Who Can I Trust on the Way to the Dog Show? The FTC on Review Websites and Fake Reviews

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I am making my annual pilgrimage next week to bring my mother to the Westminster Dog Show.  We need to stay and eat near Madison Square Garden, as she likes to be very close to all the action; plus, there is a chance we might be in the same hotel as Wilma the champion Boxer, and nothing could be better than that. But I am not a regular in the NoMad area, so I turned to reviews, rankings, ratings and recommendations. Sometimes we may doubt reviews written on a restaurant or hotel web page – they probably picked the best of the best to highlight. So we turn to articles or websites that research and rate various options. But can they be trusted?

The FTC’s recent proposed settlement with LendEDU gives us reason to pause. The complaint alleges the website www.lendedu.com promoted itself as a resource for consumer products to research options for financial products such as loans and insurance. The website provided star rankings and rate tables that it said were objective and unbiased.

The FTC alleged that LendEDU offered to improve the status of companies in exchange for higher payments per click. It is pretty clear that a company cannot say it is providing unbiased reviews but then offer money in exchange for improving reviews. What is less clear is what happens if a review site is silent about its practices and provides a ranking without any indication that compensation is involved. Is there any implied claim that review sites are free from the taint of filthy lucre? And what if the reviews themselves are neutral and objective as promised, but companies that are reviewed can pay for better visual highlighting or a more favorable placement than competing companies, even ones receiving a more favorable ranking? Is this a legitimate way for companies to monetize their web content or deceptive conduct?

In LendEDU, the company did have an “Advertiser’s Disclosure” link that at least in part disclosed that it was compensated by some of the companies featured on the website. We know that disclosures must appear in close proximity to the claims they modify. The FTC has explained in its .com Disclosures Guide how to use and not to use hyperlinked disclosures. In the proposed order, the FTC takes hyperlinking off the table by defining “close proximity” to mean “that the disclosure is very near the triggering representation. For example, a disclosure made through a hyperlink, pop-up, interstitial, or other similar technique is not in close proximity to the triggering representation.” One might say this is the standard applied to LendEDU as a company now under FTC order, but it should give other companies pause as to whether the hyperlinked disclosure might be falling into even deeper disfavor.

In addition, the FTC alleged that positive reviews written about the website were actually written by company employees and friends. We saw similar allegations recently in the Sunday Riley case, alleging the company encouraged employees to create fake profiles on Sephora to favorably review the company’s products. Shortly thereafter, Commissioner Wilson tweeted:

Perhaps she was foreshadowing this case, but there are others in the pipeline as well. It seems most of the FTC’s advertising cases now involve a count of fake reviews, both on an advertiser’s own websites and on third-party sites. I hear, often, things like, “we would never do that,” but claims of fake reviews seem to be so commonplace it would be a good time to really dig into the practices of your marketing department to make sure they are not engaged in any after-hours review activity. In addition, be careful about endorsing your client’s products. The LendEDU complaint included at ¶37 an allegation that a review of LendEDU’s comparison tool by LendEDU’s outside counsel should have disclosed the connection between the lawyer and the company.

Commissioner Slaughter issued a concurring statement in the LendEDU case that is a loud warning bark: “I write separately to highlight the importance of this case in addressing a cutting-edge market practice that I fear is becoming increasingly common online: purportedly neutral rankings and recommendations that actually reflect paid product placement. . . . Companies that engage in pay-to-play rankings and ratings should take heed: This conduct robs consumers of vital information, pollutes our online marketplaces, and violates the law, which will result in serious consequences.”

Anyone with organic, unbiased recommendations for where to go around Penn Station, please let me know!

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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