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Fake and deceptive reviews and endorsements – prevalent in
online shopping – are a target of the FTC’s proposed
rulemaking. The FTC has authority to promulgate trade regulation
rules that define with specificity the acts or practices that are
unfair or deceptive in or affecting commerce under 15 U.S.C.
45(a)(1).
The FTC states that it is concerned that some platforms may have
mixed incentives to deal effectively with the problematic reviews
and, despite some platforms purporting to take enforcement of
problematic reviews seriously, fake and deceptive reviews continue
to flourish on those very platforms. The sheer number of people
engaged in fraudulent or deceptive reviews and endorsements makes
them even more difficult to combat, especially given such content
is often created by individuals or small companies, some of whom
are located abroad.
The FTC is considering civil penalty remedies as a potent
deterrent. The FTC is considering initiating a Magnuson-Moss
rulemaking to address certain types of clear Section 5 violations
involving reviews and endorsements. The FTC also noted that it
reviewed many comments to the Use of Endorsements and Testimonials
in Advertising, 16 CFR part 255.
The FTC has a long history of challenging reviews and
endorsements, including, for example, that the FTC has
challenged:
- Fabricated consumer reviews. See,
e.g., Complaint 9-17, FTC Roomster Corp.,
No. 1:22-CV-07389 (S.D.N.Y. Aug. 30, 2022) (purchase and sale of
fake app store and other reviews for room and roommate finder app
and platform); Complaint at 2-4, Sunday Riley Modern Skincare,
LLC, No. C-4729 (Nov. 6, 2020) (company personnel created fake
accounts to write fake reviews of company’s products on
third-party retailer’s website); Complaint at 12-13, 15-16,
Shop Tutors, Inc., No. C-4719 (Feb. 3, 2020) (reviews of
LendEDU were fabricated by its employees, other associates, or
their friends and published on a third-party website); Complaint at
20, FTC v. Cure Encapsulations, Inc., No.
1:19-cv-00982 (E.D.N.Y. Feb. 26, 2019) (Amazon reviews of
defendants’ product were fabricated by one or more third
parties whom defendants had paid to generate reviews). It has
similarly challenged fictitious endorsements. See, e.g.,
Complaint at 14, 19, FTC v. A.S. Resch., LLC
(Synovia), No. 1:19-cv-3423 (D. Colo. Dec 5, 2019) (fake
consumer testimonials); Complaint at 20-22, 31, Global Cmty.
Innovations LLC, No. 5:19-CV-00788 (N.D. Ohio Apr. 10, 2019)
(fake consumer testimonials); Complaint at 27-28, 43, Jason
Cardiff (Redwood Sci. Techs., Inc.), No. ED 18-cv-02104 SJO
(C.D. Cal. Oct. 24, 2018) (testimonials in infomercial were paid
actors who had not used defendants’ product); Complaint at
12-3, 20, FTC v. Mktg. Architects, Inc., No.
2:18-cv-00050-NT (D. Me. Feb. 5, 2018) (fake testimonials);
Complaint at 14, 21, FTC v. Health Rsch. Labs.,
LLC, No. 2:17-cv-00467-JDL (D. Me. Nov. 30, 2017) (fake
consumer testimonials and expert endorsements); Complaint at 13,
18, 28, XXL Impressions LLC, No. 1:17-cv-00067-NT (D. Me.
Feb. 22, 2017) (defendants do not know whether consumer endorsers
of their products who appeared in their ads actually exist);
Complaint at 5, 7, 12-13, FTC v. Anthony Dill,
No. 2:16-cv-00023-GZS (D. Me. Jan. 19, 2016) (fake testimonials);
Amended Complaint at 38-39, 43-44, FTC v. Lisa
Levey, No. 03-4670 GAF (C.D. Cal. Mar. 8, 2004) (fictitious
expert endorsements). It has also challenged false claims that
specific celebrities endorsed specific products, services, or
businesses. See, e.g., Complaint at 15, 19-20, 30-31,
Global Cmty. Innovations LLC, No. 5:19-CV-00788 (N.D. Ohio
Apr. 10, 2019); Complaint at 5, 18-20, 22-23, 36, FTC v.
Tarr, Inc., No. 3:17-cv-02024-LAB-KSC (S.D. Cal. Oct. 3,
2017); Complaint at 13-15, 18, Sales Slash, LLC, No
CV15-03107 (C.D. Cal. Apr. 27, 2015); Complaint at 2, 4-5, Norm
Thompson Outfitters, Inc., No. C-4495 (Sept. 29, 2014);
The Raymond Lee Org., Inc., 92 F.T.C. 489 (1978) (use of
the names, photographs and words of public officials, including
members of the Congress, misled consumers that the officials
recommended or endorsed the business). It has similarly challenged
false claims of endorsements by specific entities. See,
e.g., Complaint at 15-16, 18, FTC v. Mercola.com,
LLC, No. 1:16-cv-04282 (N.D. Ill. Apr. 13, 2016)
(misrepresentation the FDA endorsed the use of indoor tanning
systems as safe); Mytinger & Casselberry, Inc., 57
F.T.C. 717, 743-46 (1960) (misrepresentation that a consent decree
restraining respondents from making certain claims was an
endorsement by the U.S. government of its product); Trade Union
Courier Publ’g Corp., 51 F.T.C. 1275, 1300-03 (1955)
(misrepresentation that newspaper was endorsed by the American
Federation of Labor when it was only endorsed by some unions within
the AFL); Ar-Ex Cosms., Inc., 48 F.T.C. 800, 806 (1952)
(misrepresentation that lipstick had been recommended by
Consumers’ Research); A. P. W. Paper Co., Inc., 38
F.T.C. 1, 15-17 (1944) (misrepresentation that product was endorsed
by the American Red Cross); Wilbert W. Haase Co., Inc., 33
F.T.C. 662, 681-83 (1941) (misrepresentation that insurance company
had endorsed burial vault business and its vaults). Furthermore,
the Commission has challenged advertisements that misrepresent
endorsers’ experiences. See, e.g., Complaint at 14,
18, FTC v. A.S. Resch., LLC (Synovia), No.
