FTC Cracking Down on Penny Auction & Acai Fake News Site Operators

Perhaps you’re familiar with the consumer news report type websites that make it look like a real news reporter endorses a particular penny auction site, for over a year now there have been many of these sites used by affiliate marketers. Many consumers have been fooled by such sites, many of which make it look like the site was seen on ABC News, Rolling Stone, Wired, CNN, Fox News and others when they haven’t been.
The following is a press release from the FTC from April on the FTC, Intermark Communications, Inc. is named, and they and possibly others, are alleged to have run fake news penny auction advertorial sites.
“In addition to the acai berry products, Defendant also has operated websites utilizing the deceptive newsformat to promote products involving work-at-home business opportunities, debt relief, penny auctions,skin treatments, teeth whitening, electronic cigarettes and natural disaster preparation.” – http://www.ftc.gov/os/caselist/1023232/index.shtm
For Release: 04/19/2011 – Audio

FTC Seeks to Halt 10 Operators of Fake News Sites from Making Deceptive Claims About Acai Berry Weight Loss Products

Internet Marketers Falsely Claim Endorsement from ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports, FTC Alleges

The Federal Trade Commission is requesting federal courts to temporarily halt the allegedly deceptive tactics of 10 operations using fake news websites to market acai berry weight-loss products.  The FTC seeks to permanently stop this misleading practice and has asked courts to freeze the operations’ assets pending trial.

According to the FTC, the defendants operate websites that are meant to appear as if they belong to legitimate news-gathering organizations, but in reality the sites are simply advertisements aimed at deceptively enticing consumers to buy the featured acai berry weight-loss products from other merchants.

The FTC complaints allege that typical fake news sites have titles such as “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News.”  The sites often include the names and logos of major media outlets – such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports – and falsely represent that the reports on the sites have been seen on these networks.  An investigative-sounding headline on one such site proclaims “Acai Berry Diet Exposed:  Miracle Diet or Scam?” The sub-headline reads, “As part of a new series:  ‘Diet Trends:  A look at America’s Top Diets’ we examine consumer tips for dieting during a recession.”  The article that follows purports to document a reporter’s first-hand experience with acai berry supplements – typically claiming to have lost 25 pounds in four weeks.

“Almost everything about these sites is fake,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection.  “The weight loss results, the so-called investigations, the reporters, the consumer testimonials, and the attempt to portray an objective, journalistic endeavor.”

The Illinois Attorney General’s office is announcing an additional case against an affiliate marketer using fake news websites to promote acai berry weight-loss products.

The FTC will ask the courts to permanently bar the allegedly deceptive claims, and to require the companies to provide money for refunds to consumers who purchased the supplements and other products.  The FTC charges that the defendants:

  • make false and unsupported claims that acai berry supplements will cause rapid and substantial weight loss;
  • deceptively represent that:
    • their websites are objective news reports;
    • independent tests demonstrate the effectiveness of the product, and
    • comments following the “articles” on their websites reflect the views of independent consumers; and
  • fail to disclose their financial relationships to the merchants selling the products.

The Federal Trade Commission has a new consumer alert to help consumers recognize and avoid deceptive claims made by fake news sites that market acai berries for weight loss.  It also has a new video detailing the risks of free trials, which often are used to market acai berry supplements and other products.

According to the FTC complaints, in pitching the acai weight-loss products, the defendants postattention-grabbing ads on search engines and high volume websites, such as “Acai Berry EXPOSED – Health Reporter Discovers the Shocking Truth,” driving traffic to the fake news sites and ultimately to the sites where merchants sell the products.  The FTC has received numerouscomplaints from consumers who paid between $70 and $100 for weight-loss products after having been deceived by fake news sites.

Reporters or commentators pictured on the sites are fictional and have not conducted the tests or experienced the results described in the reports, the FTC alleges.  The “responses” and “comments” following the reports are simply additional advertising content, not independent statements from ordinary consumers.  The defendants receive commissions when consumers buy the products or sign up for “free trials” on the product-selling sites – but they fail to adequately disclose their lack of objectivity and their financial incentive to get consumers to buy the products.  According to the FTC, the defendants collectively have paid more than $10 million to advertise their fake news sites, and have likely received well in excess of that amount in ill-gotten commissions.

Derived from acai palm trees that are native to Central and South America, acai berry supplements are often marketed to consumers who hope to lose weight.  In 2010, the FTC filed an action against acai berry marketer Central Coast Nutraceuticals for deceptively marketing acai berry supplements as weight-loss products, and “colon cleansers” as an aid for preventing cancer.

The defendants running the fake news sites who were charged in these cases make very similar claims that consumers can experience dramatic weight loss by taking acai berry supplements in combination with a companion product such as a so-called colon cleanser.

