The Cost of Fake Online Reviews Goes Beyond Morality

by Gray Reed & McGraw

[author: Travis Crabtree]

Hopefully, you’ve decided to read on because you believe you may be victim to a fake competitor review and you are not looking for advice on how to get away with it.  If you are looking for advice on how to get away with it, you’ll have to look somewhere else.  If you are looking for some information on what happens when you are victim or need to persuade a client not to do it, then read on.

A Missouri court recently awarded a company $150,001 as the victim of three fake online reviews.  In the case of The Fireworks Restoration Company v. Hosto, two gentlemen formed two companies together.  As often happens when you mix business with friendship, the relationship went downhill and the parties split their businesses.  Mr. Hosto, apparently, was not happy with the result.

To invoke his revenge, Mr. Hosto pretended to be former customers of the business, The Fireworks Restoration Company, and left negative reviews on Google and Yahoo.  In the review, Mr. Hosto, using the name of an actual former customer, wrote, “dealing with these people was the biggest mistake I have ever made in my whole life.”  He continued, “It was a miserable experience and the job was done so poorly we decided to sell the house.  They were great salesman [sic] but their workman [sic] were idiots and the owner was not willing to help in any way . . . I was so happy just to get them out of my life I paid them much more than I should have because their law firm threatened to lien my house if I disagree[d] with any part of their bill. . . Do yourself a favor and call your insurance company and get a referal [sic] for legitimate business people.”  The review stayed on Yahoo for two months and on Google for two years.

Suspecting foul play, the company filed a John Doe lawsuit.  The suit allowed the company to subpoena information from Yahoo that provided enough information to confirm the suspicion that Mr. Hosto was the true author—a fact Mr. Hosto admitted when he was called out on the postings.  The company then sued Mr. Hosto for defamation.  As we have discussed before, the Communications Decency Act makes it difficult to sue Google or Yahoo for user generated content.

It was easy for the company to prove Mr. Hosto said false things about the company with malice with the intention to harm.  But, The Fireworks Restoration Company had difficulty proving it was damaged by the negative review resulting in a $1 award from the jury for lost profits.  The jury, however, decided to punish Mr. Hosto granting $150,000 in punitive damages.

The court of appeals upheld the jury’s award rejecting Mr. Hosto’s argument the company failed to present evidence of one actual customer who relied upon the fake online review.  Instead, in addition to the owner’s testimony and a consultant who talked about the importance of online reviews, two competitors in the same industry testified they read the reviews and that they opined it had to have had a negative impact on the company’s business which, prior to this, had a good reputation.

Aware of the difficulty of finding actual customers who were turned off by the review, the court wrote:

We reject Defendant’s contention that Plaintiff needed to produce testimony from potential customers who opted to turn elsewhere due to the web reviews. With the internet, consumers are able to compare businesses and their wares with unprecedented speed. Interpersonal contact is characteristically absent, so if a consumer declines to engage a business it encounters on the internet, that consumer continues his or her search and the business has no knowledge it has been passed by. As such, it would be unreasonably burdensome to impose upon a business plaintiff the requirement that it locate potential customers that it never knew in order to successfully demonstrate actual damage to its reputation. The deleterious impact of such a constraint far outweighs any benefits it would have in proving reputational harm.

Affirming the punitive damage award, the court wrote:

From the outset, Defendant’s conduct evinced a calculated desire to seriously damage Plaintiff’s business reputation and, in doing so, deliver, in Defendant’s words, “the knock-[out] punch [he] had looked forward to delivering for so long.” Defendant admitted that he was “bitter and wanted revenge.”…Even after having time to consider his actions, Defendant did not cease his conduct. Instead, he testified that he went online to post an additional fictitious review because he “felt something satisfying in” posting the initial derogatory reviews. Not until he received notification of Plaintiff’s suit did Defendant demonstrate any contrition, and even then his apologies were couched in a desire to forego litigation.

Many online reputation management gurus would explain that a few negative reviews actually give credence to the surrounding positive reviews, assuming the positive greatly outweighs the negative.  Nevertheless, there is no good reason to anonymously write a fake negative review of your competitor.  While ethics should be sufficient discouragement, with enough resources, a victim of the fake review can unmask your identity and take you to court.  As shown by the jury in Missouri, they don’t take too kindly to people seeking vengeance online with fake reviews.  Even if you don’t cause actual damages, they will make you pay.

For related materials, go the Visibility Magazine Legal Corner online archives and see DO YOU HAVE AN ONLINE ENDORSEMENT POLICY? The FTC thinks you should and They Can’t Do That on the Internet!

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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