Online Advertising, Affiliate Marketing Compliance and Fraud with Pace Lattin

Monthly archive

September 2016

Lube King Scott Fraser of Las Vegas Charged by SEC For Fraud in Fake Reviews

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Scott Fraser, the CEO and a main shareholder in Las Vegas-situated Empowered merchandise Inc., and paid promoter Nathan Yeung were charged by using the SEC for orchestrating fraudulent promotional campaigns to tout the manufacturer’s stock.

In step with the company, Fraser individually ran a publication publishing industry and hired Yeung to secretly support him promote Empowered merchandise by way of on-line publication articles that were supposedly authored by impartial writers.

Unbeknownst to traders, nevertheless, Fraser and Yeung virtually wrote, licensed and allotted these glowing articles about Empowered products themselves, working under such pseudonyms as “Charlie Buck” and then hiring different promoters to disseminate the promotions to their respective subscriber lists in trade for prices. And of direction the promotions failed to disclose that Empowered merchandise and Fraser approved and paid for the ads.

FTC Bans Owners of Debt Relief Operation

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In 2015, the Federal Trade Commission filed a complaint alleging that numerous individuals and entities, doing business as “Payday Support Center” or “Infinity Client Solutions,” deceptively promised to resolve consumers’ loans via a “hardship program.” According to the FTC, the business targeted consumers with outstanding payday loans.

Upon enrollment, consumers ceased making payments to their lenders. The Commission alleges that the defendants, however, failed to deliver the promised debt relief services, worsening consumers’ financial difficulties after having spent hundreds of dollars for no loan reduction or settlement.

Pursuant to two stipulated final orders announced last week, the defendants are banned from all debt relief-related activities and are otherwise prohibited from misrepresenting the characteristics about any products and services. The defendants are also barred form profiting from consumers’ personal information and failing to dispose of it in a proper manner.

Given the defendants’ financial condition and inability to pay, each order imposes a partially suspended judgment of more than $23.7 million. The full judgments are due immediately in the event that the FTC determines that the defendants misrepresented their financial situation.

The debt settlement industry remains in the regulatory crosshairs following recent sweeps. Marketers must remain diligent with respect to policing their own and end-user advertising partner compliance.

Contact an FTC and state attorney general defense lawyer if you are the subject of a regulatory enforcement investigation or action, or if you are interested in implementing preventative compliance measures.

Richard B. Newman is an Internet law, online marketing compliance, telemarketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing and defending clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, complex commercial litigation defense, SPAM law compliance and litigation defense, intellectual property transactional and litigation matters, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

Lack of Standing Results in Dismissal of TCPA Suit

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A federal district judge in California recently ruled that a TCPA plaintiff lacked standing to bring her TCPA claims because she failed to set forth evidence that she suffered an injury-in-fact with respect to each telephone call. The matter is Romero v. Department Stores National Bank, et al., No. 15-CV-193 (S.D. Cal. Aug. 5, 2016).

In Romero, the plaintiff alleged that the defendant, a creditor that attempted to call the plaintiff on her cell phone number after she failed to make payments on her credit card, was responsible for initiating approximately more than 300 telephone calls to her cell phone via an automatic dialing system. The plaintiff only answered a few of the calls, yet alleged that she suffered “severe and substantial emotional distress.”

The defendant moved to dismiss, based in large part upon the recent ruling by the Supreme Court in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (A statutory violation alone is not sufficient to establish the injury-in-fact requirement of Article III. If the defendant’s actions would not have caused a concrete, or de facto, injury in the absence of a statute, the existence of the statute does not automatically give a plaintiff standing).

In response, the plaintiff asserted that the harm suffered was grounded in privacy and the aggravation associated with unwanted telephone calls. The court disagreed, stating that “one singular call, viewed in isolation and without consideration of the purposes of the call, does not cause any injury that is traceable to the conduct for which the TCPA created a private right of action, namely the use of an ATDS to call a cell phone.”

The court found that the plaintiff was unable to establish evidence that the use of an ATDS by the defendant “caused her greater lost time, aggravation, and distress than she would have suffered had the calls she answered been dialed manually, which would not have violated the TCPA.”

