Step by Step: How to Get Sued by the FTC for "Free Trial" Offers

This case filed yesterday in North Dakota illustrates the perils of "negative option" marketing:

http://www.ag.state.nd.us/documents/...erXMBrands.pdf

The companies are alleged to have marketed **** berry and teeth-whitening products. If you read the legal document closely, you'll note that the order to "cease and desist" also applies to “officers, directors, owners, agents, servants, employees and representatives” of the business.

There is an accompanying warning not to destroy evidence, along with an allegation the state has concerns about the safety and efficacy of the products.

Now, imagine yourself as an affiliate of a company that operates largely in the same way. The person who provides the sales material, the sales copy, the website and causes you to get paid has been named a respondent in a case that alleges deceptive trade practices -- and you, as an affiliate, have been warned not to destroy evidence.

What could that evidence consist of?

1.) Blog posts in which you used information and material provided by the company to woo your audience and/or added your own spin to make the offers even more appealing.
2.) Emails you sent to your list.
3.) Forum posts in which you sang the praises of the company.
4.) Correspondence in which you sought to woo prospects who contacted you.
5.) Documents and records of all sorts, including checks, check stubs, receipts, electronic records, your own Blog or website, videos.

Recently I have covered cases in which judges have ordered YouTube videos, for example, not to be destroyed. I covered a case earlier this week in which a federal judge in an FTC case appointed a receiver and the receiver acted virtually instantly to seize the website.

One of the allegations in the case is that scammers used images of the President of the United States to push a fraudulent "medical discount" plan masquerading as health insurance.

Imagine you were an affiliate for a similar company accused of doing a similar thing. You've now potentially been drawn into a federal case.

Some of you will remember the AdSurfDaily (ASD) autosurf Ponzi case. One of the allegations in that case was that affiliates falsely claimed the operator received an award for business acumen from the President of the United States and that the operator knew it was a lie but nevertheless permitted it to go viral on the Internet.

The short way to look as this is "GIGO" -- Garbage In, Garbage Out." The operator plants the lie, and the affiliates spread it virally. The Feds seized tens of millions of dollars in the ASD case.

Prior to the ASD seizure, longtime Warriors warned that it was a scam -- an obvious Ponzi scheme. Some of them were heckled and ridiculed for suggesting that Internet Marketers had a duty to peel back layers of the onion and not promote "opportunities" simply because they are "popular" or because the companies and affiliates swear they are legitimate.

GIGO.

The Feds went on to allege that ASD had "followers," members of a "flock." Some of the affiliates later were identified as members of the so-called "sovereign" movement. Some of them argued that all commerce is legal and that the government is Constitutionally prohibited from interfering with commerce. It is an argument that would have made narcotics trafficking legal -- even slavery.

Indeed, if all commerce is legal, then it would be legal to sell people to the highest bidder in the Public Square of your town. You could "lawfully" sell cocaine on the Internet to whomever you pleased under this bizarre theory.

A couple of days ago, while doing research on **** berry companies, I came across websites that "trapped" me by effectively disabling the "back" button on my browser and beaming confusing pop-up messages.

Why some IMers consider this a sound practice I'll never know. What's the message? That the marketer wanted my money so desperately that he or she was willing to hold me hostage on a website and perform a sort of electronic shakedown in which I'd fork over money to set myself free?

I was left to wonder whether the marketer had given even a moment of thought to the PR consequences of such an approach. I also was left to wonder if the marketer actually had considered the consequences and decided to disregard them because the shakedown method had been proven to "work" -- and that something that "works" is the only thing that matters.

Such pages create instant critics. Some of them later emerge as litigants.

I also came across a site that used a script to make it appear as though I'd be buying the product from someone in my city. The site grabbed the IP and swapped in the city. An extremely handsome spokesmodel tried to persuade me that, yes, she was from my town and, yes, she once was overweight -- but had been cured of her weight problem by the **** berry.

The website appears to have been registered in Greece; I am from the United States. The page also had a comments board. It appeared to be populated by shills. It is likely that the marketer was posting under multiple identities on "her" own board, serving up softball questions and answering them "herself."

Be careful out there, Warriors. Lean economic times bring out the worst, the people who prey on all sorts of vulnerabilities, including health woes. There also have been several spectacular cases of affinity fraud recently in which various populations have been targeted: senior citizens, people of faith, people who share ethnic and cultural bonds, people who share political bonds and belief systems.

Why do they do it?

Because it "works."

Patrick