“Cut down a bit of your belly everyday by following this 1 weird old tip,” it reads. The “weird old tip” is revealed only after you abandon what you were reading and click on the ad.
For months, versions of the ad have been just about everywhere. They have run as pop-ups and display ads on some of the most popular Web sites around, including Facebook, Weather.com and About.com. They have also shown up on the home pages of news organizations such as the Los Angeles Times, MSNBC, The Washington Post and the Guardian newspaper in Britain.
The ad is so broadly distributed that it’s likely you’ve seen it not just once or twice but hundreds of times. The accumulated number of “impressions” — the number of times it has flashed by someone on the Internet over the past 18 months— runs into “the tens of billions,” estimates Steve Wernikoff, a government lawyer who has tracked it. “It’s just a tremendous amount.”
The innocent-seeming “1 Tip” ad is actually the tip of something much larger: a vast array of diet and weight-loss companies hawking everything from pills made from African mangoes to potions made from exotic acai berries. Federal officials have alleged that the companies behind the ads make inflated claims about their products and use deceptive means to market them.
The take so far: at least $1 billion and counting.
The “1 Tip” ads are the work of armies of “affiliates,” independent promoters who place them on behalf of small diet-product sellers with names such as HCG Ultra Lean Plus. The promoters profit each time someone clicks through to the product seller’s site and orders a free sample. The sample, however, isn’t always so free.
A 3-step scheme, FTC says
In lawsuits filed over the past year, the Federal Trade Commission has alleged that the ads are the leading edge of what amounts to a three-step scheme that has conned millions of people.
Much like a barker outside a carnival tent, “1 Tip” is merely a come-on, a lure to start the process. People who click on the ad are directed to a second site, which looks like a diet or health-news page. The sites go by names such as Consumeronlinetips.com and Weeklyhealthnews.com.
The sites typically feature an article in which an attractive young TV reporter “investigates” the benefits of a diet involving a series of products. Sometimes the products are made from mangoes or acai berries, a fruit grown in South and Central America. In other cases, the products come from human chorionic gonadotropin (hCG), a hormone produced by developing embryos and the pituitary gland.
“We here at Channel 7 are a little skeptical” of the hCG diet, reads the copy at Consumeronlinetips.com. “So we decided to put these products to the test.”
In each case, the sites carry favorable blurbs about the diet from well-known news organizations such as ABC, CNN and USA Today, along with brief, laudatory “reader comments.”
“I saw this report on TV the other day and was amazed at the results,” reads one. “I am getting married next month so the timing couldn’t have been better!!”
The pages have links that lead to a third site, where consumers can use a credit or debit card to order “trial” samples of the featured products.
Almost everything about these would-be news sites is bogus, the federal government contends. It has said that the offer of free or low-cost samples is a scheme to capture consumers’ credit card numbers, leading to thousands of complaints about unauthorized charges.
In an action aimed at Internet promoters of acai berry products in April, the FTC filed 10 lawsuits against some of the companies and individuals behind the ads. The agency’s allegations are nearly identical in each case: that sites such as Consumeronlinetips.com aren’t legitimate news organizations, that the defendants can’t substantiate the claims of dramatic weight loss (“25 pounds in only four weeks!”) and that the sites’ operators don’t disclose that they have financial ties to the diet-product merchants they’re linking to.
Although the promoters are apparently unconnected to one another, their sites are remarkably similar. All use what the FTC contends are fake articles. Several used the photo of the reporter supposedly investigating the diet. The woman identified as “reporter Julia Miller” on some of the sites is actually a French newscaster, Melissa Theuriau, who has said she was unaware that her image was being used this way. The endorsements from the real news organizations, such as CNN or ABC, are a sham, too, the government says.
The promoters use the same formula, and sometimes the exact same ad, “because it’s cheap,” said David O’Toole, an FTC lawyer who has been involved in the agency’s crackdown. “They don’t have to create a new ad from whole cloth. It’s easy to use it again and again because it keeps costs down. And it works.”
The Web site operators are known as affiliate marketers because they’re allied with, but independent of, the merchants whose products they’re promoting. The relationship works like this: The affiliates seed the Internet with the “1 Tip” ad and put up the testimonial Web sites with their own funds. When a would-be customer clicks the links on the affiliate site and orders products from the merchant’s site, the affiliate receives a cut of the purchase. The payment varies from company to company, but FTC investigators found evidence that it can be as much as $30 per order.
One of the companies the government sued, IMM Interactive of Long Island, spent more than $1.3 million last year to place “flat belly” ads, which generated more than a billion impressions, according to the lawsuit. Thanks to all those impressions, more than a million people took the plunge and clicked on the ad, the agency said.