According to the court, distress related to telephone calls could potentially be an injury-in-fact to establish standing, so long as the harm has a nexus with the each specific call. The argument being, the plaintiff could not connect an injury to telephone calls that were not answered. Thus, standing could only potentially exist for the small handful of calls that were actually answered

This defense-oriented decision based upon Article III standing for each individual call is a small victory for marketers.

Please contact an advertising compliance lawyer if you are interested in discussing the design and implementation of telemarketing campaigns, or if you are the subject of a telemarketing related investigation or enforcement action.

Richard B. Newman is an Internet law, online marketing compliance, telemarketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing and defending clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, complex commercial litigation defense, SPAM law compliance and litigation defense, intellectual property transactional and litigation matters, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

FTC Goes After 1-800 Contacts

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The Federal Trade Commission (FTC) has announced a lawsuit against 1-800 Contacts, charging the online retailer of contact lenses with allegations of unlawfully orchestrating and maintaining a web of anticompetitive agreements with rival companies.

The FTC alleges 1-800 Contacts entered into bidding agreements with at least 14 competing companies and networks.

These bidding agreements purportedly restrain price competition in Internet search auctions. Additionally, they restrict truthful and non-misleading advertising to consumers, according to the FTC.

This case stems from 1-800 Contacts’ alleged decision to threaten competing companies with lawsuits after learning that, when consumers searched online for “1-800 Contacts,” they would then see advertisements for both 1-800 Contacts and a competing seller

. In almost all cases, these competing companies agreed to sign the purportedly anti-competitive agreements. These agreements usually forced the company to use negative keywords designed to stop search engines from displaying their website when those search terms are used.

The FTC argues these agreements harm consumers by restraining competition and reducing the number of relevant advertisements on the Internet.

The FTC voted 3-0 to issue the administrative complaint.

Exchange Wire: Fraud Protection from Impact Radius Works

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Originally from ExchangeWire. 14 June, 2016, it was announced that Impact Radius, the marketing and affiliate solutions platform, had acquired ad fraud detection and prevention platform, Forensiq, for an undisclosed sum, in a bid to offer a unique market proposition. According to the press release at the time, no company before had combined algorithmic attribution of consumer journey touchpoints with cutting-edge ad fraud detection to reveal insights that are not polluted by fraudulent data. Keen to understand more about the acquisition, the rationale behind it, and the future of the new entity, ExchangeWire spoke with Mark Wrighton, commercial director, Impact Radius; David Sendroff, co-founder and CEO, Forensiq; and Julia Smith, director of communications, Forensiq.

ExchangeWire: On the face of it, Forensiq seems like an unlikely acquisition for Impact Radius, known as an affiliate marketing platform – what was the rationale on both sides? How does fraud manifest itself within the Impact Radius platform?

Mark Wrighton: Both of those questions are intricately entwined. While Impact Radius were regarded as an affiliate marketing platform, focusing on the incrementality of the performance channel, about three to four years ago we shifted our business focus to looking at performance in a cross-channel context. All activity from a performance perspective lent itself to cross-channel de-duplication. We were already looking at rules-based modelling from a performance basis. We focus on one system of truth into understanding where advertisers should spend and attribute correctly.

David Sendroff Headshot

David Sendroff, Forensiq

David Sendroff:  We have had a great relationship with Impact Radius for many years and have been a great advisor to them along the way. Impact Radius is interesting as a holistic platform; it’s a system of record where you can run your whole business on one platform and have integrity behind the data. There are so many bots, and there is so much non-human traffic, and because of the impact they have on metrics and understanding campaign performance, cleansing the data before it enters into the algorithm can provide a source of truth as to what’s actually happening. Forensiq sits at the top of the funnel, evaluating data before you have purchased an impression. This means you can determine the integrity and intent behind the user, page, or impression. What makes the combination powerful is the the deep understanding of the actual performance behind the media buys. It becomes a true, full-funnel platform, where you can manage all media, both online and offline, and track it all the way down the funnel.

Julia Smith: Advertisers desire transparency. The role of the CMO is changing. They are taking higher focus on fraud, attribution, transparency, how it’s all linked, and where their money is being spent. Forensiq has a strong relationship with many advertisers and this makes us a much stronger team.

