Companies are advised to thoroughly investigate the companies they hire to manage their online reputations and reviews to ensure that only truthful and accurate reviews and comments from actual consumers are posted online. A company that does not thoroughly investigate the companies they use could find themselves in violation of the Federal Trade Commission’s (FTC) Guides Concerning the Use of Endorsements and Testimonials in Advertising (the 'Guides'). The Guides set forth the principles that the FTC uses when evaluating testimonials and endorsements.
The FTC and other regulators recognize that consumer endorsements and testimonials are a powerful selling tool for businesses and that some companies are exploiting that by writing and posting fake online reviews. Recent studies have estimated that almost 20% of Yelp reviews are fake or suspicious and filtered by Yelp’s fraud algorithm. To combat these tactics, regulators are investigating and taking action.
On September 23rd, the Attorney General of New York announced that nineteen companies agreed to pay more than $350,000 in fines for writing fake online consumer reviews. The settlement stems from a year-long undercover investigation by the state Attorney General’s office into companies that posted fake reviews to websites such as Yelp and Google Local. The state alleged that the practice of posting fake reviews violated New York’s laws against false advertising and deceptive business practices.
The investigation focused on search engine optimization (SEO) companies that help businesses manage their online reputations. According to the Attorney General, these companies would combat negative online consumer reviews by creating fake online profiles and paying freelance writers to write positive fake reviews. The investigation also found that the SEO companies were using ‘IP spoofing techniques’ to hide their identities, while creating hundreds of fake online profiles.
The settlement requires the companies to discontinue the practice of posting fake reviews. Individual fines range from $2,500 to nearly $100,000.