• by Wendy Davis  @wendyndavis, April 7, 2015

Siding with the Federal Trade Commission, a federal judge has held affiliate marketing company  responsible for “fake news” sites that promoted weight-loss products sold by LeanSpa.

In a decision quietly issued last month, U.S. District Court Judge Janet Hall in Connecticut rejected LeadClick's argument that it wasn't liable for deceptive sites that were developed by third parties in its affiliate network. Hall ordered LeadClick and its parent company to disgorge a total of $16 million.

LeadClick filed papers late last week appealing that decision.

The FTC's litigation surrounding LeanSpa dates to late 2011, when the FTC charged the company and others -- including Web site operator Boris Mizhen of Guilford, Conn. -- with using fictional “news” articles about acai berry to dupe consumers.

Mizhen's affiliate marketers created fake news sites with names like “dailyhealth6.com,” and then produced articles that appeared to be objective reports, like 'Acai Berry Diet Exposed: Miracle Diet or Scam?'” the FTC alleged in its court papers.

Those sites often included logos of the major news networks, but the news on the sites was phony, according to the FTC. In addition to duping consumers with fake news sites, Mizhen and his companies allegedly tricked people by offering free trials to anyone willing to pay $5 mailing costs, but then sending regular shipments at a cost of around $80 a month.

The FTC named LeadClick as a defendant in the case in 2012, eight months after bringing charges against the other defendants.

Mizhen and LeanSpa settled the allegations last year, but LeadClick fought the case. Among other arguments, the affiliate marketing company said the federal Communications Decency Act protects Web services companies from liability for the actions of third parties.

“The undisputed facts demonstrate that LeadClick had no role whatsoever in creating or publishing these allegedly deceptive advertisements, which were crafted and widely used by affiliate marketers long before those publishers had any association with LeadClick,” the company argued in a motion seeking summary judgment.

Hall rejected LeadClick's arguments. The judge ruled that LeadClick wasn't entitled to rely on the Communications Decency Act on the theory that the company played too active a role in the alleged deception.

“LeadClick solicited and hired the affiliate marketers to advertise LeanSpa’s products, knowing that affiliates used fake news pages,” Hall said in the ruling. “LeadClick also screened advertisements according to merchants’ preferences.”

Hall added that LeadClick's media-buying activities -- which she said involved purchasing ad space on genuine news sites and then selling that inventory to affiliates -- played a role in deceiving consumers.

“The alleged deception in this case is the representation that independent testing was being conducted by genuine news reporters,” Hall wrote. “LeadClick’s media buying contributed to that deception by providing consumers with yet another reason to think that the news site was genuine.”