Consumers rely on online reviews to a significant degree in making decisions about products and services. Websites like Yelp host reviews for thousands of businesses and are visited by millions of users. Whereas reviews of businesses were once primarily left to professional writers, the internet has enabled nearly anyone with an internet connection to post information about their experiences. These reviews can have a direct impact, positive or negative, on a business’ revenue. In this environment, some businesses may try to boost their own online standing by posting positive reviews about themselves, or they may try to damage competitors’ reputations by posting negative information. State and federal laws prohibit both of these practices, and businesses who run afoul of the law could face hefty fines and liability to the companies they have harmed.
Companies that try to enhance their online reputation by posting fake positive reviews may face liability under state or federal law, since their fraudulent efforts to boost their own standing harms their competitors. Those that use review sites to disparage their competitors may face fines by state or federal regulators, or civil liability to the victims of their disparagement. The federal Lanham Act prohibits advertising and other commercial speech that makes false or misleading statements that “misrepresent the nature, characteristics, qualities, or geographic origin” of one’s own products or services, or those of someone else. 15 U.S.C. § 1125(a)(1)(B). Federal regulations require anyone endorsing a product or service to disclose any financial relationship they have with the seller or manufacturer, such as if a writer receives compensation for writing a product review. 16 C.F.R. § 255.5.
A 2013 investigation by the New York Attorney General identified multiple instances of businesses writing positive reviews about their own products, or hiring other companies to write fake positive reviews for them. Investigators posed as the owners of a yogurt shop that had been the subject of deceptive negative online reviews. They approached several companies described as “reputation-enhancement firms” to see if they could help improve their online profile. These firms allegedly offered fake reviews, starting at $1 each, written by people in eastern Europe, the Philippines, and Bangladesh, or they offered gift certificates and other incentives to their clients’ customers to get them to write positive reviews.
Other companies identified in the investigation produced fake reviews in-house by requiring employees to post positive information online. In all, the Attorney General settled claims against 19 companies and collected a total of $350,000 in fines.
An investigation by the Federal Trade Commission (FTC) in 2010 into Reverb Communications, a public relations firm for the video game industry, resulted in charges that the company posted positive reviews to the iTunes store without disclosing its financial relationship to the game companies. The reviews appeared to have been written by ordinary users, but they were allegedly the work of Reverb employees. The company and the FTC entered into a settlement agreement, in which the company did not pay a penalty but removed all comments from iTunes and other sites and agreed to refrain from similar future conduct.
If you or your business has a contract dispute or other legal matter, you should consult with a skilled business and commercial lawyer. James G. Schwartz has represented businesses in the Bay Area for the past 38 years. To schedule an initial confidential consultation to see how we can help you, please contact us today online or at (925) 463-1073.
More Blog Posts:
Liability for Cybersecurity Breaches Still Uncertain for Many Businesses, Pleasanton Business & Commercial Law Blog, June 30, 2014
Supreme Court Limits Jurisdiction of U.S. Courts over Foreign Corporations with Domestic Subsidiaries, Pleasanton Business & Commercial Law Blog, March 28, 2014
FTC Announces $3.5 Million Settlement, One of the Largest Ever, in FCRA Lawsuit, Pleasanton Business & Commercial Law Blog, February 26, 2014