Does The FTC Get To Ignore Section 230 Of The CDA?

I’ve mostly joked that a FTC and state AGs select to live in a anticipation universe where Section 230 doesn’t exist. A new statute from a Second Circuit has incited my fun on a ear, suggesting that my underlying fears — of a Section 230-free section for consumer insurance agencies — might have spin a dystopian reality.

The Opinion

The box involves weight detriment products, including colon cleanses, vended by LeanSpa. To beget some-more sales, LeanSpa hired LeadClick to act as an associate selling manager. LeadClick concurrent graduation of LeanSpa’s products with LeadClick’s network of affiliates. Some affiliates promoted a products regulating feign news sites, with articles styled to demeanour like legitimate news articles and consumer comments/testimonials that were fake. Apparently, all of this combined adult to vast business. LeanSpa paid LeadClick $35-$45 any time a consumer sealed adult for LeanSpa’s “free” hearing (which was a disastrous billing option). LeadClick common 80-90% of these sign-up fees with affiliates and kept a residue for itself. In total, LeadClick billed LeanSpa $22M, of that LeanSpa paid usually $12M. Still, LeanSpa incited into LeadClick’s tip customer, forming 85% of a eAdvertising division’s sales.

The justice summarizes a pivotal contribution about LeadClick’s purpose in a feign new sites scheme:

While LeadClick did not itself emanate feign news sites to publicize products…it (1) knew that feign news sites were common in a associate selling attention and that some of a affiliates were regulating feign news sites, (2) authorized of a use of these sites, and, (3) on occasion, supposing affiliates with calm to use on their feign news pages.

The justice also records that LeadClick spasmodic bought ads on legitimate news sites to foster feign news sites in a associate network.

The FTC’s Prima Facie Case

The FTC purported that LeadClick vigilant in feign practices. LeadClick responded that it didn’t do any feign practices itself; if anyone did, it was a affiliates. Extensively citing the Ninth Circuit’s FTC v. Neovi ruling from 2010 (an bias case, not a dishonesty case, yet this row ignores a difference) and a successive 11th Circuit box (FTC v. IAB Marketing Associates), a Second Circuit concludes that “a suspect might be hold probable for enchanting in feign practices or acts if, with trust of a deception, it possibly directly participates in a feign intrigue or has a management to control a feign calm during issue.”

In a Neovi case, a suspect Qchex had an online check-creation apparatus that fraudsters used to emanate and send feign checks. The justice hold that Qchex vigilant in astray practices when it printed and afterwards delivered a feign checks to recipients. But here, LeadClick never “delivered” anything. Indeed, LeadClick argued that a authorised customary conflates approach guilt with aiding/abetting liability. The Second Circuit disagreed, observant a suspect who “allows a dishonesty to proceed” so “engages, through a possess actions, in a feign act or use that causes mistreat to consumers.”

I’m not a philosopher, yet to me, “allowing” a third celebration to dedicate bungle is a weird and overly expanded approach of defining *direct* liability. Once this justice creates this devout cheat, LeadClick didn’t have a chance. Applying a authorised customary to LeadClick:

  • knowledge. “LeadClick knew that (1) a use of feign news pages was prevalent in associate marketing, and (2) a possess associate marketers were regulating feign news sites to marketplace LeanSpaʹs products.”
  • “direct appearance in a feign conduct.” LeadClick confident this customary by “recruiting and profitable affiliates who used feign news sites for generating traffic, handling those affiliates, suggesting concrete edits to feign news pages, and purchasing ensign space for feign news sites on legitimate news sources.”
  • “ability to control.” LeadClick ran an associate network that enclosed feign news sites. “As a manager of a associate network, LeadClick had a shortcoming to safeguard that a advertisements constructed by a associate network were not feign or misleading.” we suspicion a authorised customary required
    “ability,” yet a justice tautologically uses a tenure “responsibility” to prove this element. Also note that a court’s authorised customary (“has a management to control a feign calm during issue”) sounds a lot like principal-agency liability, yet a justice doesn’t contend or indicate that LeadClick had a principal-agency attribute with affiliates. Apparently a justice is requesting some kind of agency-lite liability.

Finally, a justice says that LeadClick’s vigilant to mistreat consumers is irrelevant; “it is adequate that it orchestrated a intrigue that was expected to pretence reasonable consumers.”

Section 230

Because of a court’s egghead corner-cutting that LeadClick committed a “direct” defilement of a FTCA, a Section 230 shield was already doomed. This is unchanging with a Neovi case, where Section 230 didn’t even come adult even yet all of a feign calm was supposing by third parties. Even yet Section 230 doesn’t request to a defendant’s possess authorised violations, a justice unfortunately decides to plod adult Section 230 jurisprudence anyway, apparently for kicks.

