## Facts

- LeadClick operated an affiliate-marketing network connecting merchants to third-party affiliates who advertised products online; LeadClick tracked conversions and was paid based on performance.
- LeanSpa, an online seller of weight-loss products marketed through “free trial” offers, hired LeadClick to drive traffic and sales.
- Many affiliates promoted LeanSpa through “fake news” sites designed to look like legitimate news outlets and containing false “reporter” testing claims and fabricated consumer comments.
- LeadClick did not author most fake news pages, but it knew affiliates were using them, approved their use, and at times provided content, suggested edits, and screened/approved proposed affiliate pages.
- LeadClick also purchased banner-ad space on legitimate news sites and resold it to affiliates who used it to redirect consumers to fake news pages marketing LeanSpa.
- The alleged “free trial” marketing charged consumers about $79.99 and imposed recurring charges that were difficult to cancel.

## Issues

1. Whether LeadClick could be held liable under FTC Act § 5 and Connecticut’s unfair trade practices statute for deceptive marketing by affiliates when LeadClick knew of, approved, and participated in developing and disseminating the deceptive content.
2. Whether the Communications Decency Act, 47 U.S.C. § 230, immunized LeadClick from liability as an intermediary for affiliate-created content.
3. Whether CoreLogic (LeadClick’s parent) could be required, as a relief defendant, to disgorge funds received from LeadClick, or whether it had a legitimate claim to those funds as repayment for value provided.

## Decision

- The Second Circuit affirmed summary judgment holding LeadClick liable under FTC Act § 5 and the state statute for its role in deceptive marketing using fake news sites.
- The court rejected LeadClick’s CDA § 230 defense because LeadClick materially contributed to the deceptive content and thus acted as an information content provider as to that content.
- The court reversed the monetary relief ordered against CoreLogic as a relief defendant, holding CoreLogic received the funds in exchange for valuable consideration and therefore had a legitimate claim.
- The case was remanded with instructions to enter judgment for CoreLogic on the relief-defendant claim.

## Legal Principles

- Deception under FTC Act § 5 is established by (1) a representation, omission, or practice (2) likely to mislead reasonable consumers (3) that is material to consumers’ decisions.
- An entity that knows of deceptive practices, has authority to control them, and assists or encourages them may be liable for deceptive conduct even if third parties created much of the content.
- CDA § 230 does not bar claims where the defendant is responsible, in whole or in part, for the creation or development of the unlawful content, including by materially contributing to its unlawfulness.
- Relief-defendant disgorgement is improper when the recipient has a legitimate claim to the funds, such as receipt in exchange for valuable consideration.

## Conclusion

The court held an affiliate network operator liable for deceptive advertising where it knowingly approved and helped shape fake news marketing, denied CDA § 230 immunity because of that developmental role, and limited relief-defendant disgorgement by requiring proof the recipient lacked a legitimate claim to the funds.


F.T.C. v. LeadClick Media, LLC, 838 F.3d 158 (2d Cir. 2016)