False Advertising Liability for Affiliate Marketing

by Foley & Lardner LLP

Foley & Lardner LLP

The proliferation of e-commerce websites along with the rise of social media, blogging, and online communities has greatly increased the importance of affiliate marketing.  Affiliate marketing allows an affiliate to earn a commission by directing a customer to a company’s website to purchase a product.  Websites providing information, reviews, advice, and resources about particular types of products can earn substantial revenue by embedding affiliate links in webpages.  Affiliate marketers should be aware of a recent expansion in false advertising liability in the courts premised on negative reviews, rankings, and product comparisons.  Meanwhile, product manufacturers feeling aggrieved by statements made on product review websites now have a possible false advertising cause of action for seeking redress.

It has been a little more than two years since the Supreme Court rendered its decision in the Lexmark case clarifying the standing requirements for false advertising claims brought under the Lanham Act.  Just after the decision was rendered commentators began to warn that the decision changed the law in a way that would expand the scope of potential plaintiffs for false advertising claims to non-direct competitors.  Before the Lexmark decision various lower court decisions had limited false advertising causes of action to only situations in which the allegedly false representations were made by someone in direct competition with the plaintiff.  The Supreme Court eliminated that requirement and held that a plaintiff could have standing to sue for false advertising even if the parties were not direct competitors.  Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1393-95 (2014).  The elimination of the direct competitor requirement by the Supreme Court has now opened the door to false advertising suits against affiliate marketers.

Claims for false advertising are premised on § 43(a)(1) of the Lanham Act, which is codified at 15 U.S.C. § 1125(a)(1) as follows: “Any person who, on or in connection with any goods or services . . . uses in commerce . . . any . . . false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”  The Supreme Court established a new test in Lexmark for standing that requires a plaintiff suing for false advertising to (1) allege an injury to a commercial interest in reputation or sales; and (2) show that such injury was proximately caused by defendant’s misrepresentations.  Lexmark, 134 S. Ct. at 1388-91.

Two recent district court opinions from the Southern District of New York demonstrate that courts are now willing to proceed with false advertising claims against affiliate marketers.  Casper Sleep, Inc. v. Mitcham, 2016 U.S. Dist. LEXIS 118771 (S.D.N.Y. Sept. 1, 2016); Enigma Software Grp. USA, LLC v. Bleeping Computer LLC, 2016 U.S. Dist. LEXIS 89160 (S.D.N.Y. July 8, 2016).  Both decisions note that Lexmark eliminated the direct competitor requirement for asserting claims of false advertising.

In Casper Sleep, the plaintiff Casper Sleep, Inc. sells mattresses over the Internet while the defendants Jack Mitcham and Mattress Nerd LLC operate a website that reviews mattresses.  According to the court, Mitcham has direct affiliate marketing relationships with Casper’s competitors but not with Casper, meaning that Mitcham collects sales commissions from those competitors when his readers purchase products through affiliate links on his website or with coupon codes that he provides.  Casper alleged that Mitcham’s reviews of the Casper mattress repeatedly recommend Casper’s competitors over Casper and contain affiliate links to various of Casper’s competitors’ products, along with an Amazon.com link to Casper’s product, but that in his “Disclaimer” at the bottom of the review Mitcham groups his relationships with everyone together, stating that “[t]his article includes ‘affiliate links,’ meaning that I’d get paid a commission if you purchased anything from them.”  Casper alleged that Mitcham’s statements suggesting that Mitcham has the same financial interest in sales of Casper products as he does in sales of competitors’ products caused Casper lost sales and diminished its goodwill in the marketplace.

Mitcham filed a motion to dismiss the false advertising claim brought by Casper, but the motion was denied in part.  The court reasoned that Mitcham’s “Disclaimer” plausibly materially misleads consumers by directly suggesting that Mitcham has the same pecuniary interest in pushing sales of Casper that he does in pushing sales of each of the other mattress companies mentioned in the review.  The court also reasoned that given that the reviews recommend Casper’s competitors’ mattresses over Casper’s mattresses, it is perfectly plausible that the alleged deception caused consumers to withhold trade from Casper, such that Casper suffered economic or reputational injury flowing directly from the alleged deception.  Mitcham argued that the false advertising claim should fail because Mitcham does not directly compete with Casper, but the court stated that such an argument is foreclosed by Lexmark, which explained that a direct-competition requirement is not required for a false advertising cause of action.

In Enigma Software, the plaintiff Enigma Software Group USA, LLC develops and markets computer security products including the anti-malware program SpyHunter, while defendant Bleeping Computer LLC owns and operates a computer support website.  According to the court, Bleeping generates profits through its affiliate program, under which it receives commissions from designated affiliate software companies for promoting their products on its website and, under that program, Bleeping posts affiliate links throughout its website which redirect users to third-party webpages where they can buy affiliate products.  The court noted that Bleeping does not receive commissions from Enigma on sales of SpyHunter, but it does have an affiliate arrangement with Malwarebytes, a competitor of Enigma.

According to the court opinion, the Bleeping website includes a “Forums” section where Bleeping offers advice and answers users’ questions about topics related to computer security and technology.  Enigma alleged that Bleeping has adopted and employed a pattern of making, in its Forums posts, false, inaccurate, misleading and disparaging statements about Enigma and SpyHunter while simultaneously recommending Malwarebytes’ anti-spyware product.  Enigma further alleged that Bleeping had a staff member with the handle Quietman7 who, in various posts on the Forums, both disparages Enigma’s product and encourages the purchase of Malwarebytes’ product as an alternative.  Bleeping filed a motion to dismiss the false advertising claim brought by Enigma, but the motion was denied in part.  The court reasoned that by holding Quietman7 out as a staff member who could be “trusted to give correct . . . answers” to users’ questions, users could have reasonably relied on this representation.  Bleeping argued that the false advertising claim should fail because Enigma and Bleeping are not direct competitors, but the court noted that, after Lexmark, a plaintiff need not allege that the parties are direct competitors.

Given the willingness of courts to proceed with false advertising claims against affiliate marketers, anyone involved in affiliate marketing should make sure that any reviews, rankings, and product comparisons are not falsified to improperly promote the products of affiliate companies while unfairly disparaging the products of other companies.  Product manufacturers feeling aggrieved by false statements made by affiliate marketers now have a potential false advertising cause of action to consider for seeking redress.  The prediction of expanded false advertising liability in view of the Supreme Court’s Lexmark decision is now ringing true for affiliate marketers.

View This Blog

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley & Lardner LLP | Attorney Advertising

Written by:

Foley & Lardner LLP

Foley & Lardner LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.