Photo (cc) by Senator McCaskill
A federal judge has ordered a marketing company and its parent company to hand over $16 million in “ill-gotten gains” they received from operating a scheme that used phony news sites to push acai berry and colon cleanse weight-loss products.
According to the Federal Trade Commission, LeadClick Media and its parent company, CoreLogic, used deceptive marketing to entice consumers to purchase the diet pills from LeanSpa’s online store.
The FTC said they tricked consumers into thinking that the people endorsing LeanSpa’s products were independent customers and news outlets, rather than paid advertisers.
Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement:
“This ruling is good news because it takes ill-gotten gains out of the hands of companies who knew they were promoting a scam and gives them back to the consumers who lost millions of dollars. It also makes clear that a parent company cannot retain ill-gotten gains of its subsidiaries.”
In 2011, the FTC shut down the operation run by LeanSpa and Boris Mizhen of Connecticut. In addition to deceiving consumers with its fake news reports, LeanSpa also used a “free trial” to lure consumers into enrolling in a recurring purchase program that cost about $80 per month and was difficult to cancel.
LeadClick and CoreLogic have been ordered to give up nearly $16 million they received as payment from LeanSpa for their services. The returned funds will be used to refund consumers tricked by the deceptive marketing ploy, the FTC said.
In finding LeadClick responsible for the deceptive content on its affiliates’ websites, the court noted that LeadClick recruited the affiliates, had the power to approve or reject their marketing websites, paid the affiliates, purchased advertising space for them, and gave them feedback about the content of their sites. The court also rejected LeadClick’s claim that it was immune from liability under Section 230 of the Communications Decency Act, because it was responsible in part for the fake news sites promoting LeanSpa’s products.
LeadClick and CoreLogic are appealing the court’s decision.
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