LeadClick managed an affiliate-marketing network to provide its customers online advertising. Instead of running its own online advertising, LeadClick would connect its clients with thirdparty affiliates that would design and implement the advertisements. The client party would pay LeadClick for every clicked advertisement link that resulted in a purchase, and LeadClick would remit a percentage of the payment to the third-party affiliate that created the advertisement itself, pocketing the difference as revenue. One such client was LeanSpa, which hired LeadClick to promote weight loss and colon cleansing products in 2010.
In 2011, the FTC filed a complaint against LeanSpa, among other defendants for unfair trade practices. Unknown to LeanSpa, LeadClickâ€™s affiliates used fake news sites to promote its advertisements. Fake news sites consisted of websites that looked like genuine news sites, with logos that resembled news sites, and photographs of reporters that did not exist. The news sites contained articles that claimed that real reporters had conducted an independent analysis of LeanSpaâ€™s products and believed they worked. While LeanSpa was not aware of the third-party affiliates business practices, LeadClick had direct knowledge and the FTC amended the complaint in 2012 to include LeadClick. Lastly, in 2013, the FTC again amended the complaint to include CoreLogic, a company that wholly owned LeadClick and of which LeadClick was a direct subsidiary.
In 2015, the district court granted the FTCâ€™s motion for summary judgment and required LeadClick to disgorge $11.9 million in payment received from LeanSpa. Of that $11.9 million, $4.1 million had already been transferred to CoreLogic. The disgorgement of payment ordered by the district court included the $4.1 million. CoreLogic and LeadClick appealed. Do you think LeadClick should be held liable for unfair trading practices? Do you think CoreLogic should be forced to disgorge the $4.1 million even if they had no knowledge of LeadClickâ€™s day-to-day practices? How did the appeals court decide?