Opinion ID: 4036586
Heading Depth: 4
Heading Rank: 1

Heading: LeadClick Knew of the Deception

Text: LeadClick knew that (1) the use of false news pages was prevalent in affiliate marketing, and (2) its own affiliate marketers were using fake news sites to market LeanSpaʹs products: ‐ 28 ‐  An eAdvertising division employee noted that in the summer of 2010, fake news sites were ʺfairly common,ʺ J. App. at 158a‐59a;  Another employee testified in his deposition that during his time at LeadClick, ʺeveryone was using ʹem,ʺ id. at 235;  LeadClick employees occasionally discussed fake article pages, fake news pages, and news style pages among themselves and with affiliates and merchant clients;  A LeadClick employee testified that he saw ʺmanyʺ false news sites from LeadClick affiliates that contained false information, J. App. at 387a, 389a; and  LeadClick was even familiar with the specific content of these sites, and employees occasionally referred to ʺstep 1 and step 2ʺ pairing typical of fake news sites, see J. App. at 157a, 746a, 800a. ii. Direct Participation in the Deceptive Practices In addition to this knowledge, LeadClick participated in the deceptive scheme through the following acts:  A LeadClick employee ʺscoutedʺ fake news websites to recruit potential affiliates for the LeanSpa account; ‐ 29 ‐  LeadClick employees required alterations to the content of its affiliatesʹ fake news pages by instructing them to revise their pages to comply with explicit directives from LeanSpa;  A LeadClick employee instructed an affiliate to check that his fake news site was not ʺcrazy [misleading]ʺ and advising him not to remove the reporter photograph, but to ʺjust add advertorial,ʺ J. App. at 230a‐31a;  LeadClick employees advised affiliates on the content to include in their pages to increase consumer traffic, see J. App. at 788a (telling an affiliate ʺ[i]t is much more realistic if you say that someone lost 10‐12 lbs[.] in 4 weeks rather than saying anything more than thatʺ); and  LeadClick purchased banner advertisement space on genuine news sites to resell that space to affiliates running fake news pages to ʺgenerat[e] quality traffic in very lucrative placements.ʺ J. App. at 714a. Considered together, this conduct clearly demonstrates LeadClickʹs direct participation in the deceptive advertising scheme. LeadClickʹs own actions ‐‐ recruiting and paying affiliates who used fake news sites for generating traffic, managing those affiliates, suggesting substantive edits to fake news ‐ 30 ‐ pages, and purchasing banner space for fake news sites on legitimate news sources ‐‐ caused significant harm to consumers. iii. LeadClickʹs Authority to Control the Deceptive Practices or Acts LeadClick was paid by LeanSpa to recruit and manage a network of affiliates who would advertise LeanSpaʹs products. As established above, LeadClick knew that some of its affiliates were using fake news sites to advertise LeanSpa products. As the manager and orchestrator of the affiliate marketing scheme, LeadClick had the authority to control the deceptive practices of affiliates that joined its network:  LeadClick had the ultimate authority to review and approve or disapprove of an affiliate using a fake news site;  LeadClick permitted affiliates using fake news sites to join its network and refer customers to LeanSpa, and it paid its affiliates with fake news sites for generating actions; and  LeadClick employees affirmatively approved the use of fake news sites by telling a potential affiliate that ʺNews Style landers are totally fine,ʺ J. App. at 761a, and explaining to a potential merchant client that ʺ[a]ll of ‐ 31 ‐ [its] traffic would be through display on fake article pages,ʺ Id. at 750a (emphasis added); As the manager of the affiliate network, LeadClick had a responsibility to ensure that the advertisements produced by its affiliate network were not deceptive or misleading. By failing to do so and allowing the use of fake news sites on its network, despite its knowledge of the deception, LeadClick engaged in a deceptive practice for which it may be held directly liable under the FTC Act. As discussed above, LeadClick is not liable here merely because it aided and abetted its affiliatesʹ deception. Rather, its liability arises from its own deceptive practices: directly participating in the deceptive scheme by recruiting, managing, and paying a network of affiliates to generate consumer traffic through the use of deceptive advertising and allowing the use of deceptive advertising where it had the authority to control the affiliates participating in its network. See Neovi, 604 F.3d at 1157 n.5 (rejecting similar argument and noting that defendantʹs ʺactions caused consumer harm; it did not merely aid or abet others who caused consumer harmʺ). Moreover, LeadClick is directly liable regardless of whether it intended to deceive consumers ‐‐ it is enough that it orchestrated a scheme that ‐ 32 ‐ was likeely to misllead reason nable conssumers. Seee Verity In ntʹl, Ltd., 4443 F.3d at 663. And thee scheme d did just tha at: the ma ajority of trraffic from m LeadClick kʹs affiliatee network k came fro generating enough trraffic to billl LeanSpaa for om fake neews sites, g approxiimately $2 22 million a and earn L LeanSpa reecognition as LeadCllickʹs ʺtop customer.ʺ J. App p. at 343a, 908a, 1016 6a. Acco ordingly, th he district court did n not err in cconcluding that LeadCliick is direcctly liable u under Secttion 5 of th he FTC Act and CUT TPA.