[co-author: Hadley Dreibelbis]
Suppressing negative customer reviews may lead to costly consequences. Online fashion retailer Fashion Nova recently settled the Federal Trade Commission’s (“FTC”) allegations that the company blocked negative online reviews of its products on its website – to the tune of $4.2 million. The FTC’s complaint had alleged that the product reviews on Fashion Nova’s website were misrepresentative, because Fashion Nova suppressed customer reviews with less favorable ratings. This complaint is the first of its kind issued by the FTC. Consumer companies should be careful of how they share reviews of their goods online to avoid a similar costly penalty.
Cherry-picking favorable reviews
Fashion Nova specializes in “fast fashion,” clothing designed and manufactured quickly so that it can be sold in real time to match constantly evolving fashion trends (and often at relatively low prices). Fashion Nova markets heavily through social media, including Instagram, but primarily sells its fashion via its website, which includes a “REVIEWS” section at the bottom of each product page where customers provide one to five star ratings.
In its complaint, the FTC alleged that Fashion Nova installed a third-party online product review management interface which allowed Fashion Nova to select which types of reviews would automatically be published versus those that would need to be reviewed by the company prior to posting. Fashion Nova allegedly chose to have higher reviews (four- and five-star ratings) automatically post, but would review and decline to publish the “hundreds of thousands” of lower-starred, more negative reviews. The FTC asserts that suppressing negative reviews “deprives consumers of potentially useful information and artificially inflates the product’s average star rating.”
As part of the proposed settlement, Fashion Nova will be required to post on its website all customer reviews of products currently being sold, with exception of those unrelated to product or containing unlawful or obscene content, in addition to the hefty monetary fine.
FTC is cracking down
While the FTC has historically spoken out against review suppression and fake reviews, whether on a retailer’s own website or its social media pages, this case is the first where the FTC has formally complained that a company’s failure to post negative reviews constitutes a deceptive practice in violation of the FTC Act. The FTC is also sending warning letters to at least 10 online review management companies, advising them not to avoid collecting or publishing negative reviews. Ultimately the risk lies with the retailer, however, even if they have outsourced review management to a third party. And the FTC released new guidance for online retailers and review platforms on how to comply with the agency’s principles for collecting and publishing customer reviews without misleading consumers.
On January 28, 2022, the FTC published the proposed consent agreement with Fashion Nova in the Federal Register. Interested parties are encouraged to file comments, which must be received on or before February 28, 2022.
Next steps
In light of this recent settlement, companies, particularly online retailers, must exercise caution when collecting and publishing customer reviews, or when hiring a third-party to provide this service. To avoid misleading consumers, retailers should be certain that they are soliciting reviews that will give an honest picture of what consumers think about their business and goods or services. Develop a strategy for how to effectively handle and mitigate any negative reviews; don’t just hide them from your customers and ignore them, or you’ll face a reckoning from the FTC.
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