Federal Trade Commission v. LeadClick Media, LLC

LeadClick Media, LLC (LeadClick) (defendant) operated an affiliate-marketing network. Merchants hired LeadClick to arrange advertising of their products via LeadClick’s network of third-party affiliate publishers. The affiliates advertised products using email distributions, banner ads, search-engine optimization, and advertising websites. LeadClick monitored the affiliates using tracking software. LeanSpa, LLC, hired LeadClick to arrange advertising for LeanSpa’s purported weight-loss products. LeadClick’s affiliates advertised the products using fake news sites. The sites falsely represented that a reporter had independently tested the weight-loss products and concluded they were effective. The sites also contained purported user comments praising the products when the comments were in fact generated by the affiliates themselves. Most of the traffic to LeanSpa’s website generated by LeadClick affiliates came from the fake news sites. Although LeadClick did not directly create the sites, it was aware that fake news sites were common in affiliate marketing, knew that its affiliates used them, approved of that use, and sometimes provided affiliates with content for such sites. The Federal Trade Commission (FTC) and the State of Connecticut (plaintiffs) sued LeadClick, alleging, among other things, that LeadClick was liable under § 5 of the FTC Act for its role in deceptive trade practices. LeadClick argued that it could not be liable because it did not directly create the deceptive fake news sites. The district court granted summary judgment in the FTC’s and Connecticut’s favor. LeadClick appealed.