FTC Resolves first Action against "Affiliate Network" of Internet Advertisers
Two more online marketers have agreed to settlements with the Federal Trade Commission that will permanently halt their allegedly deceptive practice of using fake news websites to promote acai berry supplements and so-called “colon cleansers” with deceptive claims that consumers could use them to lose weight.
In the first case, the FTC settlement with Intermark Communications, Inc., doing business as Copeac and several other defendants allegedly involved in the scheme results from the first FTC suit against an affiliate network. As an affiliate network, Copeac not only operated its own fake news sites, it also recruited an entire network of affiliates that used fake news sites to promote products with allegedly deceptive claims.
The FTC’s original complaint against the New York-based Copeac was part of a law enforcement sweep the agency conducted last year against 10 alleged operators of fake news sites. The FTC charged all of them with deceptive advertising for portraying the sites as legitimate news sites; making false and unsupported weight-loss claims; and failing to disclose that they were being paid by the merchants of their so-called weight-loss products. In settling with the Copeac defendants, the FTC amended its complaint by adding allegations that the operation developed an affiliate network, and by adding three individual defendants.
Under the settlement, the Copeac defendants will pay more than $1.3 million, which represents revenues they received from deceptive fake news site ads for acai berries, colon cleansers, and other supposed weight-loss dietary supplements; and revenues they received for other products marketed on fake news sites. The settlement also requires Copeac to monitor all its affiliate marketers when selling any good or service, obtain adequate information about the affiliate marketers it hires, approve their advertisements, and immediately stop processing payments generated by any affiliate marketer using deceptive advertisements.
In the second case, under the terms of the settlement with Coulomb Media, Inc., and Cody Low, also known as Joe Brooks, the defendants’ $2.7 million judgment will be suspended after they pay $170,000 in cash, proceeds from the sale of Low’s 2010 Chevrolet Tahoe, and a certificate of deposit.
As part of the FTC’s ongoing crackdown on bogus health claims, the proposed settlements with the Copeac and Coulomb defendants will require the operators to make clear when their commercial messages are advertisements rather than legitimate journalism, and will bar the defendants from further deceptive claims about health-related products such as the acai berry weight-loss supplements and colon cleansers they marketed. The defendants also are required to disclose any material connections they have with merchants, and will be barred from making deceptive claims about other products.
With these two settlements, eight of the 10 fake news site cases the FTC brought in 2010 have been resolved, and all the fake news sites affiliated with the eight operations have been permanently shut down.
When federal courts temporarily halted all 10 fake news operations last year at the FTC’s request, the agency alleged that their websites were designed to falsely appear as if they were part of legitimate news organizations, but were actually nothing more than advertisements deceptively enticing consumers to buy the featured acai berry weight-loss products from online merchants. With titles such as “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News,” the sites often falsely represented that the reports they carried had been seen on major media outlets such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports. Investigative-sounding headlines presented stories that purported to document a reporter’s first-hand experience with acai berry supplements – typically claiming to have lost 25 pounds in four weeks, according to the FTC complaints.
In pitching the acai weight-loss products, the defendants posted attention-grabbing ads on search engines and high volume websites, such as “Acai Berry EXPOSED – Health Reporter Discovers the Shocking Truth,” driving traffic to the fake news sites and ultimately to the sites where merchants sell the products, according to the complaints. The FTC received numerous complaints from consumers who paid between $70 and $100 for weight-loss products after having been deceived by fake news sites.
Derived from acai palm trees that are native to Central and South America, acai berry supplements often are marketed to consumers who hope to lose weight. In recent settlements with other online acai berry marketers, defendants in the Central Coast Nutraceuticals case were required to pay $1.5 million, and Jesse Willms was required to surrender corporate and personal assets, including bank account funds, a Cadillac Escalade, a fur coat, and artwork. In 2011, the Commission brought a suit against another online acai berry marketer, LeanSpa, LLC, which the Commission sued in conjunction with the State of Connecticut. In that case, the FTC obtained a preliminary injunction barring the defendants from engaging in the charged deceptive practices.
The FTC helps consumers recognize and avoid deceptive claims made by fake news sites that market acai berries for weight loss. To learn more, see the consumer alert THIS JUST IN: Fake News Sites Promote Bogus Weight Loss Benefits of Acai Berry Supplements, and the video Free Trial Offers, which explains how free trials are often used to market acai berry supplements and other products.
The amended complaint and proposed settlement against Copeac also name as defendants Timothy McCallan, Michael Krongel, and Danielle Krongel.
The Commission vote approving the amended complaint and proposed consent decree against the Copeac defendants was 4-0. The FTC filed the complaint and proposed consent decree in the U.S. District Court for the Northern District of Illinois, Eastern Division, on March 1, 2012, and it was entered by the court on March 15, 2012. The FTC thanks the Florida Attorney General’s office for its assistance in the Copeac matter.
The Commission vote approving the proposed consent decree for the Coulomb defendants was 3-1, with Commissioner J. Thomas Rosch voting no. The FTC filed the proposed consent decree in the U.S. District Court for the Eastern District of Michigan on March 14, 2012, and it was entered by the court on March 21, 2012.
NOTE: These consent decrees are for settlement purposes only and do not constitute an admission by the defendant that the law has been violated. Consent decrees have the force of law when approved and signed by the District Court judge.
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FTC File No. X110037) (Coulomb Media, Inc.)
(Two Fake News Settlements NR)
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