Editor's Note: An earlier version of this story incorrectly reported the settlement amount as $16 million.
A company that used fake Internet news sites to sell acai berry and "colon cleansing" products has been ordered to pay $11.9 million. The money will be used to make refunds to consumers taken in by the scheme.
A U.S. district court found that LeadClick Media and its parent company, CoreLogic, are responsible for the false claims and fake news sites used by its affiliates to bamboozle customers. According to the Federal Trade Commission's complaint, LeanSpa used a “free trial” ploy to enroll consumers into its recurring purchase program that cost $79.99 a month and that was difficult to cancel.
LeadClick’s network lured consumers to LeanSpa’s online store through fake news websites designed to trick consumers into believing that independent news outlets and independent customers, rather than paid advertisers, had reviewed and endorsed LeanSpa’s products.
“This ruling is good news because it takes ill-gotten gains out of the hands of companies who knew they were promoting a scam and gives them back to the consumers who lost millions of dollars,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It also makes clear that a parent company cannot retain ill-gotten gains of its subsidiaries.”
The FTC’s case dates back to December 2011, when the Commission and the State of Connecticut first sued LeanSpa and its principal, Boris Mizhen. In January 2014, the FTC and the State of Connecticut settled with LeanSpa and Mizhen, who agreed to stop their deceptive practices and surrender assets for redress to consumers.
In the summary judgment ruling, the court held that the fake news sites developed by LeadClick’s affiliates deceived consumers by using real news organization names and logos along with purported testimonials from users of LeanSpa’s products.
In finding LeadClick responsible for the deceptive content on its affiliates’ websites, the court noted that LeadClick recruited the affiliates, had the power to approve or reject their marketing websites, paid the affiliates, purchased advertising space for them, and gave them feedback about the content of their sites.