FTC Settles First Suit Against An Affiliate Network

During the time when the Google Money Tree scam was going on, many of us that were helping people file complaints and getting the word out about the scam came to the conclusion that one of the best things the FTC could do would be to target the affiliate networks. The affiliate networks are the central distribution hub for many scams, so by targeting the networks, you cripple the must critical point of distribution. Targeting the intermediaries is something I discussed in the article Impeding Scalability In Fraud and which was recently discussed in the Salty Droid’s article Suits Versus Unicorns

I talked to Senior Litigator Collot Guerard at the FTC about targeting the affiliate networks and went over how the offers were brought into the networks and how they were distributed to affiliates. My understanding from talking to her was that the ability to succeed in going after the networks would have to do with how involved they were in the activity and the creatives.

FTC Settle’s With The Copeac Affiliate Network

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.”

“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.”

Other FTC Actions Against Intermediaries…

10/09/2009 – FTC Broadens It’s Radar – FTC Vs. MoneyGram

“The FT.C charged that MoneyGram knew that its system was being used to defraud people but did very little about it, and that in some cases its agents in Canada actually participated in these schemes. According to the FTC’s complaint, MoneyGram knew, or avoided knowing, that about 131 of its more than 1,200 agents accounted for more than 95 percent of the fraud complaints it received in 2008 regarding money transfers to Canada; a similarly small number of agents was responsible for more than 96 percent of all fraud complaints to the company in 2006.”

Attorney Michael Webster noted:

“Commercial litigation attorney Michael Webster noted, “This is an important change in emphasis by the FTC. In seeking to stop those who enable fraud from profiting, the FTC has signaled its willingness to go beyond simply getting unenforceable default judgments against con criminals who have skipped on to the next con project.”

01/20/2011 – FTC Targets Affiliates – FTC Vs. Media Innovations, LLC, Hermosa Group, LLC; Financial Future Network, LLC; and Jonathan Greenberg, individually and as an officer of the companies, Defendants.

Count III

“25. Through the means described in Paragraph 17, Defendants have represented, directly orindirectly, expressly or by implication, that consumers who use the services promoted in Defendants’advertisements will have their debts settled quickly or immediately.

26. The representation set forth in Paragraph 25 was false or not substantiated at the time therepresentation was made. Therefore, the making of the representation as set forth in Paragraph 25 of this Complaint constitutes a deceptive act or practice in or affecting commerce in violation of Section5(a) of the FTC Act, 15 U.S.C. § 45(a).

This is interesting, because it indicates that the FTC is willing to look at affiliates that do not subtantiate claims (and especially obviously false claims)…maybe claims such as:

This one…

“If You Can Spare 60 Minutes A Day, We Can Offer You A Certified, Proven Work From Home Opportunity To Make Up To $379 Per Day!” (used by hundreds of scams bizopps)

Affiliate offers using that above headline as well as many of the other fraudulent elements discussed in my Home Business Scams Red Flag Priority Checklist are constantly being pushed by many different affiliate networks and affiliates.

Many of those elements were used by the site ShoeMoneyHomeJobs.com:

Or this one which claimed this…

“Weird “Money Machine” (Stolen From Big Name Guru) Cracks The Million Dollar A Year Code & Delivers Up To $198,016 Every Month For Anyone Who Can Click Their Mouse 7 Times…”

But which was actually more like this:

That “product” from the “Andrew X” has been running through the ClickBank marketplace since March 3, 2011, was promoted heavily by affiliates such as Anik Singal who sent an email asking me: “You’ve probably seen the AMAZING
new software that my buddy Mike Harvey has released right?”

Instant Cash Empire is still running through ClickBank as of today:

Instant Cash Order Page As Of 03/23/2012

Instant Cash Order Page As Of 03/23/2012

Other FTC Hints About Going After Affiliate Networks And Other Similar Facilitators Of Fraud

FTC has also given some indication that knowledge of activity that violates FTC guidelines could come into play by using the following language in their Advertising FAQs:

“Are advertising agencies subject to the FTC Act?

Yes. In addition to the advertiser, the advertising agency also may be held legally responsible for misleading claims in ads. Advertising agencies have a duty to make an independent check on the information used to substantiate ad claims. They may not rely on an advertiser’s assurance that the claims are substantiated. In determining whether an ad agency should be held liable, the FTC looks at:

  • The extent of the agency’s participation in the preparation of the challenged ad; and
  • Whether the agency knew or should have known that the ad included false or deceptive claims.”

