Are Companies Responsible For Actions Of Affiliates?

from the lawsuits-galore dept

Mon, Jun 30th 2008 6:46am — Mike Masnick

Back in May we wrote about how shoe store DSW was suing Zappos over potential trademark infringement done by an affiliate -- and now we've got another similar story. The company NameSafe is suing competitor LifeLock over Google ads that make use of NameSafe's name. While we've seen plenty of lawsuits where Google was incorrectly sued over ads based on competitor search terms, this case actually does seem a little more reasonable on those points: rather than suing Google, NameSafe is suing LifeLock, and NameSafe can probably make a half-decent case that the ads could be seen as confusing or deceptive.

However, where this case gets more interesting is on the question of whether LifeLock is to blame -- or if it's the fault of an affiliate marketer, as LifeLock claims. LifeLock says that it terminated the affiliate's account and also reminded all of its affiliates that this type of activity goes against their reseller agreements. That seems like a reasonable response, but for now the lawsuit against LifeLock continues, which will inevitably raise questions about whether or not a company is responsible for the actions of its affiliates and resellers. It seems like common sense to say no -- that the liability should remain with those who actually did the action -- but we've seen stranger decisions from courts before, so it may not be clear cut here.

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Filed Under: advertising, affiliates, google ads, liability
Companies: lifelock, namesafe

17 Comments

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Joel Coehoorn, 30 Jun 2008 @ 7:04am

It depends.
If you have a good affiliate program and an affiliate does something dumb as part of that program, than certainly hold the affiliate liable rather than the main company.

However, I think certainly there are circumstances where a company should be held accountable for the actions of it's affiliates. Specifically, I can see company setting up "affilate programs" and then shell companies as affiliates specifically to do their dirty work form them and limit the main company's liability. The affiliate is caught and then just files for bankruptcy so nothing ever comes back to the main company.
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Anonymous Cowherd, 30 Jun 2008 @ 7:11am

Gak!
Four Masnick gavels in a row. That's gotta be some sort of record.

Time to add a "Stupid Lawsuit of the Week" box to this site, perhaps? Or maybe that would be "Stupid Lawsuit of the Hour". The rate of braindead litigation is clearly on the rise, and not just in East Texas.
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Am I missing something?, 30 Jun 2008 @ 7:39am

Why does this issue even exist?
Why can't each company be responsible for its own action, whether affiliated, working for, working against, etc.? Am I missing some ethical detail? If a company infringes on another company's rights, then isn't that company at fault?
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Hoeppner, 30 Jun 2008 @ 7:51am

well there should be [i]some[/i] responsibility. Otherwise some 'business savvy' person will just make shell corporations, write in the privacy statement that your E-mail address may be shared shared with affiliates(the shell) who don't have a privacy statement, and 'creatively' share all information that comes its way.
(testing italics)
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Hoeppner, 30 Jun 2008 @ 7:51am

didn't work. shame.
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Bozo, 30 Jun 2008 @ 8:16am

Re:
Use angle brackets "<" and ">" instead of square brackets.
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Cyn, 30 Jun 2008 @ 8:46am

Yes
If you choose to affiliate with someone and they do something wrong on your behalf you're at least partly responsible because you chose them.

It's too easy to set up shill companies and let them do your dirty work otherwise or to deliberately choose affiliates that will do naughty things on your behalf while keeping your nose clean.
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tekkiekmo, 30 Jun 2008 @ 8:55am

Re: Why does this issue even exist? by Am I missing something
that's a really nice thought, but what if the "parent" company 'encourages' the affiliate to do something?

I think the question that has to be asked here is did LifeLock know or should they have known that the affiliate was acting in the manner it did? If LifeLock did their due dilligence, then they should not be liable...
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Not me, it Couldn't be, 30 Jun 2008 @ 10:08am

The Wave of the Future
It's not my fault
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BriJinks, 30 Jun 2008 @ 10:14am

There are cases where companys encourage it, but this is not one.
There are cases where companies have encouraged there "agents" to violate trademarks and FDA/FTC regulation.

This is not one of those cases. The company responded ethically, professionally and publicly to its affiliate's actions and terminated the affiliate's relationship/agreement.

If the case could show hundreds of their affiliates behaved with direct disregard for competitor's trademarks. Further investigation/action would be warranted.

For the one company to continue legal action after the other company has responded in an ethical and professional manner to the action of ONE affiliate, is outrageous.

NameSafe needs to do some positive PR while they are on people's radar, drop the suit and be done with it. Stop wasting municipal resources and money on lawyers. Spend it on your PR people instead.
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certainly anonymous, 30 Jun 2008 @ 1:31pm

they can take some of the responsibility
For years affiliates have pretty much run wild to do as they please. Unless they get a complaint about them they may get their account ban or they may not. Many make a living off the consumer. They can do plenty spamming and carry on like it is no big deal. Meanwhile the company they may be sponsoring is left in the dust to rack in the thousands that the affiliates rake in for them. This is why there is so much spam. It's easy to set up shop and start spamming the masses. Even easier if you know how to get a bot.