I trust this is usually a second time that a Second Circuit has discussed Section 230. The before box was GoDaddy’s undramatic 2015 win in Ricci v. Teamsters, released per curiam. Oddly, this row doesn’t bring a Ricci box during all — not even once. The opinion simply says “We have had singular event to appreciate Section 230” though referencing a Ricci box by name. I’m confused since this opinion so deliberately avoided enchanting a new and apparently applicable Ricci precedent…? Could it be that Ricci would have forced a row to strech a opposite outcome or clearly combined an intra-circuit split? Is there some kind of behind-the-scenes politics among Second Circuit judges? we acquire your theories.

The justice runs by a customary 3 stump exam for Section 230’s immunity:

  1. provider/user of an interactive mechanism use (ICS). The justice rightly says “Courts typically have hold that internet use providers, website sell systems, online summary boards, and hunt engines tumble within this definition.” (What is a “website sell system”?). Then a justice goes sideways, observant it is “doubtful” that LeadClick qualifies as an ICS since it acts as an associate manager that doesn’t yield entrance to servers.

    LeadClick argued that it supposing associate tracking URLs and accessible activity on a server, yet a row responds that LeadClick didn’t bring any cases requesting Section 230 in identical contexts. The justice continues that LeadClick’s tracking use “is not a form of use that Congress dictated to strengthen in extenuation immunity” since “routing business by a HitPath server before reaching LeanSpaʹs website[] was invisible to consumers and did not advantage them in any way. Its purpose was not to inspire sermon yet to keep lane of a business referred from a associate network.”

    Say what? Affiliate programs are usually another form of advertising, so like other promotion programs, they assistance recompense publishers for formulating and disseminating their content. We might not wish this sold calm (fake news sites touting indeterminate weight detriment products). Even so, associate programs do support discourse, and a court’s libel of associate programs’ debate advantages is hapless and unsupportable. More generally, a justice seems to be marginalizing a debate advantages that third celebration vendors give to publishers, that is apparently misled when vendors assistance publishers control their business some-more efficiently. we wish other courts don’t request a “discourse promotion” threshold for requesting Section 230.

    We frequency see cases spin on a ICS prong, so it’s unequivocally intolerable to see a justice go there — generally when it eventually specifically punts on a issue, creation this contention dicta.

  2. content supposing by another information calm provider (ICP). The justice cites Accusearch for a tender that ICP “cover[s] even those who are obliged for a growth of calm usually in part,ʺ yet afterwards adds a “defendant, however, will not be hold obliged unless it assisted in a growth of what done a calm unlawful.”

    The justice says LeadClick “participated in a growth of a feign calm posted on feign news pages” since it recruited affiliates meaningful some had feign news sites, paid them, spasmodic suggested them to revise content, and bought ads on legitimate news sites. In other words, a justice cites a accurate same justification of LeadClick’s prima facie guilt as justification of a miss of gift for Section 230. This is usually another approach of observant that once a Second Circuit treated LeadClick as a approach delinquent of a FTCA, LeadClick had no possibility of subordinate for Section 230.

    Notice that nothing of a cited contribution indeed engage calm “creation” by LeadClick, so a justice apparently assumes calm “development” covers other activities — yet doesn’t contend what that tenure means.

    The justice continues: “LeadClickʹs purpose in handling a associate network distant exceeded that of neutral assistance. Instead, it participated in a growth of a affiliatesʹ deceptive websites, ‘materially contributing to [the contentʹs] purported unlawfulness.'” What does “neutral assistance” mean, and how does that describe to Section 230 immunity? we assume all destiny plaintiffs in a Second Circuit will explain that a suspect supposing “assistance” to a calm begetter that wasn’t “neutral.” That should be fun.

  3. treated as publisher/speaker. The justice pulls a same pretence with this prong, i.e., LeadClick was confronting approach guilt due to a possess bungle and citing justification from a prima facie box as disqualifying justification for this prong.

Further Implications

As we all know, no business wants to challenge opposite a FTC in court. Not usually do a FTC’s lawsuit resources dwarf those accessible even to vast defendants, yet judges give a FTC additional credit as a voice of consumers. This box highlighted how a Second Circuit focussed copiousness of authorised doctrine to get a FTC a win. Future defendants who wish to quarrel a FTC in sovereign court, take note. This kind of devout exaggeration happens distant too frequently in FTC cases, so it would be a mistake to provide it as an unlikely-to-repeat accident.

There is so most nonessential bad things here for Section 230 jurisprudence in a Second Circuit. Plaintiffs can find copiousness of effect in a court’s contention about what qualifies as “interactive mechanism services,” “neutral assistance” and “development.” Yuck.

In a footnote, a justice says a research would be a same underneath Connecticut’s UTPA. This suggests that state AGs could likewise settle a prima facie “direct” defilement opposite defendants like LeadClick per their state astray foe laws though using afoul of Section 230 either. we design we’ll see this box cited extensively by state AGs in destiny coercion actions.

Section 230’s year-of-woe keeps going. I’m prepared for 2016 to be over. Perhaps a Section 230 pendulum will pitch behind towards defendants in 2017.

Republished from Eric Goldman’s Technology Marketing Law Blog