What the Cyberheat Settlement Means to You

Lost in the recent coverage of the $400,000-pluse settlement between online pornographer Cyber heat and the Federal Trade Commission were the ramifications for everyone else.

But as Thomas Hughes, a marketing and advertising lawyer with Hunton & Williams in Washington noted on his blog, they’re serious.

Last year, the FTC argued in an Arizona court that even though Cyberheat didn’t intend for affiliates to violate the Can Spam Act, didn’t know they violated it and didn’t attempt to avoid knowledge of their spamming, the company was still liable for their behavior.

The court ruled against the FTC, handing it what looked to be a defeat.

However, Cyberheat and the FTC settled, it was announced last week, with Cyberheat agreeing to some unusually tight restrictions on its affiliate program.

Besides agreeing to pay the relatively small amount of $413,000, Cyberheat also agreed to:

*Contractually require its affiliates to identify any subaffiliates they intend to use.

*Provide each affiliate a copy of the FTC’s order.

*Get a written agreement from each affiliate to comply with the order and the Can Spam Act.

*Contractually require each affiliate that intends to use e-mail marketing to provide Cyberheat the e-mail address from which the campaign will be sent, the subject line, the dates the e-mail will be sent, the e-mail addresses to which the e-mail will be sent, and a certification regarding how the addresses were gathered, all at least seven days before the campaign.

*Review each affiliate’s e-mail campaign for compliance with the Can Spam Act at least three days before the campaign and certify in writing it has done so.

*Require each consumer who signs up for Cyberheat’s services to indicate how they heard of the company. If they heard of it through e-mail, Cyberheat has agreed to monitor the affiliate that sent the e-mail for compliance with Can Spam.

Besides being highly restrictive to Cyberheat’s affiliate program, this settlement also places more responsibility on marketers overall to monitor their affiliates for spamming, according to Hughes.

“As I have said before, the Commission is increasingly skeptical of the ‘I did not know about it’ defense,” Hughes wrote on his blog at ReasonableBasis.com. “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.”