How has the process of tackling fraud for Impact Radius changed since the acquisition?

Mark Wrighton: We have different processes for individual products versus the full cross-channel piece. There are inherent trust issues in the industry, so we started by making sure we had the highest quality, premium publishers in place before allowing people into our marketplace. Beyond that, we built a system of alerts. You have to have a best-in-class solution, because of how fraud continually evolves. We would often rely on API data from Forensiq for any analysis we’re doing. This was one reason I was excited about joining forces. Big agencies would constantly talk to us about Forensiq being in that space, so to have them on side is incredibly compelling.

Does having Forensiq on-board remove the human element required in fraud detection?

Mark Wrighton, Impact Radius

Mark Wrighton, Impact Radius

Mark Wrighton, Impact Radius: There will always be a human element, and you won’t ever completely remove it, but Forensiq does have accelerated capabilities.

David Sendroff: We evaluate massive amounts of data and our data science team build algorithms so that we can create probabilistic risk around different elements. We have got real-time capabilities and we’re in the process of rolling out a deeply integrated solution, which flags and blocks the platform to protect our clients. There is always a human element to remove bad traffic sources, and that’s true within the data science team as well. It’s understanding the type of fraud being detected. We can incorporate real-time actions back in our algorithms to minimise the false positive, and even false negative, and this can be adjusted based on varying factors.

Will this deal take Forensiq off the table as a solution for other advertising platforms?

David Sendroff: Forensiq is a strong business and a strong brand and we plan on continuing that, even with an independent offering. Clients can leverage us as a model within the Impact Radius platform, as well as outside of it.

What does Forensiq have in the pipeline, which Impact Radius will help to drive?

Mark Wrighton: As part of the acquisition, we raised USD$30m (£22.7m) to use towards growth. Outside of that, we now have 80% of our resources going into the data engineering and science team, to contribute to platform advancement, so a lot of investment is going into new products and our R&D capabilities.

This move could signal a trend of marketing/advertising platforms owning and operating their own fraud-detection solutions – do you expect that to be the case?

Julia Smith, Forensiq

Julia Smith, Forensiq

Mark Wrighton: Perhaps. The power in the platform comes from the suite we have in brand safety and viewability; and, if you look at the landscape, viewability is becoming a commoditised solution, in that everyone is using the same two methods for identifying it and brand safety has become commoditised as well. Ad fraud is the most difficult. I think it’s possible other companies could acquire some types of solutions, but I think building them can be challenging. One of the greater benefits we have is our centralised ad-fraud intelligence. As so many clients are feeding into this database, access to data to create those insights is crucial. But I do believe there will be more consolidation over time.

Julia Smith: There is a need for independence. If you have your own in-house tool, how trustworthy is that data? People say they prefer to have an independent company and the industry often calls upon agencies to have to show due diligence in using an independent verification tool.

Mark Written: As Julia says, independence is important. Impact Radius is not a media owner, so we don’t have the challenge of justifying our position on the credibility of our fraud detection.

David Sendroff: Innovation within fraud will make it difficult for others. If you look at the importance of decision making, it’s based on the insight provided by Forensiq. It’s difficult for other companies to reach that scale. There’s an awful lot of inertia. It would be interesting to watch, but it would be very difficult from a board-level perspective.

FTC Announces Seminar on Disclosures

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As previously discussed here, on September 15, 2016, the Federal Trade Commission will host a public workshop to examine and evaluate disclosures that marketers make to consumers about advertising claims and privacy practices, including data dissemination and tracking technologies. The workshop will delve into the effectiveness of disclosures to ensure consumers notice them, comprehend them, are not misled by them and can utilize them in their decision-making.

Discussion topics will take into account factors that influence a disclosure’s efficacy, including those that are made in conjunction with financial products. Principles tested and discussed by regulators (FTC and CFPB) during the workshop, particularly those pertaining to specific industries, should be incorporated into the design and implementation of corporate disclosures across all platforms.

The FTC has expressed hope that the event will generate discussion among industry leaders, academics, and regulators on efforts to improve the evaluation and testing of disclosures.

