Flogs, Farticles, Facebook, Fraud, FTC, oh F%!*

Affiliate Summit East 2012, 2:00 – 3:00 p.m.

Moderator: Jim Banks, CEO, Spade Media

Panelists: - Sarah de Diego, Attorney, De Diego Law- Vladimir Karetnikov, Media Buyer, Westwood Promotion, Inc.- Susannah Booth-Winemiller, Senior Manager, Union Square

Media- Tom Cohn, Attorney, LeClair Ryan

FTC v. IMM Interactive/COPEAC

• Web Marketers Falsely Claim Endorsement by ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports, FTC Alleges

• FTC obtained federal court orders to temporarily halt allegedly deceptive tactics of 10 operations using fake news websites to market acai berry weight-loss products.

• According to FTC, defendants operate websites that are meant to appear as if they belong to legitimate news-gathering organizations, but in fact the sites are simply ads aimed at deceptively enticing consumers to buy the featured acai berry weight-loss products from merchants.

• FTC complaints allege that these fake news sites have titles like “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News.”  Sites often include names and logos of major media outlets, such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports, and falsely represent that the reports have been seen on these networks.

• http://ftc.gov/os/caselist/1023232/index.shtm

The Resulting Settlements

• By March 2012, a total of eight out of ten affiliate marketers (including Intermark/ Copeac, sued for its conduct as both network and affiliate) had settled actions by the FTC and were ordered to stop using fake news sites to market dietary supplements and other products.

• In these settlements, the affiliates also had to agree to:– claim substantiation provisions for weight loss and other health-related

products, and – monitor other affiliate marketers, should they ever operate as an advertiser

or a network. – money judgments ranging from $143K to $2.7M, but were partially

suspended due to inability to pay.• Copeac settlement: three individual defendants together ordered to

pay over $1.3 million.

FTC v. Central Coast Nutraceuticals, Inc.

• FTC announced that an operation that marketed acai berry supplements, "colon cleansers," and other products using allegedly fraudulent free trial offers and phony endorsements from Oprah Winfrey and Rachael Ray will pay $1.5 million as part of a settlement. The money will be made available for consumer refunds.

• The case against is part of the FTC's ongoing efforts to protect consumers from fraudulent internet marketing, as well as false and misleading health claims.

• The settlement order bans the defendants from so-called "negative-option" sales, such as continuity plans and free or introductory price trial offers, in which consumers pay nothing up front or only a small fee to receive a product, but are then automatically charged a higher price unless they take steps to cancel or return before end of trial period.

• The settlement order also imposes tough monitoring requirements re: using affiliate marketers – prior review/approval of all content; terminate/cutoff payment to any making deceptive claims.

• http://www.ftc.gov/os/caselist/1023028/index.shtm

Bogus Health Claims + Fake Celeb Endorsements = $$$

Unauthorized use of celebrity names like Oprah, Rachel Ray, and Dr. Oz, leads to serious legal problems.

Fake Geotargeted Banners

NEWS FLASH! There’s no actual mom in [Insert your city] that is making $7,487 per month part-time

Example: Recent Non-Compliant Page

Example: Upsell with False Info

- Fake expiration date creates false urgency

Example: Name Dropping Exit Pop Up

Not so “Free” TrialsFTC v. Jesse Willms• Willms allegedly used bogus "free" product offers that deceived consumers in

the United States and other countries and charged them for products and services they did not want or agree to purchase.

• The settlement order, permanently bans Jesse Willms and his companies from using "negative-option" marketing, a practice in which the seller interprets consumers' silence or inaction as permission to charge them.

• Judgment of $359 million that will be suspended upon Willms's surrender of bank account funds and proceeds from the sale of his house, personal property, and corporate assets, including a Cadillac Escalade, fur coat, and artwork.

• "The fact that almost four million consumers fell prey to the lure of these 'free trial' offers is a stark reminder that 'free' offers can come at a huge price," said David Vladeck, Director of FTC's Bureau of Consumer Protection. "The FTC has stopped about $1 billion in online marketing fraud during the past two years by shutting down operations like this. But consumers still need to beware, because scam artists are constantly coming up with new ways to deceive people online.“

SIMPLE TIPS TO BE LEGIT

• Ask yourself: are you just simply making claims up? If you answered yes, STOP.

• Avoid trouble niches: weight loss, skin care, and biz op and most of your problems will vanish.

• Don’t state actual facts and figures unless they are substantiated.

• If an offer appears sketchy it probably is. • There are tons of legitimate advertisers, agencies and

networks that have legitimate products and compliant offers - look around Affiliate Summit and find some!

• Reach out to the advertiser or network for legitimate testimonials and insist on affidavits so you have proof.

• Ask for proof that the product or service performs as claimed.

• Ask – do you have the right to use that name, image, logo?

• Just use the facts. • Be persuasive, but not a liar.• Write good copy.• Direct link, don’t make your own landing pages.

Be Creative!

VS

FACEBOOK

• All the Rules Still Apply–False Advertising–Endorsements–Testimonials

FACEBOOK SPAM

State of Washington v. Adscend Media, LLC.- Facebook and Washington Attorney General both sued

Adscend for clickjacking/likejacking- Settled by entering into a consent decree with AG- Agreed: ““the term “commercial electronic message”

shall include but not be limited to social networking communications under circumstances in which an electronic message is not delivered to an “inbox,” but rather to locations on social networking sites such as Wall posts, News Feeds, homepages, Page suggestions and similar destinations”

Settlement Terms:

• Cannot use false or misleading headers or subject lines, won’t conceal the sender’s identity;

• Messages must include “clear and conspicuous” identification that its messages are advertisements and solicitations, especially if appear to be from a “friend”;

• Maintain an affiliate monitoring program with daily monitoring;

• Pay $100,000 to state for attorney’s fees.

Affiliate Fraud Hurts Affiliates, Networks, and the Industry

• Advertisers don’t pay even for legitimate traffic;

• Offers are pulled completely;• Advertisers don’t want to try affiliate

marketing = less good offers to choose from;• Affiliate marketing seen as a scam;• Negative publicity;• More regulation by the Feds and States.

Questions?

Jim Banks, CEO, Spade MediaJim.Banks@spadesmedia.com

Sarah de Diego, Attorney, De Diego LawSarah@dediegolaw.net

Vladimir Karetnikov, Media Buyer, Westwood PromotionVladimir.Karetnikov@gmail.com

Susannah Booth-Winemiller, Senior Manager, Susannah@unionsquaremedia.comTom Cohn, Attorney, LeClair Ryan

Thomas.Cohn@leclairryan.com