Consumer Law

As part of a settlement with the Federal Trade Commission, Cyberheat agreed to pay $413,000 and monitor its affiliates.  (I mentioned the Commission's action against Cyberheat in March 2007, when the Commission failed to convince a federal judge that the CAN SPAM Act imposed near strict liability on advertisers for the conduct of their affiliates).  Far more interesting than the rather modest civil penalty of $413,000 are the monitoring requirements that the Order imposes on Cyberheat if it continues using affiliates to market it services.  These include:

• Contractually requiring the affiliate to identify any subaffiliates it intends to use

• Providing each affiliate a copy of the Order

• Obtaining from each affiliate an express agreement to comply with the Order and the CAN SPAM Act

• Contractually requiring each affiliate that intends to use email marketing to provide Cyberheat, at least 7 days before the campaign, the email address from which the email will be sent, the subject line, the proposed dates the email will be sent, the email addresses to which the email will be sent, and a certification regarding how the addresses were obtained

• At least 3 days prior to an email campaign being conducted, Cyberheat must review the campaign for compliance with the CAN SPAN Act and provide written acknowledge that it has reviewed the campaign and that it complies with the CAN SPAM Act, and

• Requiring each consumers that signs up for Cyberheat service to identify the manner through which they heard of the service.  If they heard of the service via email, Cyberheat must monitor the affiliate that sent the email for continued compliance with the CAN SPAM Act.

As I have said before, the Commission is increasingly skeptical of the "I did not know about it defense."  Companies that use affiliates to sell their products or services should conduct due diligence up front, have contractual provisions that require compliance with the specific statutes and regulations implicated by the affiliate's marketing, and should monitor their conduct to ensure compliance.