control or influence of” Boris. While it’s taken years, the FTC has prevailed.
A lot of email marketers use affiliates. In my experience a lot of email marketers use affiliates as a way to insulate themselves and their reputation from certain activities, including spamming. This ruling tells us that affiliates are not protection from fraudulent activity. Nor are affiliates protected from the fraudulent activities of their customers.