Affiliate marketing largely involves two online entities: merchants and publishers. Merchants (anyone with something to sell) pay publishers (including bloggers, YouTube influencers, even The New York Times-owned review site Wirecutter) to create ads or links that drive consumers to point-of-sale websites. Each click that results in a sale earns the publisher a commission; 10 per cent from Amazon for a luxury beauty purchase, for instance.
By next year, it will be a $US6.8 billion ($9.9 billion) business, according to estimates from Forrester Consulting, sprawling across websites, email and social media platforms. Most participants are aboveboard. Others are not, and they are the target of the lawsuit filed by Bullock and DeGeneres.
A common trick involves setting up fake news sites. The scammers then post a real image — Bullock appearing on NBC’s “Today” show to promote a film, to use one example from her lawsuit — that has been doctored to become an endorsement: “Sandra Bullock talks about her new skin care line.” (She has never had a skin care line.) An accompanying link leads to a site selling the celebrity’s supposed products.
Another ad included as an exhibit in the lawsuit fabricated an interview: “Sandra even admitted that plastic surgeons are furious with her after noticing a large decline in patients.” (Nope.) In their complaint, the film star and the talk show host listed 40 beauty products that have been sold online with their names fraudulently attached, items like Bella Pelle Wrinkle Cream that “they have never heard of, used or endorsed.”
“The celebrity endorsement-theft business model is based on a scheme to trick consumers into disclosing their credit card and/or debit card information in order to enroll them in costly programs with undisclosed, or poorly disclosed, recurring charges,” Bullock and DeGeneres said in the complaint. Ads for the products “typically include unsubstantiated claims that the products will lead to dramatic results,” they added.
‘Free’ trials, full price
Many of the fake ads associated with DeGeneres and Bullock offer free trials. In practice, customers are often charged full price, the complaint said.
Dubious offers of free trials put forward online through affiliate marketers “have infested the internet and social media” and cost more than a million victims upward of $US1.3 billion over the past decade, according to a report last year from the Better Business Bureau. The number of complaints has also surged abroad, with Australian regulators reporting that for the first nine months of 2018, complaints rose fivefold and losses soared 3,800 per cent — nearly 40 times more than in the previous year.
Fabricated endorsements have been an issue since moviedom’s earliest days. The problem became more serious in the 1970s, when advertisers began to pay celebrities huge sums to appear in television commercials: Suddenly a lot of money was at stake. Today, those deals are worth tens of millions of dollars — more than film work, even for most A-list stars. Julia Roberts, for instance, signed a five-year endorsement contract with Lancôme cosmetics in 2010 that was valued at $US50 million.
The littering of the internet with phony endorsements can imperil stars’ reputations and limit their ability to secure legitimate endorsement deals.
Actresses over 40 who the public considers trustworthy (Oprah Winfrey, Sally Field, Kelly Ripa) are the most frequent targets of endorsement theft; anti-aging products are one of the biggest rackets. Male stars like Denzel Washington also fall victim, often as fake pitchmen for erectile dysfunction pills.
“It’s very hard to track down the source,” Mehmet Oz, who hosts the “Dr. Oz. Show,” wrote in a Wall Street Journal column in April. His legal team sends out roughly 3,000 cease-and-desist letters a year involving bogus online ads.
The Federal Trade Commission has started to look more closely at affiliate marketing fraud. In one case, the agency found that consumers had been duped into paying $US179 million over five years for unproven weight-loss, muscle-building and wrinkle-reduction products. The items, advertised on websites designed to resemble publications like Men’s Health and Good Housekeeping, featured phony endorsements from celebrities like Paula Deen, Jennifer Aniston and Jason Statham.
Because many affiliate marketing networks are multilayered and purposefully obscured, “it’s hard to track down the perpetrators of this kind of fraud,” said Susan Grant, director of consumer protection and privacy at the Consumer Federation of America. “All of this subterfuge is necessary in order to extend the scam for as long as possible.”
The New York Times