Using Online Reviews – FTC Settlement Provides Helpful Guidance

Published On April 30, 2015 | By Jon Frankel | FTC & State AG, General

Online reviews of products, services and businesses have become integral in how consumers make e-commerce purchases. Many savvy consumers rely on reviews by other consumers or experts before they make a purchase, plan a trip, choose where to dine, or determine whether to do business with a particular seller in online marketplaces, like eBay and Etsy. Indeed, one of the great benefits of shopping online is the ability to read product reviews written by either experts or just fellow shoppers. Reviews become even more important for online shopping where consumers do not have the ability to touch, feel, or test products prior to purchase, as consumers would be able to in a brick-and-mortar store.

Not surprisingly, more and more companies focus on maintaining a strong reputation through customer reviews and use reviews not only to tout their products or services but also to differentiate themselves from competitors. A recent FTC settlement provides important guidance to companies that solicit online reviews with cash, discounts, or other incentives.

The Federal Trade Commission brought a complaint against AmeriFreight, an automobile shipment broker that arranges for freight carriers to ship its customers’ cars. The FTC alleged that AmeriFreight represented that satisfied customers had posted online reviews about the company’s services. For instance, AmeriFreight’s website claimed that the company had “more highly ranked ratings and reviews than any other company in the automobile transport business.” AmeriFreight failed, however, to disclose that it gave consumers $50 dollar discounts off of the company’s services to provide favorable reviews and also offered consumers the chance to win a $100 dollar “Best Monthly Review Award” for the review with the most creative subject title and “informative content.” Further, according to the FTC, AmeriFreight deceptively represented that its favorable reviews were based on the unbiased reviews of their customers and that AmeriFreight violated Section 5 of the Federal Trade Commission Act by failing to disclose that incentives were tied to its customers’ reviews.

In a final order settling the FTC’s complaint, AmeriFreight is prohibited from misrepresenting that its products or service are highly rated or top-ranked based on unbiased consumer reviews, or that customer reviews are unbiased. AmeriFreight also is required to clearly and prominently disclose any material connection between the company and its endorsers, and for a period of 5 years to make available to the FTC all advertisements and promotional materials related to reviews of its services.

Takeaways

If companies have paid their customers to write online reviews, or offer discounts or other incentives, they must clearly and prominently disclose those connections. If they fail to do so, they could be subject to claims by the Federal Trade Commission and/or State Attorneys General, that they are deceiving their customers. Also, all companies should ensure compliance with the FTC’s Endorsements and Testimonials Guide. This guide, among other things, requires that when there is a connection between an endorser and the seller of an advertised product or service that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed. In general consumers should read reviews with a critical eye because, as the FTC notes, you can’t always trust what you read online.

In addition, this recent settlement may signal that the FTC is growing more aggressive in its enforcement of “testimonial” cases. This settlement comes on the heels of several other cases in which the FTC admonished companies for similar practices, but issued staff closing letters – for instance, in investigations into practices involving Hyundai, AnnTaylor and Nordstrom.

Photo by AJC from Flickr

About The Author

Jon Frankel has been advising clients on privacy, data security, e-commerce, intellectual property and litigation matters for more than 15 years. Jon provides practical advice to mitigate privacy and data security risks and helps clients navigate a myriad of complex data collection, use and sharing cases. Jon advises on health and children’s privacy; email, SMS and telemarketing; mobile applications; user generated content; contests, promotions, and sweepstakes, online gaming; and requests from law enforcement. Prior to joining ZwillGen, Jon was a partner in the Washington, D.C. office of Bingham McCutchen, LLP, where he co-chaired the Privacy and Security Group.

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