It seems it is time for a refresher course on the FTC’s 2009 Endorsement & Testimonial Guidelines. Even with the government shut down and the FTC website closed and shuttered as of the date of this writing, states can still prosecute companies for posting fake online reviews. At least two states have taken actions against companies for astroturfing and violating essential principles of the FTC’s guidelines, namely that endorsements and testimonials must be truthful, and any material connection between the endorser and the brand needs to be disclosed. To read more about the FTC’s guidelines and its enforcement practices, click here.
On September 23, 2013, the New York Attorney General announced that it had levied more than $350,000 in fines against companies for using fake online reviews. In “Operation Clean Turf,” a year-long undercover investigation of the reputation management industry, the New York regulator accused 19 companies of false advertising and engaging in illegal and deceptive business practices because of their use of fake reviews.
In this undercover investigation, representatives of the New York Attorney General posed as the owner of a yogurt shop. They called leading SEO companies for help fighting negative reviews on consumer review websites such as Yelp and Citysearch.com. The investigation revealed that the SEO companies’ reputation management services relied on bogus online profiles and advanced IP spoofing techniques to hide their true identities. Their own employees and freelance writers from the Philippines, Bangladesh, and Eastern Europe wrote and posted fake reviews. In some instances, they even publicized the fraud, posting on Craig’s List for people to “post multiple positive reviews on major review [sic] sites.” A spa advertised: “I need someone who is a Yelp expert to post positive reviews for a spa….” A nightclub advertised that it was looking for writers to post reviews “without getting flagged.”
Faced with flagrant violations of the law, the New York AG doled out penalties to nineteen companies, ranging individually from $2500 to just under $100,000. In its announcement, the AG’s office explained: “The practice of preparing or disseminating a false or deceptive review that a reasonable consumer would believe to be a neutral, third-party review is a form of false advertising known as ‘astroturfing.’ Astroturfing is false and deceptive, and it violates [New York Law].” The Attorney General asserted how consumers rely on these on-line reviews in making purchasing decisions, warning that prosecutors will enforce laws against deceitful practices.
The New York settlement comes on the heels of Florida pursuing the Lifestyle Lift company for failure to comply with the FTC endorsement testimonial guidelines. The company agreed that in the future it would disclose if the models in its advertisements had received compensation, and what if any facial rejuvenation services they had received. In addition the company agreed to comply with the FTC guidelines concerning before-and-after photographs and disclosures about what results are typical. Finally, Lifestyle Lift agreed to discontinue using the term revolutionary to describe its cosmetic procedures. They also agreed to give refunds to consumers who have purchased the services over a four-year period.
The lesson here is that even with the federal government in shut down, state regulators are watching. Astroturfing may result in legal action with financial penalties by federal or state authorities.
- Never use fake online reviews.
- Disclose all material connections between your influencers and the brand.
- Understand that offering product or service or sweepstakes entry in exchange for a tweet is a material connection under the FTC’s standards.
- Review the laws of the state in which you operate. Chances are, it has false advertising statutes that empower state regulators to enforce the FTC’s standards.
- Ensure that your employees and agencies know you will not tolerate astroturfing. If you do not have policies in place, now is the time to create them. If you have policies, start monitoring to ensure their enforcement.
© Kyle-Beth Hilfer, P.C. 2013
DISCLOSURE: This article does not constitute legal advice. If you have legal questions about your influencer marketing or reputation management programs, please contact this post’s author or another attorney.