Lifestyle Lift Settles NYAG Claim Over Fake Consumer Reviews

By Eric Goldman

Lifestyle Lift has settled a claim from the New York Attorney General’s office over its employees posting fake consumer reviews to the web. According to the NYAG press release, Lifestyle Lift will stop posting anonymous positive product reviews and pay $300k plus costs.

This is not the first time I’ve blogged about Lifestyle Lift. In early 2008, I blogged about a cross-suit between Lifestyle Lift and my client, which allows consumers to share their perspectives about cosmetic treatments. Lifestyle Lift was getting hammered on RealSelf, so it sued RealSelf for trademark infringement for allowing consumers to discuss the company. Not only was this lawsuit a bald attempt to use trademark law to stifle unwanted critical commentary about the company, but RealSelf hit back with a counterclaim that Lifestyle Lift was illegally posting fake reviews on RealSelf. The parties ultimately settled, which ended RealSelf’s efforts to demonstrate Lifestyle Lift’s bad behavior.

Fortunately, the NYAG saw RealSelf’s concerns to a conclusion, and I’m glad the NYAG did so. Fake consumer reviews are a real issue on the Internet. They generally come in three flavors: (1) a company posting favorable reviews of itself, (2) a company posting negative reviews of its competitors, or (3) a griping consumer who goes rogue. Each of these types has the potential to distort consumer decision-making. Competitive fake consumer reviews also can create wasteful arms races involving the review website and competitors trying to stomping out the bad behavior. In some cases, competitors are drawn into the morass, feeling like they have to emulate their competition to keep the playing field level.

While the NYAG got a good settlement, it’s not clear exactly what legal rules govern fake consumer reviews today. The NYAG press release doesn’t mention the NYAG’s legal theory, and in general there is no single law that clearly prohibits fake reviews. In that sense, there is a fairly obvious implicit gap in legal doctrines that makes it hard to crack down on fake reviews.

Even so, I am not convinced that regulation is a preferred option to combat fake consumer reviews. Ultimately, I believe the burden should largely rest on review websites to provide a forum that is sufficiently game-resistant that consumers can trust the information on the website. I can’t say Epinions was perfect on this score, but we had a number of techniques that I thought discouraged fake reviews more effectively than many other websites. Review websites that can effectively suppress fake reviews should earn consumers’ trust, which should deliver a premium economic payoff. So there are strong marketplace mechanisms to encourage review websites to fight fake reviews.

This mechanism doesn’t work as well when fake consumer reviews are published in less mediated fora, such as standalone marketer-created websites that consumers find through search engines. Lifestyle Lift used this technique as well (the NYAG posted some examples; another example). These situations are potentially more pernicious because (1) there is no intermediary website who is concerned about managing its own reputation, and (2) searchers tend to trust highly ranking sites in Google search results on that basis alone. (If the site isn’t highly ranking, then the odds that it will influence consumer decision-making go way down). Anti-fake review enforcement efforts can have some value to improving information credibility in our society, but they can only do so much. Too many publication venues, not enough enforcement capacity. As a result, the odds are way too stacked in the gamer’s favor.

In my opinion, the only real “solution” to fake consumer reviews is to teach consumers proper techniques for searching for information and evaluating the credibility of the information they consume. This is one of those crucial life-coping skills that everyone needs to learn at an early age, right up there with the three Rs and how to manage money. Education is the only scalable answer to the problems of information credibility in our complex information society.

This settlement is a small part of ongoing marketing law battles over testimonials, editorial content v. advertising and the degree of required transparency about an author’s biases and financial interests. We know that marketers play games in this area and that consumers can be misled by non-credible information (I’m reminded of my recent post on the efficacy of testimonials). So consumers may need some protection. But we can also make some serious regulatory missteps here. The editorial/advertising distinction is incoherent, it’s not clear if consumers want or benefit from additional transparency, no one has figured out how additional transparency viably can be provided in restrictive interfaces like Twitter or search engine text ads, and any efforts to suppress anonymous reviews could have serious collateral consequences. So while it’s good to see Lifestyle Lift get smacked down, I remain a little nervous where some of the other regulatory efforts may take us.

More on this story:

* Kate Kaye at ClickZ looks at the current and possibly inadequate disclosures at some Lifestyle Lift-operated standalone sites

* Paul Levy