Last month, the Federal Trade Commission (“FTC”) sued Cure Encapsulations, Inc., (“Cure”) and its owner, alleging that Cure had violated the FTC Act by making false and unsubstantiated claims about its weight-loss product and by paying a third party to write and post fake reviews of its product on Amazon.
Cure’s owner had contacted a website called Amazon Verified Reviews stating, “I need 30 reviews 3 per day…. The goal of my competition is to bring me down to a 4.2 overall rating, and I need to be at 4.3 overall in order to have the sales. I am sending you now another $200 and will pay you total of $1000 additional to the cost of the reviews if you stand on the product, and make sure the next 12 days if someone post a negative review you add real positive reviews from real aged accounts (no proxy vpn vps) to make it back to a 4.3 overall…. Please make sure my product should stay a five star.”
Amazon Verified Reviews, which offered Amazon sellers the ability to “push” their products “towards the top” using “verified” product reviews, posted a number of reviews for Cure’s weight-loss product.
These fake reviews made claims such as “I have lost 10 pounds in the first week of using these;” “After 3 weeks, I already lost 10 pounds;” “After taking this for two weeks, I have lost 5 pounds;” and “I have lost 20 pounds by using these amazing capsules.”
Cure quickly agreed to settle the case on terms set out in a proposed stipulated court order, which prohibits the defendants from making unsubstantiated claims for its products and from saying or implying that reviews are truthful or by actual users of the product when they are not.
The proposed order also requires Cure to notify Amazon and all purchasers of the product that it paid for reviews. Finally, the order imposes a judgment of $12.8 million, which will be suspended upon payment of a $50,000 fine and compliance with other requirements.
What does this mean for your business? It should be obvious that you shouldn’t pay for fake reviews, but you might be surprised to learn that FTC guidelines require bloggers, social network site users and others who create online product reviews to disclose the receipt of free merchandise or payment for even honest reviews.
While no specific method of disclosure is required, the FTC has made it clear that the disclosure must be “clear and conspicuous.”
Companies who send online reviewers free products or payments can be held liable for false or unsubstantiated statements made through endorsements or for failing to disclose any “material connection” between themselves and their endorsers.
Any advertiser using third party marketing should prepare its own guidelines to be provided to bloggers and other third parties endorsing the advertiser’s products or services.
These guidelines need to cover the obligations of the endorser under the FTC guidelines to make only truthful and substantiated claims about the advertiser’s product or service and to clearly disclose any “material connection” (e.g., free product, payments, employment of the reviewer by the advertiser).
Advertisers using third party marketing should also create programs for monitoring the statements made by these endorsers. In addition, all companies would be wise to implement internal policies prohibiting their employees from writing reviews about their own products or services.
Please let us know if you have any questions about these FTC guidelines or need assistance drafting guidelines and policies.
Photo by Christian Wiediger on Unsplash