1:19-cv-3423 (testimonialists had used a prior product formulation
that contained substantially different ingredients); Complaint at
22, 25, NextGen Nutritionals, LLC, No.
8:17-cv-2807-T-36AEP (M.D. Fla. Jan. 9, 2018) (testimonials in ads
misrepresented the actual experiences of customers); Complaint at
22-24, 27, FTC v. Russel T. Dalbey, No.
1:11-cv-01396-CMA—KLM (D. Colo. May 26, 2011) (testimonials
misrepresented earnings from brokering promissory notes using
defendants’ system); Computer Bus. Servs., Inc., 123
F.T.C. 75, 78-79 (1997) (testimonials by purchasers of home-based
business ventures did not reflect their actual experiences); R.
J. Reynolds Tobacco Co., 46 F.T.C. 706, 731-32 (1950)
(endorsements communicated endorsers exclusively smoked Camel
cigarettes whereas they did not smoke cigarettes, did not smoke
Camels exclusively, or could not tell the difference between Camels
and other cigarettes). - Giving an incentive for a review or endorsement
and requiring that it be positive. See, e.g.,
Complaint at 14, 19-20, FTC A.S. Resch., LLC
(Synovia), No. 1:19-cv-3423 (offered consumer endorsers with
free product in exchange for “especially positive and
inspiring” reviews); Complaint at 5-6, 8, Urthbox,
Inc., No. C-4676 (Apr. 3, 2019) (deceptively provided
compensation for the posting of positive reviews on the BBB’s
website and other third-party websites); Complaint at 2-3,
AmeriFreight, Inc., No. C-4518 (Feb. 27, 2015) (every
month past customers were encouraged to submit reviews of
respondent’s services in order to be eligible for a $100
“Best Monthly Review Award”, given to “the review
with the most captivating subject line and best content” and
that they should “be creative and try to make your review
stand out for viewers to read!”). - Sellers who control websites claiming to provide
independent opinions of products. See, e.g.,
Complaint at 2, 8-9, Son Le., C-4619 (May 31, 2020)
(respondents operated purportedly independent websites that
reviewed their own trampolines); Complaint at 19-20, 28,
FTC v. Roca Labs, Inc., No. 8:15-cv-02231-MSS-TBM
(M.D. Fla. Sept. 24, 2015) (defendants operated Gastricbypass.me
website, a purported independent, objective resource, which
endorsed defendants’ products); Complaint at 21-25, 28,
FTC v. NourishLife, LLC, No. 1:15-cv-00093 (N.D.
Ill. Jan. 7, 2015) (defendants operated Apraxia Research website, a
purported independent, objective resource, which endorsed a type of
supplement sold only by defendants). It has also challenged sellers
who control purportedly independent organizations or entities that
reviewed or approved the sellers’ products or services.
See, e.g., Complaint at 3-5, Bollman Hat Co., No.
C-4643 (Jan. 23, 2018) (respondents created seal misrepresenting
that independent organization endorsed their products as made in
the United States); Complaint at 18-20, 26, NextGen
Nutritionals, LLC, No. 8:17-cv-2807-T-36AEP (M.D. Fla. Jan. 9,
2018) (misrepresentation that sites displaying the Certified
Ethical Site Seal were verified by an independent, third-party
program); Complaint at 2-4, Moonlight Slumber, LLC, No.
C-4634 (Sept. 28, 2017) (respondent misrepresented that baby
mattresses had been certified by Green Safety Shield, when in fact
the shield was its own designation); Complaint at 4-6, Benjamin
Moore & Co., Inc., No. C-4646 (July 11, 2017) (respondent
used seal of its own creation to misrepresent that paints had been
endorsed or certified by independent third party); Complaint at
2-4, ICP Constr. Inc., No. 4648 (July 11, 2017) (same);
Complaint at 2-3, Ecobaby Organics, Inc., No. C-4416 (July
25, 2013) (manufacturer misrepresented seal was awarded by industry
association when in fact it created and controlled that
association); Complaint at 2-4, Nonprofit Mgmt. LLC, No.
C-4315 (Jan. 11, 2011) (respondents misrepresented their seal
program was endorsed by two associations when in fact a respondent
owned and operated them); Complaint at 34, 37, FTC v.
A. Glenn Braswell, No. 2:03-cv-03700-DT-PJW (C.D. Cal. May
27, 2003) (defendants established Council on Natural Nutrition and
then misrepresented it was an independent organization of experts
who had endorsed defendants’ products). - Suppression of customer reviews based upon their
negativity. See Complaint at 1-2, Fashion
Nova LLC, C-4759 (Mar. 18, 2022). Commission staff has also
addressed the issue in a closing letter. See Letter from
Serena Viswanathan, Acting Associate Director, Division of
Advertising Practices to Amy R. Mudge and Randall M. Shaheen,
Counsel for Yotpo, Ltd. (Nov. 17, 2020), https://www.ftc.gov/system/files/documents/closing_letters/nid/202_3039_yotpo_closing_letter.pdf.
The FTC obtained comments to the proposed rulemaking so expect
new rulemaking and guidance in 2023.
Disclaimer: This Alert has been
prepared and published for informational purposes only and is not
offered, nor should be construed, as legal advice. For more
information, please see the firm’s
full disclaimer.
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