Five Federal Enforcement Actions that Changed the Online Industry In the last five years the marketing industry has been hit with a lot of lawsuits that have drastically changed the industry. Gone are the days of affiliate networks making bad decisions to promote less-than legitl offers – or at least an understanding that doing illegal or unethical things may get them in trouble. However, this change didn’t come over night, several companies had to have their ass handed to them by the FTC before anything was done. Here are five major lawsuits that have changed the industry significantly, with each company being hit hard, and then the industry responding with major changes that benefited the industry.
1) Ads4Dough aka A4D fined $1 Million for promoting Fake News Sites and Misleading Consumers with Weight-loss. This boutique affiliate network, run by one-time super affiliate Jason Akatiff was caught up in the scandals that broke in 2011 and 2012 with fake news sites. They were caught by the FTC and settled for a relatively small amount and agreed that they would no longer promote deceptive products on fake news sites, and would provide studies and research about any product that they promoted. The company, along with other took this seriously and relaunched with new branding and focus. Since then they have become bigger than ever.
2) LeapLab fined for $4.1 Million for crappy loans. Arizona based financial lead-generation company owned by John Ayers was sued and put out of business for buying and selling information that was illegal under the law including social security and bank account information. This was part larger investigations against unethical Pay-day loan lenders who were caught allegedly violating the law. No one was left unscathed in these lawsuits including a lender affiliated with Montel Williams. These lawsuits have been changing the online lending industry significantly, making it clear that you can’t prey on consumers.
3) FTC Fines Lumosity $2 Million for Fake Brain Tests. You probably saw all the commercials that claimed that brain training company Lumosity could expand your brain in new and impossibly strange ways. The FTC didn’t agree with them that the test did anything, and they ended up taking action against the company which eventually agreed they were lying about their services. The FTC’s Bureau of Consumer Protection Director, Jessica Rich, said in a statement about this case that, “Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease, but Lumosity simply did not have the science to back up its ads.” Even games like Lumosity have to back up their claims, do some basic research.
4) Avrom Lasarow Goes Broke Fighting FTC over Fake Skin Cancer App. According to the FTC’s complaints, each of the apps instructed users to photograph a mole with a smartphone camera and input other information about the mole. The apps then purported to calculate the mole’s melanoma risk as low, medium, or high. The FTC alleged that the marketers deceptively claimed the apps accurately analyzed melanoma risk and could assess such risk in early stages. The marketers lacked adequate evidence to support such claims, the FTC charged. Lasarow claimed he couldn’t afford to pay the settlement of $58,623.42. While this wasn’t a lot of money, showed that app developers need to back up their claims.
5) Boost Software and Amit Mehta shut down by FTC. The FTC alleged that the Florida-based companies, accused in two different actions, led consumers to think they had technical issues with their computers and, therefore, needed the companies’ tech help. The sales pitches were hardcore and deceptive, the FTC said, particularly considering the computers didn’t actually have problems. Then the users are told that to repair the problems they’ll need to buy the software for $29-$49. After doing that, the FTC said, they would be directed to call a phone number to supposedly activate the software. The FTC alleges that consumers were then pounded with sales pitches to buy computer repair services and more software.