August 26, 2010
FTC Dings PR Firm for Fake Reviews -- In re Reverb Communications
[Post by Venkat]
In re Reverb Communications, FTC No. 092-3199 (Aug. 26, 2010) (Settlement)
Professor Goldman has posted a bunch about the FTC's endorsement guidelines. (See, e.g., "Do the FTC's New Endorsement/Testimonial Rules Violate 47 USC 230?;" "A Fuller Explanation of Why the FTC Endorsement/Testimonial Guidelines Violate 47 USC 230.") He posted in April about the FTC's look into the practices of Ann Taylor, which ended without any FTC action and looked like a warning shot: "FTC Drops Investigation of Advertiser Who Gave Gifts to Bloggers." Now the FTC actually conducted an investigation and settled with a PR firm which the FTC alleged wrote (and encouraged its employees to write) bogus reviews for the PR firm's clients in the iTunes store.
Here's the FTC's press release: "Public Relations Firm to Settle FTC Charges that It Advertised Clients' Gaming Apps Through Misleading Online Endorsements."
The FTC's Complaint [.pdf] outlines the key problems the FTC had with Reverb:
1. Reverb, its principals and employees posted reviews about Reverb's clients' gaming application and these reviews were posted "using account names that would give the readers . . . the impression they had been submitted by disinterested customers."
2. The reviews were not independent reviews. Reverb was hired "to promote the gaming applications and [was] often paid a percentage of the applications' sales," and there was no disclosure of this.
As a result of the investigation, Reverb settled with the FTC. The settlement requires Reverb to, among other things:
(1) cease misrepresenting "the status of any user or endorser;"
(2) not make future statements which are not accompanied by a "clear and prominent" disclosure of any "material connection" between the person writing the statement and any third party (including Reverb);
(3) take down any reviews that do not comply with the settlement;
(4) maintain records for five years of compliance with the settlement, including future reviews posted and any consumer complaints;
(5) deliver a copy of the settlement/consent decree to all employees and agents; and
(6) provide proof of compliance.
Ouch. Fake consumer reviews are not anything new. Previously, "Lifestyle Lift" settled with the New York AG's office over allegations of posting fake reviews, and was also involved in litigation with Realself.com where Realself brought counterclaims over Lifestyle Lift's alleged posting of fake reviews. (Here's Professor Goldman's post on the Lifestyle Lift settlement with the New York AG's office: "Lifestyle Lift Settles NYAG Claim Over Fake Consumer Reviews.") Reverb's conduct predated the FTC's recent issuance of its endorsement guidelines. (The guidelines aren't new law. They're interpretative rules that the agency put out to let businesses and the public know that it was taking a look at the online endorsement issue (and to provide guidance).)
Reverb's settlement with the FTC shouldn't come as a big surprise, but I guess is a good reminder that the FTC is out there policing the internet! I would think common sense would prevent a public relations firm from being paid to post faux reviews and posting them without disclosure, but this settlement illustrates that this isn't necessarily the case. The name of Reverb's client was not disclosed in this case, but a fake review brought to light seems harmful to the brand that is reviewed.
One thing that was surprising was the actual reviews posted by or on behalf of Reverb:
"Amazing new game"
"ONE of the BEST"
"Really Cool Game"
"GREAT, family-friendly board game app"
"One of the best apps just got better"
You would think if someone was paid to write reviews, they would write reviews that made it look like they actually tried the product or service in question? These reviews look awfully similar to comment spam.
It's also worth noting that I didn't see anything out there about the FTC going after the company who was reviewed - i.e., Reverb's client (which is what the FTC considered doing in Ann Talyor's case). This settlement should send a message to Reverb's clients and others in its shoes.
Additional coverage: NYT: "Charges Settled Over Fake Reviews on iTunes" (with a quote from Prof. Goldman: "fake reviews [are] 'a pervasive problem on the Internet'").
Related: "A Fake Amazon Reviewer Confesses" (WSJ, July 2009)
Posted by Venkat at August 26, 2010 03:10 PM | Content Regulation