The FTC has recently announced the settlement of an action involving a work-from-home scheme. (FTC vs. Fat Giraffe Marketing.) According to the FTC, over the course of three years, the defendants -- individuals and the companies they control -- charged consumers to join a program that purportedly would allow them to make significant income from home by posting advertising links on websites.
As alleged in the complaint, defendants used affiliate marketing networks to promote their program through email blasts and ads. The emails contained links that, when clicked, sent consumers to fake review sites with phony reviews that looked like they were from news sources because they bore the logos of various news organizations, like CNN and USA Today.
The review sites also contained links that, when clicked, sent consumers to the defendants’ sales websites, where consumers could pay to enroll in the defendants’ program. These websites promised significant income with little effort, and showed supposed consumer testimonials. One of the "testimonials" was from a single mother who had lost her job and then became a millionaire with defendants' program. However, the testimonials were false, as were the supposed customers.
The result? A complaint from the FTC alleging a laundry list of violations, namely of the FTC Act, the Business Opportunity Rule, and the Telemarketing Sales Rule. And now, a settlement that bans the defendants for life from marketing any business opportunity or business coaching service. In addition, the order imposes a financial judgment of more than $10 million.
The complaint here is like a law school exam of bad acts. But because I'm thinking a lot about affiliate marketing these days (in preparation for my speaking gig at NAD West), there are a few points I'd like to make about that. Here, of course, the marketers themselves were the putative bad actors. But even when the marketer is on the up-and-up, it risks liability if it does not properly manage its affiliates, the people and entities it engages to send it traffic and to whom it promises a share of the revenue for their successful efforts. Marketers using affiliates to market their goods and services must (1) explain what can and cannot be said about their products and services; 2) establish reasonable monitoring programs to watch what their affiliates are saying and how and where they’re saying it; and 3) follow up if they find questionable practices. If they don't, they could wind up like these marketers, the subjects of another FTC action involving affiliate marketing.
The complaint alleges that the defendants pocketed several million dollars from consumers who paid to join their bogus program, and took in several million more by tricking their customers into calling certain telemarketing sales floors that sold them one-on-one business coaching packages costing thousands of dollars.