FTC Picks Low-Hanging Fruit, Smacks Down Acai Affiliate Marketers9 May, 2011 By: Jonathan L. Pompan, Jeffrey D. Knowles
On April 19, the Federal Trade Commission (FTC) moved to stop operators of websites from making allegedly deceptive claims about acai berry weight-loss products. The enforcement actions announced by the FTC during a press conference in Chicago target affiliate marketers who made allegedly deceptive advertising claims by posting online fake news stories about the weight-loss benefits of acai berry. The FTC filed 10 federal cases in a total of six courts. Also, the Illinois Attorney General has filed one suit in Illinois.
FTC Targets Allegedly Deceptive Websites
The FTC says the sites, which were in actuality advertisements, used the logos of legitimate news organizations and names similar to known news organizations to entice consumers to buy weight-loss products from other marketers, with whom the website operator was an affiliate marketer.
In addition to misleading consumers about the nature of the sites, the FTC alleges that fake news stories also misled consumers by making deceptive representations about the independence of the tests demonstrating the effectiveness of the product, including fabricated consumer comments beneath the fake news stories, and failing to disclose the material connections between the affiliate marketer and the merchants selling the acai berry products.
The FTC will ask the courts to permanently bar the allegedly deceptive claims, and require the companies to provide money for refunds to consumers who purchased the supplements and other products.
FTC's Next Steps
The FTC decided to pursue acai advertising because it was prominent, and the FTC had prior enforcement experience with acai berry products. But, the Commission was clear that it would look at other areas promoted by affiliate marketers. During the press conference, one FTC official noted that one of the defendants ran multiple affiliate advertising operations promoting teeth whitening and government grant programs. Work-from-home offers also were mentioned and have been the focus of ongoing enforcement actions. The FTC also said it will use investigatory methods to actively explore the role of product marketers in the development of affiliates’ marketing claims.
The FTC is sending a clear message that it will be using its enforcement authority against product marketers, affiliate networks and affiliates that allegedly imitate news sites, make unsubstantiated advertising claims, and engage in deceptive advertising.
The FTC’s announcement is, in reality, about much more than weight-loss claims and allegedly deceptive websites. It is a shot across the bow, putting affiliate networks, affiliate marketers and product marketers on notice that federal and state scrutiny of their activities has never been higher.
When an industry is the target of coordinated FTC and state attorney general lawsuits, it is critical for individual companies to review their own legal compliance programs and to ask how they can help the entire industry avoid major enforcement sweeps and retaliatory regulation.
Jeffrey D. Knowles is a partner at Venable LLP and chair of the firm’s Advertising, Marketing and New Media Group. Jonathan L. Pompan is of counsel at Venable LLP. They can be reached at (202) 344-4000.