Wednesday 05 February, 2014
By now, every affiliate marketer should know that the FTC takes an active interest in what we do. It’s not the Wild West it was just a few short years ago. Although they can’t monitor everything everybody does, they’re paying attention and this means your affiliate marketing needs to be done honestly.
The latest FTC smackdown was a complaint against ClickBooth in November, 2012. The complaint accused the affiliate network and its merchants and marketers of using deceptive advertising to sell acai berry and colon cleanse products. It charged that they used fake news stories and unsubstantiated weight loss claims to sell the products. The result was a settlement for $2 million.
Deceptive Advertising and Unsubstantiated Claims
What were they doing that was objectionable? According to the FTC, a number of things. They created fake news sites with names like channel5healthnews.com with phony news stories. While the site claimed that these used the results of independent tests carried out by objective third parties, they were actually written by the marketers themselves. There were also fake customer testimonials and reviews that painted the products in a positive light.
So, why did the FTC go after the network and not the marketers? The reason is that ClickBooth allegedly helped the marketers deceive their customers. The affiliate network designed ads and tweaked fake claims. It even went so far as to set up sites to promote these products and their false claims. The list is huge but among the names are Acai Advanced Cleanse, Slimberry, HCG Extreme, and Tone DeTox. Supposedly, they even used names and emblems of TV stations (‘as seen on CNN’).
The FTC complaint also alleges that the network and its merchants weren’t honest with their customers about their policies. It says they didn’t disclose adequately to customers that there was a limit to the refund period for the ‘free’ trial products. Customers, it claims, were automatically enrolled in a schedule payment plan if they signed up. They were required to cancel the program in order to stop recurring shipments and charges.
The Settlement and Its Effects
The settlement consists of $2 million which the FTC will redistribute to customers who it alleges were duped. The defendants are also barred from a wide range of marketing practices considered deceptive such as making unsupported claims, misrepresenting facts or study results, and failing to disclose their terms to customers. In other words, the FTC will be watching closely.
It should be noted that the defendants in the lawsuit, John Daniel Lemp and his two companies ClickBooth and IntegraClick, bear no admission of guilt. The defendants settled, which means they weren’t found ‘guilty.’
Although official statements and correspondences from ClickBooth say that they’re one of the affiliate networks that works hardest to protect consumer rights, this is still a stain on their reputation. It comes after reports in early 2012 of meetings held within the company where employees were told to get rid of emails and instant messages that could be incriminating. These reports were denied by ClickBooth representatives, who also said there was no evidence that an FTC investigation was underway.
After the settlement, a rumor spread that ClickBooth’s Florida offices had been raided by the FTC, further casting doubt on the company’s viability. However, this rumor was started by anonymous posts on forums and message boards that could possibly be a competitor kicking ClickBooth while it’s down.
On affiliate marketing forums across the web, the company’s reputation as a good affiliate network still remains intact. If you’ve been in affiliate marketing for any length of time, you know that even if the FTC claims are true, the things ClickBooth supposedly did are somewhat widespread. What this story really teaches us is that the FTC is watching. Federal regulatory bodies are watching affiliate marketers increasingly closely online.
Here are a few takeaways from the story:
* Ultimately, you’re responsible for what your affiliates are out there doing. All of it reflects back on you and you could be held legally responsible. If they’re putting out fake reviews and testimonials or phony news stories, you could get into big trouble. A great way to circumvent this is to provide them with all the materials they need and make sure those materials are solid.
* Any deceptive practices you’re doing in your own marketing campaigns can get you into a heap of trouble. ClickBooth is a big company and it can take a $2 million hit, but most solo marketers can’t. While they’re not going to nail everyone, they could pick just a few individuals to make glaring examples of.
* Acai berry doesn’t actually help you lose weight.
The rules of the game are always changing, and this is a good thing. You shouldn’t be deceiving anyone anyway. If the products you’re promoting are such crap that you need to lie to people in order to buy them, you’re in the wrong niche. News stories like this are a wake-up call to remind marketers to make sure what we’re doing is honest and ethical.