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Through a series of recent law enforcement actions, the FTC has articulated what should be apparent: that truth-in-advertising principles apply to affiliate marketers and to the companies that use them to promote their products. A settlement announced today by the FTC makes a similarly obvious point: The law applies to affiliate marketing networks, too.
According to the FTC’s complaint against IMM Interactive — people may know it as Copeac — the company operated fake news sites to peddle acai diet products and “colon cleansers.” But to use a phrase popular with pitchmen, “But wait. There’s more!” The FTC also charged that Copeac recruited an entire network of affiliates that used fake news sites to promote products with allegedly deceptive claims.
The FTC’s original lawsuit was part of a law enforcement sweep filed last year against ten operators of fake news sites. Those complaints challenged three kinds of conduct as illegal:
- falsely portraying the sites as legitimate news outlets;
- making false and unsupported health claims; and
- failing to disclose the defendants were being paid by the companies selling the products.
In settling with Copeac, the FTC amended its complaint to name three individuals — Timothy McCallan, Michael Krongel, and Danielle Krongel — and to challenge actions the defendants undertook in their role as an affiliate network. Under the settlement, they’ll pay more than $1.3 million, which represents revenue they received from their own fake news site ads and money they got for products marketed on others’ bogus sites. The settlement also requires Copeac to monitor all its affiliate marketers, to get adequate information about the affiliate marketers it hires, to approve their ads, and to immediately stop processing payments generated by any affiliate marketer that uses deceptive claims.
In a second affiliate marketing settlement just announced by the FTC, Coulomb Media and Cody Low (also known as Joe Brooks), the defendants agreed to a $2.7 million judgment, which will be suspended after they turn over $170,000 in cash, proceeds from the sale of a 2010 Chevy Tahoe, and a certificate of deposit. That case also involved bogus news sites pitching acai berry products.
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