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The Federal Trade Commission has announced two proposed settlements that will conclude their sweep against online marketers that allegedly used fake news sites to promote weight-loss products.
The two settlements, one with Beony International and owner Mario Milanovic and one with Beony International employee Cody Adams, each impose a $13 million judgment. However, that will be suspended when the defendants pay more $1.6 million and sell a 2008 Porsche. However, if the financial information the defendants provided is later determined to have been false, the full amount of the judgments will be imposed.
Circa Direct LLC and Andrew Davidson will pay more than $2 million to settle the FTC complaint charging them with deceptive advertising by operating fake news websites to promote acai berry weight loss products. This follows September’s $1 million settlement with the Coleadium, Inc. affiliate network, also known as “Ads4Dough,” and its owner will pay $1 million to settle a similar FTC complaint.
The Coleadium, Inc. affiliate network, also known as “Ads4Dough,” and its owner will pay $1 million to settle a Federal Trade Commission complaint that they used fake news sites to make deceptive claims to promote acai berry supplements and “colon cleansers” as weight-loss products. In addition, the FTC charged that they used “free trial” offers to trick consumers into signing up for additional shipments that were billed monthly.
The products included the acai berry supplements AcaiOptimum, AcaiBurn-Force Max, Acai Tropic, Acai Fit, and Acai Elite Blast; as well as colon cleansers Natura Cleanse, Smart Colon Flush, Advanced Colon Max, and Colo Flush.
The FTC’s complaint alleges that Coleadium and its owner, Jason Akatiff, acted as intermediaries between online merchants selling the products and affiliate marketers who used fake news Web sites to promote them and funnel consumers to the merchants’ sites. The complaint alleges that through their affiliates, the company and its owner:
- made false or unsupported claims that use of the acai and colon cleanser products would cause rapid and substantial weight loss;
- falsely represented that the stories on the fake news sites were objective news reports written by real reporters who conducted independent tests of the products, and that the comments following were those of independent consumers;
- failed to adequately disclose that the content on the fake news sites was authored by affiliate marketers who, along with the defendants, received payments from the merchants; and
- failed to adequately disclose that consumers who sign up to receive a trial supply of the advertised products but who do not return the products and cancel quickly will be charged for the products, and will be shipped more products and billed on a recurring basis.
In addition to the $1 million payment, the settlement requires Coleadium and Akatiff to monitor the affiliate marketers in their network to ensure that their statements are truthful and in compliance with federal advertising law. In addition, they are barred from making any material deceptive representations, including deceptive claims about weight loss and health, and about relevant studies, tests and research.
They also are barred from failing to disclose any material connection between themselves or others marketing or selling products, and the endorsers of the products; that the content of a “news” website or other publication was not written by an objective reporter but is an advertisement placed for payment; and that consumers may be subject to recurring charges when they sign up for trial supplies of the products.
The Federal Trade Commission has asked to federal courts to issue temporary restraining orders to stop 10 alleged “fake news” operations from using their Web sites to market acai berry weight-loss products. The FTC seeks to permanently stop these practices and has asked courts to freeze the operations’ assets pending trial.
According to the FTC, the websites that are intended to appear as if they belong to legitimate news organizations. However, the FTC maintains that the sites are simply advertisements using deceptive practices to entice consumers to buy the featured acai berry weight-loss products from other merchants.
The FTC complaints allege that the fake news sites have titles such as “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News.” They often include the names and logos of major media outlets such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports and falsely represent that the reports on the sites have been seen on these networks.
The FTC is asking the courts to permanently bar the allegedly deceptive claims, and to require the companies to provide money for refunds to consumers who purchased the supplements and other products. The FTC charges that the defendants:
- make false and unsupported claims that acai berry supplements will cause rapid and substantial weight loss;
- deceptively represent that their websites are objective news reporters, that independent tests demonstrate the effectiveness of the product, and that the comments following the “articles” on their websites reflect the views of independent consumers; and
- fail to disclose their financial relationships to the merchants selling the products.