Ruling Affirmed By 1st Cir. More to Come?

By Jonathan R. Tung, Esq. on May 23, 2016 | Last updated on March 21, 2019

There's some grumbling out there about what a jerk Napster's John Fanning was to create, a now-defunct website that asked users to rate whether a stranger was a jerk or not. But those same persons may be cheering a little inside knowing that Fanning lost a bid to undo an FTC suit against him in the First Circuit, on the grounds that he was personally liable for materially misrepresentations made on the site.

It's still a dark age we live in, though -- persons can still "Yelp" other persons. Are similar lawsuits ahead? and Its Business Model

Readers may remember in its inception years of 2009 when the "reputation management" website gave users a means to find the latest dirt in a world "filled with jerks." Similar to "hot or not" websites, asked users to vote on whether or not someone was a jerk, or not a jerk.

The brilliance of the model was in how it extracted monies from persons. The only way for someone to dispute votes against him for being a "jerk" on the site was to create a profile on it. And to do that would cost said jerk $30. What could go wrong?

Issues of Misrepresentation

At issue in the case was whether or not the site had materially misrepresented the source of its material on the site. To the casual observer, the website's profile pages appeared user-generated. At least, this was the view of the FTC and later the circuit court. In reality, the pages were simply sourced from Facebook, but this was not made clear by As a result, the First Circuit's tone was disfavorable towards given the site's "emphasis on user generated content," the $30 membership fee which largely yielded little value to paying members, and the overall distasteful nature of the web-space.

It's Gonna Get Worse Before It Gets Better

Shahin Rothermel, an associate attorney at Venable, intimated to Corporate Counsel that had only itself to blame for its woes. It was a "pretty easy target for the FTC," she said.

But it also shines a light on what web-owners must do in order to skirt clear of FTC rules violations. Disclaimers must be seen from a "net impression" point of view -- not from a "buried in page" viewpoint. Disclosures in yellow text on a yellow background will likely run afoul the spirit of FTC rules, for example.

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