COMPANY AND PARENT MUST PAY OVER $16 MILLION FOR ALLEGEDLY USING FAKE NEWS SITES TO PROMOTE DIET PILLS

FROM:  U.S. FEDERAL TRADE COMMISSION

Federal Court Rules Affiliate Marketing Network and its Parent Company Must Turn Over $16 Million They Received From Deceptive Marketing Scheme
FTC and State of Connecticut Charged LeadClick Media with Operating A Network That Used Fake News Sites to Promote Diet Pills

A U.S. district court has ruled that LeadClick Media, an affiliate marketing network, and its parent company, CoreLogic, Inc., must turn over $16 million in ill-gotten gains they received from a deceptive marketing scheme that sold purported weight-loss products.

In granting the FTC’s request for summary judgment, the court ruled that LeadClick was responsible for the false claims made by affiliate marketers it recruited on behalf of LeanSpa, LLC, a company that sold acai berry and “colon cleanse” weight-loss products. According to the FTC’s Complaint, LeanSpa used a “free trial” ploy to enroll consumers into its recurring purchase program that cost $79.99 a month and that was difficult to cancel.

LeadClick’s network lured consumers to LeanSpa’s online store through fake news websites designed to trick consumers into believing that independent news outlets and independent customers, rather than paid advertisers, had reviewed and endorsed LeanSpa’s products.

“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,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It also makes clear that a parent company cannot retain ill-gotten gains of its subsidiaries.”

The FTC’s case dates back to December 2011, when the Commission and the State of Connecticut first sued LeanSpa and its principal, Boris Mizhen. In January 2014, the FTC and the State of Connecticut settled with LeanSpa and Mizhen, who agreed to stop their deceptive practices and surrender assets for redress to consumers.

In the summary judgment ruling, the court held that the fake news sites developed by LeadClick’s affiliates deceived consumers by using real news organization names and logos along with purported testimonials from users of LeanSpa’s products. 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.

The court ordered LeadClick to give up the nearly $12 million it received from LeanSpa as payment for its affiliate marketing services. It also ruled that LeadClick’s parent company, CoreLogic, must disgorge $4 million in ill-gotten gains it received from LeadClick. LeadClick and CoreLogic are appealing the decision.

Funds recovered from the defendants will be used by the FTC to provide redress to consumers affected by the scam.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

FTC CHARGES GREEN COFFEE BEAN SELLERS WITH USING FAKE NEWS SITES, FICTITIOUS WEIGHT LOSS CLAIMS

FROM:  FEDERAL TRADE COMMISSION 

FTC Charges Green Coffee Bean Sellers with Deceiving Consumers through Fake News Sites and Bogus Weight Loss Claims

The Federal Trade Commission has sued a Florida-based operation that capitalized on the green coffee diet fad by using bogus weight loss claims and fake news websites to market the dietary supplement Pure Green Coffee. Popularized on the syndicated talk show The Dr. Oz Show, green coffee bean extract was touted as a potent weight loss treatment that supposedly burns fat.

The FTC alleged that weeks after green coffee was first promoted on The Dr. Oz Show, the defendants behind Pure Green Coffee – Nicholas Congleton, Paul Pascual, Bryan Walsh, and the companies they control – began selling their Pure Green Coffee extract, charging about $50 for a one-month supply. They marketed the dietary supplement through ads on their own sales websites – with names such as buypuregreencoffee.com, buygreenweightloss.com, greencoffeeweightcontrol.com. The sites featured footage from The Dr. Oz Show, supposed consumer endorsements, and purported clinical proof that dieters could lose weight rapidly without changing their diet or exercise regimens. The defendants also ran paid banner and text ads that appeared on search engines and contained phony weight loss claims.

The defendants made similar claims on websites they set up to look like legitimate news sites or blogs, but were in fact advertisements, and on other “fake news” sites run by affiliate marketers whom they paid to advertise the Pure Green Coffee product, according to the complaint. The fake news sites featured mastheads of fictitious news organizations such as Women’s Health Journal and Healthy Living Reviewed, as well as logos they appropriated from actual news organizations, like CNN and MSNBC.

“Not only did these defendants trick consumers with their phony weight loss claims, they also compounded the deception by advertising on pretend news sites, making it impossible for people to know whether they were seeing news or an ad,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

The FTC charged the defendants with false and unsupported advertising claims, including:

that consumers using Pure Green Coffee can lose 20 pounds in four weeks; 16 percent of body fat in twelve weeks; and 30 pounds and four-to-six inches of belly fat in three to five months.
that studies prove Pure Green Coffee use can result in average weight loss of 17 pounds in 12 weeks or 22 weeks, weight loss of 10.5 percent, and body fat loss of 16 percent without diet or exercise.
that certain websites linked to the defendants’ sites are objective news sites with articles written by objective news reporters and that the comments following the supposed articles reflected views of independent consumers.
The FTC also charged the defendants with deceptively failing to disclose that consumers who endorsed the supplement had received it for free and were paid to provide a video testimonial.

The complaint also names as defendants the companies used by Congleton, Pascual, and Walsh to market this operation:  NPB Advertising, Inc., also doing business as Pure Green Coffee; Nationwide Ventures, LLC; Olympus Advertising, Inc.; JMD Advertising, Inc.; and Signature Group, LLC.

Consumers should carefully evaluate advertising claims for weight-loss products. For more information, see the FTC’s guidance for consumers of products and services advertised for Weight Loss & Fitness.

The Commission vote authorizing the staff to file the complaint was 4-0-1, with  Commissioner McSweeny not participating. The complaint was filed in the U.S. District Court for the Middle District of Florida, Tampa Division on May 15, 2014.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are healthy at every stage of life.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.