Beyond The Google Pharmacy Sting Operation

The Non-FTC Google Pharmacy sting operation in which  “the government built its criminal case against Google using money, aliases and fake companies—tactics often used against drug cartels and other crime syndicates” was an intriguing, controversial and extensive operation. And the settlement document’s paragraph implies that Google knew advertisers were changing ads to be non-complaint after they had been approved seems to answer some questions about the degree of awareness Google has of rogue ads being run. According to these parapraphs from the settlement:

“Once the advertisements began to run on the Company’s search engine, however,- some pharmacies changed the geo-targeting of the advertisements so as to cause the advertisements to appear in the United States in response to queries by U.S. users of the Company’s search engine. Although the Company was on notice that some online pharmacies changed their geo-targeting in this manner, the Company did not prevent these changes in geo-targeting until after it became aware of the Government’s investigation.”

“Once the Company began using Square Trade, and continuing throughout the period during which the Company used PharmacyChecker, the Company conducted manual review of non-certified online pharmacy advertisements only if a pharmaceutical term appeared in the text of the advertisement. The Company was on notice,
however, that some online pharmacy advertisers, including some from Canada, avoided this review by using the prescription drug terms as keywords only and not in advertising text. For example, in a February 13, 2008 email, a member of the Company’s policy group stated “the only ads that are getting blocked are those with explicit pharma terms in the ad texts; the shady, fraudulent advertisers know not to do this.” After it became aware of the Government’s investigation, the Company made changes to its systems in order to flag for review all ads that had prescription drug terms as keywords.”

Again, though the Google Pharmacy case is intriguing,  the cases from the FTC seem to be more representative of the “fundamental shift” in the FTC’s willingness to go after the enablers of fraud.

How Intermediaries Are Responding (Or Pretending To Respond)

Obviously, it’s not always possible to know if intermediaries are serious in their newly initiated FTC compliance efforts or if they are doing them just for few, but here are a few examples of what’s happened within the past year or so:

ClickBank’s New Vendor Promotional Guidelines Implemented In August Of 2011

After a rash of obvious push-button money scams, fake actor videos, and massive refund rates, ClickBank implemented new vendor promotional guidelines effective August, 2011.

ClickBooth Dresses Compliance Page With Efforts It’s Taking To Stay In Compliance

The ClickBooth put up their Clicky’s Compliance Corner. The first post they show is from Jan, 20th, 2009. Perhaps it’s a coincidence, but the post talks about ClickBooth “Set(ting) New Standards for Advertisers Offering Retention Programs” (advertised programs that engage consumers in recurring monthly charges) and was posted exactly one week after after the National Consumer League warning about the Google Money Tree (which made use of much of my 2008 Google Money Complaints post which includes 854 comments). Around that time rumors also started that the FTC had Google Money Tree on their radar or possibly was giving them a “clean up their act period”. Although that kind of claim is impossible to verify, Google Money Tree did start making changes to their sales page which tried to make them seem more compliant.

Google Bans 130 Million Rogue Ads In 2011

Whether Google’s increased vigilance is due to it’s $500,000 milion dollar settlement, the new FTC mindshift, or because it truly want so improve user experience, it does appear to be cracking down more and more on rogue ads from scammers. Again, it’s not perfect, but here’s what Google states it’s doing:

Skeptics Respond To Middlemen Compliance Efforts

Needless to say, not everyone is convinced of many of the intermediaries compliance efforts. I’ve already noted one instance of ClickBank continuing to run an obviously fraudulent offer – and one that was extremely popular (i.e., it’s highly unlikely they don’t know about it) as you can see in the attached Compete Graph:


Instant Cash Empire Popularity

Instant Cash Empire Popularity

The spike to 300,000 unique visitors was during the Instant Cash Empire launch – and 5 months before ClickBank’s guideline’s went into effect. However, the fact is that the offer continues to run on ClickBank in the same form as it was at the time of the of the spike in traffic.

Ben Edleman’s Skepticism Of Google Adword’s Scam Sweeping

Ben Edmen’s August 26th, 2011 article about the Implications of Google’s Pharmacy Debacle states the following:

“As I noted in June, Google’s bad ads span myriad categories beyond pharmaceuticals — charging for services that are actually free, promising free service when there’s actually a charge, promoting copyright infringement, promoting spyware/adware, bogus mortgage modification offers, work-at-home scams, investment rip-offs, identify theft, and more. Each of these categories of scam advertisements is in fact unlawful, and most are prohibited under Google’s existing advertising policies. But policies alone are not enough. Will Google step forward with a serious effort to block these dubious offers? Or does Google prefer to retain the ads and enjoy the resulting revenue, but leave users vulnerable? The world is watching!”

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