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FTC Defense Lawyer on Action Illustrating Need to Hold Partners Accountable

The Federal Trade Commission recently announced the settlement of allegations that marketers deceived consumers via a get-rich quick scheme.  According to reports, the operators have agreed to a permanent ban on marketing or selling certain types of software.

The FTC alleges that the international network of defendants deceived consumers by falsely claiming they could earn big money (e.g., “60k a month on 100% autopilot” and “beginners and normal people just like you” could pull in “$4,000 a day using their cell phones”) working online by using products marketed as “secret codes.”  According to the Commission, these products were generic software applications that could help the user make mobile-friendly websites.  The complaint charges the defendants with acquiring millions of dollars in “ill-gotten gains.”

Interestingly, the complaint also alleges that the defendants contacted consumers via affiliate marketers primarily with deceptive SPAM emails in violation of the FTC Act’s prohibition against deceptive practices.  The FTC alleges that consumers visited the defendants’ websites and were met with additional deceptive claims, including relentless pop-up advertisements and  videos that featured individuals that made unsubstantiated earnings claims.  The FTC’s case also includes allegations that the defendants failed to honor the stated refund policy.

While the Federal Trade Commission does not regularly included allegations of CAN-SPAM violations, here, the agency alleges the existence of misleading subject lines, the failure to clearly and conspicuously identify commercial email as an “advertisement,” the failure to include a physical address and the absence of a statutorily required opt-out mechanism.  Consult with an FTC law firm to discuss state and federal email marketing compliance requirements and trends.

According to reports, the defendants agreed to a $7M judgment which shall be partially suspended upon payment of approximately $700,000.

The defendants also are prohibited from marketing or selling money-making software, from making misrepresentations in the promotion, marketing or sale of any product or service, and from violating the CAN-SPAM Act.

Takeaway:  In addition to private plaintiffs, state and federal regulators actively enforce email marketing compliance requirements.  Both the company that presses SEND and the company on whose behalf it is working may be held legally responsible for CAN-SPAM violations.  Additionally, those making unsubstantiated earnings claims or misleading claims regarding the nature of the products/services being offered should be prepared to write Uncle Sam a check and for lifetime bans on certain marketing activities.  The enforcement action also reminds marketers that anyone and everyone in the affiliate marketing ecosystem can be held liable for possessing actual or constructive knowledge of deceptive practices.

Richard Newman is an FTC advertising compliance and defense attorney at Hinch Newman LLP Email him at rnewman@hinchnewman.com, or call him at (212) 756-8777.

ADVERTISING MATERIAL. Informational purposes only. Not legal advice. Always seek the advice of an attorney. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777

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