SARASOTA — Clickbooth, a Web marketing company, agreed to a $2 million settlement with federal regulators over allegations the company knowingly supported false and unsubstantiated products and claims.
Clickbooth co-founder and CEO John Lemp was personally named in court filings, where the Federal Trade Commission contends Clickbooth and a subsidiary, IntegraClick, engaged in “unfair or deceptive acts or practices in or affecting commerce.” The FTC filings, documented on a Clickbooth blog detail the company's alleged involvement with deceitfully promoting dozens of weight loss and so-called colon-cleanse products. Those practices, documents show, allegedly go back to 2008.
Officials at the FTC couldn't be reached for immediate comment this morning.
But the court filings include contentions that Clickbooth consciously supported fake news websites with false reports, including one titled “1 Trick of a Tiny Belly: Reporter Loses Her 'Belly' Using 1 Easy Tip.” “The sites often include the names and logos of major broadcast and cable television networks, falsely representing that the reports on the sites have been seen on these networks,” the FTC states. “(Clickbooth) designs some of these websites for their affiliates to use.”
Clickbooth, moreover, supported the sites, the FTC alleges, though its network of affiliate publishers who earn fees when consumers buy the products. Clickbooth makes money off those purchases, through its pay-per-action model.
But the FTC, in court filings in the Northern District of Illinois, says Clickbooth should be doing more to protect consumers. “Defendants, through their affiliate marketers, have failed to disclose in a clear and conspicuous manner that they are not objectively evaluating the advertised products and, in fact, are being paid to promote the products,” the filings state. “The websites of defendants' affiliate marketers either fail entirely to disclose these facts, or fail to do so adequately. The relevant information, if disclosed at all, typically appears in small type at the bottom of the web page, following the fake consumer comments, well below the links to the products being sold.”
Lemp, through a Clickbooth spokeswoman, declined to comment this morning. But on a Nov. 13 blog post, Lemp wrote that the FTC allegations revolve around “just a handful of weight loss advertisers” and affiliates from three years ago.
Added Lemp: “These were advertisers and publishers in many cases that our compliance team had proactively shutdown from our network. This handful of advertisers and affiliates accounted for a very small percentage of our traffic over the years and even though we had never been an advertiser or publisher ourselves like other 'networks,' (the FTC) wanted to hold us responsible.”
Lemp, nonetheless, wrote that a settlement was the best decision for Clickbooth, partially because it avoids protracted litigation to fight “how an ad network should be regulated.”
Lemp and Clickbooth have been involved in several court cases over the past few years, both as a defendant and plaintiff. The firm's compliance procedures have also been questioned by a host of former employees. One employee, the former head of technology, accused Lemp of ordering senior executives to “delete incriminating data, emails and instant messages” that could become evidence in a federal investigation into Internet marketing practices.
Lemp denied the charges, and a March lawsuit on the matter was settled earlier this year.