Once a fairly loosely scrutinized space, online reviews have become an area of increased interest to and enforcement by the Federal Trade Commission (FTC). A recent FTC order is particularly telling. On March 18, 2022, FTC released a final order requiring online retailer Fashion Nova to pay $4.2 million to the FTC and prohibiting the online retailer from suppressing customer reviews of its products on its website. The order arose from a January 2022 complaint filed by FTC alleging that Fashion Nova engaged in deceptive review practices on its website. Specifically, FTC alleged that Fashion Nova represented that the product reviews on their website accurately reflected the views of all purchasers who submitted reviews of Fashion Nova products to the website, when, according to the FTC, the product reviews on the website did not accurately reflect the views of all purchasers who submitted reviews of the products. In fact, it was determined that in numerous instances, Fashion Nova suppressed product reviews with ratings lower than four stars (out of a possible five).
Beyond the monetary relief Fashion Nova must pay under the final rule, the company will also be subject to recordkeeping provisions for the next ten years. In part, these provisions require Fashion Nova to retain copies or records of all consumer or other complaints relating to customer reviews. The company must also retain all records necessary to demonstrate full compliance with each provision of the order.
This is not the first time Fashion Nova has tangled with FTC. In April 2020, FTC filed a complaint for permanent injunction and other equitable relief in the U.S. District Court for the Central District of California for the retailer’s alleged violation of the FTC’s Mail, Internet, or Telephone Order Merchandise Rule; that case settled with Fashion Nova paying $9.3 million with $7.04 million going to FTC to refund consumers and $2.26 million to be refunded directly by Fashion Nova to consumers.
This final order appears to be the first instance of FTC addressing a company’s failure to post negative reviews of its products, but it is unlikely to be the last. In fact, at the time FTC filed its complaint against Fashion Nova, FTC also announced that it would be sending letters to several companies offering review management services, placing them on notice that avoiding the collection or publication of negative reviews violates the FTC Act. Additionally, FTC released new guidance for online retailers and review platforms to educate them on key principles for collecting and publishing customer reviews in ways that do not mislead consumers.
Online retailers need to be aware of, understand, and adhere to FTC’s expected consumer review standards. Specifically, online retailers must ensure that if they are representing that the product reviews on their website accurately reflect the views of all purchasers who submitted reviews of the products, that they are also abiding by this standard in practice. As the Director of FTC’s Bureau of Consumer Protection stated, “Deceptive review practices cheat consumers, undercut honest businesses, and pollute online commerce. Fashion Nova is being held accountable for these practices, and other firms should take note.”[1] There is no reason to think FTC will not follow through on this anticipated regulatory focus.
[1] https://www.ftc.gov/news-events/news/press-releases/2022/01/fashion-nova-will-pay-42-million-part-settlement-ftc-allegations-it-blocked-negative-reviews
