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September 8, 2022

Does Every Product Really Deserve 5 Stars?! Recent Developments on Fake Online Reviews

Advisory

What’s going on?

Fake online reviews are big, BAD business! In 2021, the World Economic Forum noted that an extra star on a restaurant’s Yelp rating can increase revenue 5-9% and estimated that the direct influence of fake online reviews on global online spending is $152 billion! These big numbers obviously drive bad actors to seek to increase their positive online reviews. Fortunately, regulators and tech companies continue to take action to address the issues.

Last week, the Federal Trade Commission, along with six States (California, Colorado, Florida, Illinois, Massachusetts, and New York) filed suit against Roomster, a room rental website that bills itself as being “[t]rusted by the world’s best,” alleging that the site posted and solicited fake reviews and apartment listings. These listings, the complaint alleges, took “tens of millions of dollars from consumers who can least afford to lose their money and who need reliable housing the most. Consumers injured by Defendants’ conduct are typically students, lower-income individuals, and those desperate for safe, low-cost housing in markets where such housing is extremely hard to find.” AppWinn, a third party company used to provide fake reviews for Roomster apartments, settled related claims, paying $100,000 in total to the six states and agreeing to notify Google and Apple that Roomster reviews in the App Store and Play Store were paid for.

The Roomster suit comes on the heels of similar complaints, including:

  • In early August 2022, Amazon filed suit against over 11,000 Facebook groups that trade in fake product reviews. That claim, in which Amazon alleges that administrators of the Facebook groups are “actively deceiving Amazon’s customers and tarnishing Amazon’s brand for their own profit as well as for the profit of dishonest sellers who purchase their services,” is the latest in a series of suits by Amazon seeking to address fake reviews, dating back to April 2015.
  • In March 2022, the FTC fined Fashion Nova $4.2 million over allegations that the site blocked negative reviews. In its final order, the FTC expressly prohibited the site from suppressing customer reviews of its products.

In May 2022, the FTC released a notice announcing that it is “considering changes to tighten its guidelines for advertisers against posting fake positive reviews or manipulating reviews by suppressing bad ones.” The notice, and others like it, have sought public comment on proposed updates to the FTC Endorsement Guides which include clarification “that fake reviews are covered under the guides and added a new principle that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers should not distort or misrepresent what consumers think of their products.”

What’s the takeaway?

In short, companies and advertisers looking to promote their products and services via reviews should ensure that they are complying with common sense and FTC guidance, both in their own actions and in hiring third-party promotion partners. Paying for reviews is simply not worth the financial and reputational risk that comes with these suits and fines.

Additional resources are available here, here and here.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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