The workshop comes following the FTC’s lead generation “Follow the Lead” workshop in October 2015. Given today’s regulatory investigation and enforcement environment, the role that disclosures play, how they are structured and the specific content thereof should be afforded considerable attention.

The full agenda for the upcoming workshop can be seen, here.

Please contact an FTC defense lawyer if you are interested in discussing the design and implementation of compliant disclosures, or if you are the subject of an advertising related investigation or enforcement action.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

Ad Fraud Could Top $50 Billion This Year

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THE World Federation of Advertisers (WFA) has estimated that the value of advertising fraud (ad fraud) on the digital platform could reach in excess of US$50bil by 2025.

Due to growing concerns over cyber crime, WFA is currently spearheading an awareness campaign through its freshly published Compendium of Ad Fraud Knowledge for Media Investors.

Ad fraud, by definition, is associated with an activity where impressions, clicks, actions or data events are falsely reported to criminally earn revenue or for other purposes of deception and malice.

 But, as of now nobody really could gauge how serious ad fraud penetration is in the industry.

Some researchers have reported ad fraud exposure between as low as 2% and as high as 90%, it seems clear that there are no widely available ways of assessing the absolute exposure rate.

The challenge of establishing such figure is underlined by recent WFA research findings which demonstrate that 36% of respondents don’t know to what extend they are exposed to ad fraud.

Nevertheless, one of the highest profile research initiatives into ad fraud was the recent ‘Bot Baseline’ undertaken by the Association of National Advertisers (ANA) in the US where the cost of ad fraud is estimated at US$7.2bil, approximately 5% of the total global digital media market.

WFA marketing director (Asia) Ranji David tells StarBizWeek that now that the industry is equipped with a better understanding of issues at hand, the stakeholders have a certain guidance to combat this problem or crime.

Hogan says what brands could do first and foremost are to educate themselves.

“This compendium is downloadable from our website and we are ready to assist any brands that would like to know more on the issue. We are happy to come to Malaysia and work together with Malaysian Advertisers Association (MAA) on this.

“Malaysia has a great unified market and the community is very strong,” she says after Ad Fraud conference organised by MAA earlier this week.

Star Media Group was the media partner for the event.

Beyond this compendium, Ranji says WFA is will work across its working group to take this into the operational level to help brands adopt the right approach to address this issue.

MAA vice-president Chan May Ling thinks that the industry needs an independent party to really measure the digital media buying as marketers currently don’t have the tools to gauge the digital adveritising dollar.

“Transparency is the key as ad fraud is probably a growing concern now but we still do not have the numbers and measurement of advertising dollars is the key and MAA is working to form a technical committtee to measure digital advertising expenditure,” she says.

Chan: ‘MAA is working to form a technical committee to measure digital advertising expenditure.

Integral Ad Science managing director UK and strategic development EMEA Niall Hogan says what brands could do first and foremost are to educate themselves.

“Then, they must work with a technology company that could identify that there is a problem, gauge the level of the problem and help them by giving them some solutions to it,” he says.

In terms of the criminality side, Hogan admits that it is difficult to identify as the criminals are always two steps ahead and because of the jurisdiction in some of the countries the ad frauds are based.

“Make it more important for the industry to take on our measures and use our technology to limit the impact of fraud,” he says.

ITT Shuts Down After Defrauding Students and Losing Accreditation

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ITT Educational Services Inc said it would discontinue operations at its ITT Technical Institutes, in line with the U.S. Department of Education’s directive, affecting more than 8,000 employees.

The for-profit education provider said on Tuesday that the move would also affect hundreds of thousands of students and alumni.

“We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution,” ITT said.

The company has been under investigation by government authorities for allegations of fraud and deceptive marketing tactics.

In August, the U.S. Department of Education banned the company from enrolling students who get federal aid.

ITT’s accrediting agency said in April that ITT Technical Institutes – which provide career-oriented education programs – had not demonstrated compliance with certain accreditation standards.

The for-profit education sector has been struggling with falling enrollment, poor job placement records and regulatory scrutiny.

ITT’s shares were halted in premarket trading.

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