May It Please the Mozzers,
We're keeping Legal Monday short and sweet to bring you this breaking news. As many of you know, Valueclick and its subsidiaries, Hi-Speed Media and E-Babylon, have been under investigation by the Federal Trade Commission ("FTC") for alleged violations of the Can-Spam Act and failure to protect consumer's sensitive information.
(I've got to give a shout-out to Shoemoney for originally reporting on Valueclick's shady practices.)
The Settlement
The FTC announced today that Valueclick has agreed to pay 2.9 million dollars to settle the charges. This is the largest cash settlement since the inception of the Can-Spam Act in 2003. In addition, Valueclick is barred from future violations of the Can-Spam Act. It must also place conspicuous disclaimers indicating that consumers are required to participate and spend money on other obligations in order to qualify for "free" promotions. The settlement also requires them to provide a list of the obligations – such as applying for credit cards, purchasing products, or obtaining a car loan – that consumers must incur to qualify for a free product. Valueclick must also put in place strict measures to protect consumer information. Valueclick's compliance with these measure must be monitored by an independent party for 20 years.
The Allegations
According to allegations by the FTC, "ValueClick subsidiary Hi-Speed Media used deceptive e-mails, banner ads, and pop-ups to drive consumers to its Web sites. The e-mails and online ads claimed that consumers were eligible for “free” gifts, including laptops, iPods, and high-value gift cards, and included come-ons such as “Free PS3 for survey,” and “CONGRATULATIONS! Select your FREE Plasma TV.”" After being promised the sky, the consumers had to participate in a confusing assortment of expensive and burdensome third-party offers – including car loans and satellite television subscriptions. (Click here to download the Complaint and Exhibits from the FTC's site.) These deceptive practices amounted to violations of the CAN-SPAM Act and the FTC Act.
According to the FTC, this is its third case targeting the use of deceptive promises of free merchandise by Internet-based “lead generation” operations, and the Commission’s 18th case challenging data security practices by a company handling sensitive consumer information.
What does this mean for Valueclick?
This news comes after last week's CNN report that Valueclick's stock fell to the lowest it had been in 52 weeks. Regardless, one has to wonder whether a 2.9 million dollar fine will make a dent on a company with reported revenue of 545.6 million, earnings of 62.6 million, and operating cashflow of 114.2 million. There has been regular speculation over the last year about whether Valueclick was going to be acquired. Perhaps Valueclick's current dip in value and the final resolution of the FTC investigation will make it a more attractive candidate to potential purchasers. Let's be on the watch, shall we?
Don't be like Valueclick
The FTC is being pretty aggressive in pursuit of Can-Spam and FTC Act violators. Make sure you know what's required of you. You can find out more about how to comply with Can-Spam at the FTC's site. They also have a spiffy tutorial on what you need to do to protect consumer information.
I'm preparing a post on affiliate marketing coming soon. If you have any questions or concerns about the legal issues surrounding affiliate marketing, or if you're an affiliate marketer who has gotten in trouble for one reason or another, I would love to hear from you.
Best Regards,
Sarah
P.S. Here's an interesting account of one marketer who later regretted using ValueClick.
Sarah, you look very good in the new picture :-)
@Gab "Bookworm SEO" Goldenberg Gab? markokoko? WTF?
P.S. sorry guys, I meant to reply to gab directly but this didn't work with me...
@Sarah: thank you for the great overview!
Thanks for the overview! I am looking forward to the affiliate marketing post :)
...exSEOllent post, Sarah....spam is one of the biggest curses of thwe internet, and it is great to see companies being held accountable for misleading advertising...now only if we can do something about the viagra, penis enlargement and cracked software vendors that mercilessly assault our inboxes every day!
1) Valueclick was officially bought by Google last week. Valueclick has a name confusingly similar to Doubleclick, whom Google recently acquired.
2) I'm learning more about affiliate marketing atm. Apparently, incentivized traffic (like the stuff laid out above) results in shitty leads. Sounds like they were shortchanging advertisers as well as consumers.
"I'm preparing a post on affiliate marketing coming soon."
Thanks for the solid summary Sarah. I'm looking forward to your affiliate marketing post.
Would love for you to expound on the legal implications for an "unwitting" third party affiliate that is associated with a top level supplier / distributor that is engaged in marginally or outright illegal internet trade.
For example, importing illegal pharmaceuticals, Cuban cigars and other such contraband from outside the US.
Would also like for you to touch on the business structure and geographical parameters and whether they would have any impact.
For example, if I had a business set up in Grand Cayman that distributed products that were legal for consumption in Grand Cayman, and shipped them into the US -where they were either illegal or required a prescription, could I be pursued by the US government?
Also, can an unwitting end purchaser of such products be held accountable for having products shipped to their US address in the same manner as if they had smuggled them into the country?
By unwitting, I mean - let's say a pharmaceutical required a valid prescription and the site I bought them from stated that they perform that service, (but it's done outside the US with questionable medical practices), am I potentially liable? That may go outside the affiliate focus but since it's the end game, I thought I would ask.
Disclaimer - For those that may now be thinking "Hmmm....so Maguire is smuggling illegal contraband", I can assure you that that is not the case. I'm just curious about these issues, particularly since the cost of pharmaceuticals is so much higher in the US than other countries aroudn the world. Of course, I wouldn't mind having a Cuban cigar now and then. ;)
Great post sarah...
I remember being about 11 years old and wandering around on neopets.com clicking on all the "free laptop" offers...and giving up after about 30 minutes of clicking to all the different offers :p
A nerd from a young age, eh ;)? Heh, no worries lol - I was a bookworm from the time I learned to read!
good article
[Edited by SEOmoz to remove link.]
Greetings Carina....do be aware that adding links to your comments are frowned upon in our community, free punts are just not on. People will thumb you down if you go there, so do be aware of that!