Oprah Winfrey Sues Resveratrol Seller

(page 2 of 2)

Story Tools

Affiliate marketers are companies or individuals who devise Internet ad campaigns and spread them through programs such as Google AdWords. Through AdWords, companies bid on their placement in searches and sponsored links, and pay only when Web surfers click on their ads. The program is Google's bread and butter, accounting for most of its $22 billion in revenues last year. And the popularity of AdWords is likely to grow even more, now that Google is making it easier for advertisers to capitalize on Oprah and other trademarked names. On June 15, Google announced a new policy allowing companies to cite registered trademarks in ads, even if they don't own those trademarks.

The Federal Trade Commission has been cracking down on Internet scams of late. On July 1, the FTC announced it was bringing eight cases against companies using the Web to market get-rich schemes and money-saving opportunities that turned out to be nothing more than excuses to hit consumers with exorbitant credit-card charges. Earlier this year, the FTC asked Google and Facebook to pull down scam ads claiming to offer consumers money from the federal government's stimulus plan. And the agency has been just as tough on companies as it has on their advertising affiliates. It will neither confirm nor deny that it's looking into supplement schemes, but FTC attorney Karen S. Hobbs says that in general, "Our position is companies cannot hide behind affiliate marketing. We pursue companies directly."

State attorneys general are becoming increasingly concerned about this issue. On Aug. 19, Illinois Attorney General Lisa Madigan filed consumer fraud lawsuits against three suppliers and one affiliate marketer of acai berry products. "Consumers should always be skeptical and educate themselves instead of blindly believing any endorsement claims," Madigan said in a statement. "We must hold these Internet scammers accountable for their role in a seedy marketing game that steers unsuspecting consumers to online schemes."

Harpo's suit targets both supplement sellers and their affiliate marketers. The complaint names a handful of individuals who the company believes are responsible for writing and distributing the ads, but Rachman says there could be as many as 500 such affiliates, and his firm is still trying to locate most of them. When the bad actors are identified, the complaint will be amended to include them. The lawsuit does not specify a damage amount.

Rachman says that in the past, lawyers generally went after deceptive Web site operators individually, but that Harpo felt it would be more effective to cast a wide net. "We'd go after one Web site," he says, "and then another would pop up where the affiliate changed the Web address by a letter or a dash," but the content was pretty much the same. "We didn't want to engage in whack-a-mole. We want these practices to stop." Most of all, he says, "we want consumers to get their money back."

Weintraub is a senior writer for BusinessWeek's Science & Technology department.