A company that sells guitar lessons on DVD is being forced to pay a fine of $250,000 to the US FTC because of deceptive advertising surrounding fraudulent reviews. According to the FTC press release:
According to the FTC’s complaint, Legacy Learning advertised using an online affiliate program, through which it recruited “Review Ad” affiliates to promote its courses through endorsements in articles, blog posts, and other online editorial material, with the endorsements appearing close to hyperlinks to Legacy’s website. Affiliates received in exchange for substantial commissions on the sale of each product resulting from referrals. According to the FTC, such endorsements generated more than $5 million in sales of Legacy’s courses.
The FTC charged that Legacy Learning and Smith disseminated deceptive advertisements by representing that online endorsements written by affiliates reflected the views of ordinary consumers or “independent” reviewers, without clearly disclosing that the affiliates were paid for every sale they generated.
The FTC requires that a favorable review “by a person connected to the seller – or someone who receives cash or in-kind payment to review a product or service – should disclose the material connection between the reviewer and the seller of the product or service.” As a practical matter site publishers aren’t liable for user-submitted reviews.
Beyond this, sites like Yelp (and increasingly Google) take pains to prevent fake reviews from surfacing. Publishers would be insulated from liability surrounding fake or improperly solicited reviews. In addition, the US isn’t going to get involved in individual cases of “review fraud” at the consumer or SMB level. It’s too small time.
However the underlying behavior that was spanked by the FTC — reviews that were motivated by some quid pro quo — are increasingly common as SMBs enter a grey zone of soliciting reviews and rewarding them with incentives or discounts. While the new conventional wisdom among marketers is that SMBs must ask for online reviews as they do real world “testimonials” there’s little guidance out there about how to do this ethically.
It’s very unlikely that there would be any legal consequence for “review us on Yelp and Google and get a free cup of coffee.” But that’s the direction the market is going.
See related: Fighting the Rise of ‘Paid Reviews’
March 17th, 2011 at 2:16 pm
I’ve worked with a review site and the number of online marketers who try to get products and services listed is staggering. Scam control on the reviews themselves is a big issue. There are plenty of place to advertise for just $5 or $10 reviews that are nothing more than feature sets and some adjectives. It’s those adjectives I can’t take. And yes, I’ve tracked back folks to some well known agencies and clients and had at least one company banned.
Saw a great FourSquare promo from a DC-based developer named Kettler who offered a contest entry for leaving “an appropriate tip”. Loved that.
March 17th, 2011 at 2:18 pm
Yes . . . most of this behavior operates in the grey middle and it’s going to become increasingly a problem as reviews become more significant all the way around.
March 22nd, 2011 at 3:57 pm
[...] important to note that online reviews have recently been proven to be vulnerable to fraud. Last week, for example, the Federal Trade Commission fined a company selling guitar training DVDs [...]