With up to $10 million available as restitution for consumers, a California marketing company agreed to stop using fake news websites featuring false celebrity endorsements and spam e-mails to market weight loss products.

Last May, the Federal Trade Commission filed suit against Sale Slash and individual defendants over the company's marketing techniques. The agency asserted that the defendants, in order to sell weight loss products, used fake news websites peppered with phony endorsements from celebrities such as Oprah Winfrey, and they also made unsupported efficacy claims with headlines such as "Insider Report: Oprah and Other Celebrities Lose 4lbs/Week of Belly Fat With This Secret Our Readers Can Try Now!"

Millions of illegal spam e-mails were sent to promote the defendants' weight loss supplements, including Pure Garcinia Combogia, Premium White Kidney Bean Extract, and Premium Green Coffee, with messages such as "Breaking news …" or "Hi! Oprah says its excellent" with hyperlinks, the FTC complaint alleged. The e-mails were sent by affiliate marketers using stolen e-mail accounts, so the messages appeared to be from a friend or family member without including information on how to opt-out of future messages.

To settle the charges, the defendants agreed to change their conduct and provide roughly $10 million in restitution, a suspended amount from the $43.4 million judgment.

With regard to their actions, the defendants are prohibited from making or assisting others in making weight loss or health-related product claims, absent competent and reliable scientific evidence (specifically including a human clinical test or study as substantiation) as well as making misrepresentations about the "existence, contents, validity, results, conclusions, or interpretations" of any text, study, or research related to the human clinical test or study used to support their advertising claims.

In addition, the defendants are banned from making a host of various misrepresentations related to the advertising and marketing of their products and in emails it sends that are covered by the CAN-SPAM Act (such as sending messages that fail to identify the sender or e-mails that lack a proper opt-out option for recipients). The consent order also includes specific requirements on how the defendants must police the actions of their affiliate marketers.

As for the money, the company and five individual defendants must turn over assets that, when combined with money already secured by a court-appointed receiver, will total almost $10 million. The remainder of the $43.4 million judgment—reflecting the amount of consumer harm caused by the defendants, the FTC said—was suspended.

To read the complaint and stipulated order in FTC v. Sale Slash, click here.

Why it matters: As demonstrated by the enforcement action, affiliate arrangements won't insulate advertisers from liability with the FTC. The action also underscores the FTC's focus on weight loss claims and its efforts to eradicate the use of false endorsements and fake news websites.