Should A Company Be Liable For What Its Affiliates Do?

from the section-230? dept

We all know that there are bogus product reviews online. At times, it's difficult to take reviews seriously because of this. So, to some extent, it seems like a good thing that the FTC is apparently cracking down on bogus online reviews, as demonstrated by its decision to fine a company called Legacy Learning Systems Inc., to the tune of $250,000. Apparently, the company had an affiliate program, and those "affiliates" posted all sorts of positive reviews of the company's educational DVDs for things like "Learn and Master Guitar."

However, part of this is troubling. I have no problem with the FTC going after bogus reviews. Where it could get questionable is fining LLS for the actions of its affiliates. Lots of companies have affiliate programs, and it seems to set a dangerous precedent if the company is blamed for any actions taken by those affiliates. If the company was encouraging fake reviews or something along those lines, perhaps it would move liability back to the company, but it's not at all clear that's what happened here. Now, the FTC's press release on this is a bit vague. At one point, it suggests that the company had a special "review ad" affiliate program. If that's the case, then perhaps the company was specifically soliciting fake reviews, in which case the liability could potentially be justified. But later in the press release, the FTC seems to suggest it doesn't matter:

"Whether they advertise directly or through affiliates, companies have an obligation to ensure that the advertising for their products is not deceptive," said David Vladeck, Director of the FTC's Bureau of Consumer Protection. "Advertisers using affiliate marketers to promote their products would be wise to put in place a reasonable monitoring program to verify that those affiliates follow the principles of truth in advertising."

Perhaps our various Section 230 experts can weigh in on this, but I can't see how the above statement fits with Section 230. If the affiliates are doing deceptive practices on their own, without direct encouragement from the company, then I can't see how the company itself is liable, and I certainly can't see a legal obligation to put in place a "reasonable monitoring program." In fact, I would think that Section 230 says the exact opposite.

Once again, I have no problem with cracking down on fake reviews, but shouldn't it be the reviewers themselves who are liable for being deceptive? Blaming the company in cases where they might not know seems only likely to make the whole concept of affiliate programs too big a liability for most companies to bother offering.

Filed Under: affiliates, endorsements, ftc, liability
Companies: legacy learning systems