Consumer Reviews: How to Avoid Legal, PR Headaches
According to a 2015 Nielsen study, two-thirds of consumers trust consumer opinions over company advertising and rely on peer review sites for insights and advice. However, these sites can cause huge headaches for well-intentioned retailers that incentivize consumers to post glowing reviews or find themselves on the wrong side of a revenge or competitor-sponsored post. When not conducted correctly, these efforts can harm brands and further consumer mistrust.
The good news is that regulators are actively monitoring incentivized bloggers who fail to disclose their connections to advertisers and large e-tailers are working hard to ensure that reviews on their sites are authentic and unbiased. Retailers need to take note of recent developments in this murky landscape to avoid unnecessary legal and PR headaches.
Background on Consumer Review Sites
One of the first review sites, Epinions.com, was established in 1999. Soon after, many retailers started incorporating reviews and ratings into online marketing. With just a few minutes and the press of a button consumers could share their experiences – good or bad – with infinite like-minded consumers. A thoughtful, sincere, and unsolicited review singing the praises of a particular product is every marketer’s dream. But while some companies simply waited with fingers crossed, others sent free samples or discounts to bloggers, social influencers, and regular consumers hoping for a positive review will end up online. This opened a proverbial Pandora’s box.
Enter the Federal Trade Commission, the nation’s primary consumer protection agency, which has warned companies that positive online reviews can be considered paid endorsements in certain situations and thus require appropriate disclosures. The agency’s Endorsement and Testimonial Guides attempt to clarify the line between the “regular unbiased” consumer and the compensated consumer. A foodie blogger who finds a new kale product at her local greenmarket and writes gushingly about it on her own would not be considered an endorser under the FTC Guides. But if she receives free products or is otherwise compensated by the seller for her review, she would be considered an endorser and required to disclose her connection to the seller in her blog.
Where Others Have Stumbled
Several FTC enforcement actions have made clear that online reviews that are fabricated or do not disclose connections between reviewers and sellers violate federal law as a deceptive trade practice. In 2010 the agency brought an enforcement action against a public relations agency hired by video game developers to promote products the developer’s products. The FTC alleged that the agency engaged in deceptive advertising by having employees pose as ordinary consumers posting reviews in the iTunes store without disclosing their relationship to (Read: getting paid by) the developers.
In July 2016, Warner Bros. Home Entertainment, Inc. settled FTC charges that it deceived consumers during a marketing campaign for the video game Middle Earth: Shadow of Mordor by failing to adequately disclose that it paid online “influencers.” This included the wildly popular PewDiePie and thousands of dollars to post positive gameplay videos on YouTube and social media that were viewed more than 5.5 million times.
The settlement agreements in both of these matters required the companies to remove any endorsements that misrepresented the authors as independent users or ordinary consumers and to implement a policy to ensure that future campaigns comply with the Guides. At a minimum, these steps include educating influencers regarding sponsorship disclosures, monitoring influencer activity, and, under certain circumstances, terminating or withholding payment from influencers or ad agencies for noncompliance.
Hired Guns
State regulators have also joined in, though from a different angle. The New York Attorney General’s office has targeted companies that specialize in online reputation management, which may include creating fake reviews.
In 2013, posing as the owner of a Brooklyn yogurt shop, representatives from the NYAG’s office called leading brand management companies to request assistance in combating negative online reviews. Some companies offered to write positive – though fake – reviews on Yelp.com, Google Local and Citysearch.com and 19 other companies settled with the NYAG as a result of this investigation. In February 2016, the NYAG settled with four other companies alleged to have posted fake reviews, resulting in tens of thousands of dollars in penalties.
Enter Amazon
Amazon.com has announced that it will aggressively monitor reviews posted to its site to weed out posts by dummy accounts or lacking appropriate disclosures. The giant e-tailer has filed multiple lawsuits against companies allegedly creating false product reviews and, in 2016, revised its community guidelines to prohibit users from “creating, modifying, or posting content in exchange for compensation (including free or discounted products) or on behalf of anyone else.” Site users are also limited to posting no more than five online reviews per week. Whether other retailers follow Amazon’s lead remains to be seen.
Fighting Fake Reviews
As for companies that believe that negative online reviews about them are fake, some level of success may be achieved (without huge financial cost) by following these tips:
• Reach out: Sometimes the easiest solution is the most obvious. Informally reaching out to a reviewer before threatening legal action may lead to a stress-free and inexpensive fix.
• Complain about a TOS violation: Many consumer review sites prohibit posting false reviews, as stated in the site’s terms of service. Complaining to the site’s host and pointing out the violation could resolve the issue.
• Work with law enforcement: Yelp cooperated with the NYAG during its latest investigation. If you believe that there is a fake review about your company on a third-party site, consider reporting the matter to law enforcement.
Fake reviews harm the reputation of an upstanding company, forcing consumers to view them with a wary eye. With increasing attention and scrutiny paid to consumer reviews, retailers need a well-thought-out reputation management and monitoring program to preserve the integrity of their brand, as well as the marketplace in general.
Marc Roth is a partner in the Media, Technology and Advertising division of Manatt, Phelps & Phillips, LLP, resident in the firm’s New York City office. La Toya Sutton is an associate in the same group in the firm’s Washington, D.C., office.