IMM denied almost all of the FTC’s allegations in a court filing June 13. But it conceded that “defendant does not have sufficient information to admit or deny whether the individuals identified on some of the web pages who claim to have tested the products on themselves and experienced positive results actually tested the products and experienced such results.”
The company hedged even further in the fine print of one of its newslike Web sites, which is cited in the FTC complaint, saying, “This website, and any page on the website, is based loosely off a true story, but has been modified in multiple ways including, but not limited to: the story, the photos, and the comments. Thus, this page, and any page on this website, are not be taken literally or as a non-fiction story.”
IMM’s attorney, Mark L. Rosenberg, declined to comment.
Another defendant, Ricardo Jose Labra of Grand Rapids, Mich., began as an affiliate marketer about May 2009, when he started registering domain names and paying for them with his personal credit card, the government says.
Labra eventually spent $778,000 over 18 months for ads, attracting more than 700,000 consumers to sites promoting acai berry products. Labra “has almost certainly received multiple times that amount in ill-gotten commissions from this scheme,” the government’s complaint says.
Tom Cohn, a former FTC attorney who represents Labra and another affiliate sued by the agency, also declined to comment.
The FTC says that none of the Web sites can back up their weight-loss claims. But the real heart of the scam, it says, is the offer of a“free” sample. In fact, the Web sites disclose only in fine print that a consumer who hands over a credit card number is signing up for much more.
Someone who orders a sample offered by one hCG marketer, for example, is technically agreeing to pay an additional $79.99 for another shipment of the product two weeks later, and another $79.99 six weeks after that, according to the disclaimer. The charges and the product keep coming until the buyer calls a toll-free number to cancel.
But that’s easier said than done, investigators found. Canceling often involved time-consuming phone calls and frequent hang-ups that left customers frustrated and angry, the agency said. In the meantime, the charges continued to roll on.
A replicated formula
Collectively, the 10 cases brought by the FTC help explain the ubiquity of the “1 Tip” ad. All told, the affiliate companies sued by the FTC spent more than $10 million buying Internet ads to push acai berry diet products, the government estimates.
But that’s just a fraction of the “1 Tip” phenomenon. The ads haven’t gone away, despite the government’s “sweep” of acai berry promoters this spring. Dozens of other affiliate marketers still use the same formula — the teaser ad, the newslike Web sites, the free-sample offer — to tout hCG and African mango diets. To date, the FTC hasn’t taken action against them.
“There are certainly many more of these out there,” acknowledges the FTC’s Wernikoff. “It looks like [other marketers] didn’t get the memo.”
FTC officials don’t know how much money has been spent on products advertised in this fashion, but there are indications that it could easily exceed $1 billion.
In May, the agency filed suit against a Canadian Web site operator, Jesse Willms, who used the same formula allegedly to generate about $460 million from people in five countries, including the United States.
Willms’s Web sites allegedly charged people for a variety of products — acai berry supplements, teeth whiteners, work-at-home business opportunities — that they never ordered, according to the suit, which seeks repayment. Willms has denied the allegations: “Our companies give consumers the opportunity to buy a variety of products and services at significant savings,” he wrote on one of his Web sites.
Last year, the FTC filed a separate lawsuit against Central Coast Nutraceuticals, a Phoenix-based company that allegedly used bogus celebrity endorsements to sell more than $100 million worth of acai berry diet pills and “colon cleansers.” In that case, Oprah Winfrey and Rachael Ray filed statements with the court denying they’d ever endorsed the products, despite representations to the contrary on Central’s Web sites. The government won a temporary restraining order that froze Central’s assets and effectively put it out of business last summer; the litigation is ongoing.
In all of the cases, news sites such as MSNBC and washingtonpost.com appear to be passive hosts of the “flat belly” ads. The ads are “served” to the news sites and thousands of others by ad networks, including those operated by Google and Pulse360, based in New York. The “host” sites, in turn, receive a commission for being part of the network or when their visitors click on one of the network-fed ads.
Google feeds hundreds of ads to host sites every day and says it can’t be sure it has eliminated all that might be suspect. “We are constantly improving and investing in our system to detect bad ads, but occasionally one will bypass our systems,” said Andrea Faville, a spokeswoman for the company. “We take action as soon as we discover ads that violate our policies to remove them and prevent them from being shown in the future.”
Pulse360’s representatives did not respond to requests for comment.
A spokeswoman for The Post, which has run the ad on its Web site after it was distributed by the ad network, said the newspaper is “reviewing the situation.”
As a practical matter, the FTC’s Wernikoff said that some of “1 Tip’s” drawing power can be attributed to its appearance on Web sites belonging to real news organizations. Seeing it on the Web site of a credible news site gives consumers the false confidence that they’re not being tricked, he said.
Promoters “have created the impression of objectivity,” he said. “Consumers start off believing they’re getting objective news reports about these products when, in fact, it’s all fake. People really were confused.”