The 2nd U.S. Circuit Court of Appeals became the third federal appellate court to ever deny immunity under Section 230 of the Communications Decency Act, 47 U.S.C. § 230, which provides broad protection for content supplied to websites by their users. Federal Trade Commission v. LeadClick Media, LLC, 838 F.3d 158 (2d Cir. Sept. 23, 2016). The court held that the operator of an affiliate marketing network, LeadClick Media LLC, participated in the development of deceptive online advertising to market its client's weight-loss products, materially contributing to the unlawfulness of that content, in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45 (a)(1) & (a)(2), and the Connecticut Unfair Trade Practices Act.

Factual Background

LeadClick, now out of business, operated an affiliate marketing network that connected its customers with third-party publishers ("affiliates") that advertised the customers' products, such as email marketing, banner ads, search-engine placement, and creating advertising websites.

LeadClick solicited LeanSpa, an online retailer that sold purported weight-loss products, to use its services. Under the parties' agreement, LeanSpa paid LeadClick every time a consumer clicked on an affiliate ad and signed up for LeanSpa's "free trial." LeadClick paid a percentage of this payment to its affiliate. In total, LeadClick billed LeanSpa $22 million.

Some LeadClick affiliates operated fake news websites, which looked like genuine news sites and falsely suggested that "reporters" had tested LeanSpa's products, offering comments by "customers" who had used products. LeadClick knew such sites were common in the industry and that some of its affiliates were using them, approved the use of these sites, and provided affiliates content to use on their fake news pages. Affiliates were required to submit proposed marketing pages to LeadClick for approval and were told by LeadClick that fake news sites are "totally fine." As part of its "media buying" business, LeadClick also purchased banner ad space on genuine news sites—ads that included links to fake news sites promoting LeanSpa.

The FTC alleged LeadClick violated Section 5 of the FTC Act, which prohibits "unfair or deceptive acts or practices in or affecting commerce." 15 U.S.C. § 45(a)(1). Such a claim requires three elements: "(1) a representation, omission, or practice, that (2) is likely to mislead consumers acting reasonably under the circumstances, and (3) the representation, omission, or practice is material." The district court granted the FTC summary judgment. The Court of Appeals affirmed.

Section 230 Ruling

Section 230 states that "[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." 47 U.S.C. § 230(c)(1). As the 2nd Circuit acknowledged, courts have generally afforded websites broad immunity under this provision, barring claims that seek to hold websites responsible for content provided by their users. Courts have held that Section 230 applies if (1) defendant is the provider or user of an interactive computer service; (2) the claim is based on information provided by another information content provider; and (3) the claim treats the defendant as the publisher or speaker of that information. The court raised issues as to all three elements.

First, in dicta, the court cast doubt on whether LeadClick is an "interactive service provider," defined as "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the internet and such systems operated or services offered by libraries or educational institutions." 47 U.S.C. § 230(f)(2). Although the definition was "indeed broad," the court held, it was "not convinced" LeadClick "provides computer access in the sense of an internet service provider, website exchange system, online message board, or search engine." It raised novel issues, the court held, as to whether the definition fit LeadClick because LeadClick's provision of services was "wholly unrelated to its potential liability." Ultimately, however, the court found it need not reach this element of immunity since it went on to find the other elements lacking.

Second, the court held LeadClick was an "information content provider" with respect to the content at issue because it recruited affiliates for the LeanSpa account that used fake news sites, paid them to advertise LeanSpa products, suggested edits to advertising claims and content, and bought advertising space from real news sites to help affiliates drive traffic to the fake sites. The 2nd Circuit joined other courts in endorsing the "material contribution" standard to evaluate Section 230 immunity, concluding that "LeadClick's role in managing the affiliate network far exceeded that of neutral assistance. Instead, it participated in the development of its affiliates' deceptive websites, materially contributing to [the content's] alleged unlawfulness."

Third, the court held the FTC did not seek to hold LeadClick liable as the "publisher or speaker" of another's content, but "for its own deceptive acts or practices—for directly participating in the deceptive scheme by providing edits to affiliate webpages, for purchasing media space on real news sites with the intent to resell that space to its affiliates using fake news sites, and because it had the authority to control those affiliates and allowed them to publish deceptive statements."

Ambika Kumar Doran is partner and co-chair of DWT's media practice group and based in Seattle. James Rosenfeld is partner and co-chair of DWT's media practice group, based in New York.