The Commission votes authorizing the staff to file the complaints and seek the temporary restraining orders in Beony International LLC; Circa Direct LLC; Copeac; Ricardo Labra; and Tanner Vaughn were 5-0.  The Commission votes authorizing the staff to file the complaints and seek the temporary restraining orders in Coulomb Media, Inc.; DLXM, LLC; Charles Dunlevy; Zachary Graham; and Thou Lee were 4-1, with Commissioner J. Thomas Rosch voting no.

The FTC filed the 10 complaints and requests for temporary restraining orders in six federal courts.  In the U.S. District Court for the Northern District of Illinois, Eastern Division, the agency filed complaints against Beony International LLC, Mario Milanovic, and Cody Adams; Zachary S. Graham, Ambervine Marketing LLC, and Encastle Inc.; Intermark Communications, Inc. also doing business as Copeac, and IMM Interactive; Ricardo Jose Labra; and Thou Lee, also doing business as TL Advertising.  In the U.S. District Court for the District of New Jersey, the agency filed a complaint against Circa Direct LLC and Andrew Davidson.  In the U.S. District Court for the Eastern District of Michigan, the agency filed a complaint against Coulomb Media, Inc., and Cody Low, also known as Joe Brooks.  In the U.S. District Court for the Eastern District of New York, the agency filed a complaint against DLXM, LLC, also doing business as DLXM LLC, and Michael Volozin, also known as Mikhail Volozin.  In the U.S. District Court for the Northern District of Georgia, the agency filed a complaint against Charles Dunlevy.  In the U.S. District Court for the Western District of Washington, the agency filed a complaint against Tanner Garrett Vaughn, also doing business as Lead Expose, Inc., and Uptown Media, Inc.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the defendant has actually violated the law.  The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  “Like” the FTC on Facebook and “follow” us on Twitter.

MEDIA CONTACT:
Betsy Lordan 
Office of Public Affairs

202-326-3707
STAFF CONTACT:
Steven Wernikoff
FTC Midwest Region, Chicago
312-960-5634 

(FTC File Nos:  Beony International LLC, 1123089; Zachary S. Graham, 1123090; Copeac, 1023232; Ricardo Jose Labra, 1123088; Thou Lee, 1123085; Circa Direct LLC, 1123059; Coulomb Media, Inc., 1123072; DLXM, LLC, 1123061; Charles Dunlevy, 1123077; Tanner Garrett Vaughn, 1123067)
(Fake News Sites NR

 

PennyAuctionWatch thanks the FTC for this action.

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6 comments… add one

  • Bubba July 4, 2012, 10:52 pm

    Purportedly warning the American public of Penny Auction scams… Meanwhile you have NO LESS THAN NINE ADS from penny auction sites on this page alone, all of which are generating revenue for you! YOU are the biggest SCAM of all!! Surely, this comment will NEVER post, proving what a fraud you really are!

    Reply
    • Amanda Lee July 4, 2012, 11:21 pm

      Prove to me that the sites that are being advertised are scams. I am not a fraud.

      Reply
    • Amanda Lee July 11, 2012, 10:17 am

      They don’t all generate revenue though

      Reply
  • Bubba July 10, 2012, 10:18 pm

    I owe you an apology Amanda! When I first discovered your site, it appeared that you were actively promoting (and profiting from), the very sites that you were condemning. Further examination reveals that this is not true. You are promoting ONLY the sites that you deem to be HONEST, while chastising the scammers. I formally and officially apologize, and applaud your efforts! Please feel free to delete any derogatory comments I may have made in this regard. My bad for jumping on first impressions before investigating and understanding. So sorry!

    Reply
    • Amanda Lee July 11, 2012, 12:30 am

      Thanks so much for understanding and the apology, I forgive you. It’s sometimes hard to spend so much time on something, 3 yrs of my life and still pay hosting bills, etc though I really don’t make a whole lot with ads…. I know a have a few and they are only for sites, well except the google ads may have multiple ads, they are only for sites that I feel are OK vs some others, but it’s not an endorsement or guarantee of anything. Thank you again.

      Reply
  • berry dietary supplement November 21, 2012, 10:28 pm

    I rarely drop remarks, however i did a few searching and wound up here FTC Cracking Down on Penny Auction & Acai Fake News Site Operators – Penny
    Auction Watch®. And I actually do have 2 questions for
    you if you usually do not mind. Could it be only me or does it give the impression like a few of these remarks come across like they are coming from brain dead visitors?
    :-P And, if you are writing at other online sites, I would like to keep up with anything new you have to post.

    Would you list of the complete urls of all your shared pages like your
    Facebook page, twitter feed, or linkedin profile?

    Reply

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