Neither the business or the affiliate have been held accountable for their actions. One being turning a blind eye, the other being running wild on the internet.

It's time to set in place rules, and that is make both responsible and set in place standards for each to follow. If your affiliate just signed up, and all of the sudden they are making hundreds of dollars over night, that is cause for concern. If they say they have a news list, etc make them prove it. If you are getting complaints on a affiliate, check into it.

As for the complaint/lawsuit this just makes my blood boil. A law suit over a confusing or deceptive ad over rides helping to clean the spam off the internet. I am not impressed. I am furious. Control your affiliates, and then maybe someone will half feel sorry for you. I feel sorry for none of you.
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GA Girl in TN, 30 Jun 2008 @ 2:31pm

Re: There are cases where companys encourage it, but this is not one.
Has anyone actually read the suit papers and found that not only did Lifelock's alleged agent buy the words, but redirected all of NAMESAFE's customers to Lifelock's site. That's just wrong!! Who knows how many customers they stole. Also, it looks like NAMESAFE tried to work it out with Google with little success. While the problem may be over (as I understand Lifelock has pulled the ads); NAMESAFE still had to go to considerable expense and lost considerable sales while its customers were being confused and diverted to the Lifelock website.
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Tony, 30 Jun 2008 @ 3:26pm

Re: Why does this issue even exist?
You want companies to assume responsibility for their actions?

Next thing you know, you'll be calling for INDIVIDUALS to assume personal responsibility for their own actions.
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John (profile), 30 Jun 2008 @ 3:29pm

Agree with post #11
I agree with post #11: the companies who hire the affiliates need to be held accountable for the affiliates' actions. You say that's too hard to do?

Like post #11 said, suppose a company like Adobe hired BrandX Marketing as an affiliate. Then suppose BrandX sent out millions of spam e-mails about Adode's latest product. Some people buy it and BrandX gets a cut.

But, when people complain to Adobe about the spam, they use the time-honored excuse of "we didn't know what our affiliates were doing".

Some companies may cut off the affiliate and some companies may decide the sales outweigh the complaints. So, the customer service people will tell the customer that the affiliate has been fired... while the sales people encourage the affiliate to keep doing what they're doing.

And, as a side note, how can any company not know how their affiliates operate? Yes, some companies can have a lot of affiliates and it could be hard work to keep track of them all, but if not, how would the company know if the affiliate is sending spam, sending out libelous statements, or even false advertising?
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Tony, 30 Jun 2008 @ 3:39pm

Re: Re: There are cases where companys encourage it, but this is not one.
OK - but is LIFELOCK responsible, when their affiliate is the one who did the action, without Lifelock's knowledge or permission?

Sure, the affiliate that placed the ad SHOULD be held responsible. But Lifelock shouldn't be unless they colluded in some way.

Now, if Namesafe has evidence showing that Lifelock instructed or knowingly allowed their affiliate to run these ads, then Namesafe has a legitimate case. Otherwise, it's just another example of giong after the deep pockets.
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Tony, 30 Jun 2008 @ 3:51pm

Re: Agree with post #11
And what if Adobe's response was "Oh, really? Well, we don't like our affiliates doing that, so we're going to cut them off"?

If BrandX sent out spam without Adobe's knowledge, and Adobe acted on it as soon as they knew, then what, exactly did Adobe do wrong?

Hmm - seems a lot like another argument: If UserX posted copyrighted material on YouTube, and YouTube didn't know about it, then what, exactly, did YouTube do wrong?
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certainly anonymous, 30 Jun 2008 @ 11:42pm

Re: Agree with post #11
If they don't like their affiliates doing that, and they actually do cut them off, and supply proof that the person is no longer a affiliate, then not much harm done. But you have to sit back and see the whole scope of what has been going on for years, we have companies that never have done the right thing, and wont, unless they are forced too. They made the Can Spam laws, and quite seriously the whole farce on the Can Spam was a joke because they were told they left too many loopholes in the laws they were creating. Did any of them listen? Nope! All they did is make spam easier to send, and as long as the sender follows the guidelines, they can sleep well each night.

We have many businesses online that do the right thing. But we have many that don't care what their affiliates do, just so long as they are racking in the cash every week. You have to go after the source, because if you don't, then the affiliates will just keep sending the spam. For the half doing the right thing, going after the source will not effect them because they have always done the consumer right by stopping the affiliate that was spamming. They have control, and always have. Case in point look at the Internet and ask yourself how many companies have you received spam from out of all of the different ones that are online?

I don't care if you have 20 affiliates, or 20,000 affiliates. If you can't keep up with them, then you are in the wrong business. With the way spam has gotten over the years, and no control insight, I would probably even agree to a out right ban on affiliates at this point because there is not enough control by a few select companies. So what if I end up viewing more ads on websites. It would sure be better than the 100 or so emails I get every day, and night from spammers.
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