FTC Alleges Both Merchant and Affiliate Liable for Affiliate Actions
The FTC filed a complaint against a merchant (Credit Bureau Center), a network (Revable Network, LLC), and an affiliate marketer (Andrew Lloyd). The FTC alleged unfair or deceptive acts, negative opinion marketing, and violation of certain advertising disclosure regulations by both the merchant and the affiliate.
The affiliate created fake rental property ads on Craigslist. When people responded, he sent them a fake landlord email with an affiliate link to the merchant’s “free” credit reporting service saying that it had to be completed to go any further in the rental process. The prospective renters subsequently signed up for the service and were then charged monthly fees without their consent.
The FTC alleged multiple deceptions in the transactions. First, the rental properties never existed and the ads and process were merely a way for the affiliate to make money through its affiliate links. Second, the merchant’s landing page did not make it clear that the consumers would be charged for the monthly credit reporting. Customers complained to the merchant as well as the Better Business Bureau and law enforcement about the practices. The merchant denied refunds or gave only partial refunds.
The United States District Court for the Northern District of Illinois Eastern Division agreed that the FTC established a reasonable likelihood that the network and the affiliate acted as the merchant’s agents and that all parties were liable for the violations. The network had express authority to use advertisements to drive traffic to the merchant and was fully aware of the affiliate’s Craigslist campaign. The merchant knew about the fraud because it asked the network at one point to have the affiliate change the email template. The merchant was receiving complaints that it could have traced back to the affiliate and then terminate the affiliate but did not do so.
What can we as the performance industry take away from this case? Although it involved lead generation, it could just as easily have been based on affiliate sales and the liability would have been the same. Where the affiliate acted in violation of the law, everyone up the chain to the merchant who should or could have corrected the violations may be at fault.
You can read all of the case documents and keep up with the status of the case on the FTC website under “Credit Bureau Center, LLC (formerly known as MyScore LLC).”