On February 11, 2016, New York Attorney General Eric T. Schneiderman announced four independent settlements related to the use of allegedly deceptive online testimonials and reviews. These cases reflect continuing concern by the New York Attorney General’s office over “astroturfing” (the posting of fake or otherwise biased reviews). We wrote about theses enforcement actions previously here. Even if a company has its own strong policy in place against the use of such reviews, many companies commonly use third parties to facilitate their use of reviews and endorsements. Thus companies should carefully scrutinize what these affiliates do on their behalf.
The first settlement is with Machinima Inc., an online YouTube channel for gamers. Machinima’s YouTube network does quite well – generating more than 2 billion views each month (we’d settle for 10% of that) and covers gaming news, reviews, and other creative content.
Machinima got in trouble, however, when an investigation revealed that Machinima paid “influencers” – popular gamer personalities and experts – to post videos endorsing Microsoft’s Xbox One console and a small handful of games. One of these endorsers, for example, was paid $30,000 for their videos. However, the compensation was not disclosed in the reviews, leaving viewers to possibly conclude that they were “independently produced and that their comments reflected the influencers’ personal views.”
New York alleged that such conduct violated New York’s Executive Law§ 63(12) and General Business Law §§ 349 and 350 which prohibit misrepresentation and deceptive acts or practices in the conduct of any business as well as noting that a failure to disclose is also prohibited by the FTC’s Endorsement Guides. Indeed, the FTC settled with Machinima regarding this same conduct in 2015. You can read more about it here.
Although the FTC settlement did not involve any consumer redress, Machinima agreed to pay New York a $50,000 penalty. The settlement also prohibits the company from misrepresenting “in any influencer campaign that the endorser is an independent user of the product or service being promoted” and “prominently disclose any material financial or other connection between the endorser and the advertiser.”
Next up is Rani Spa, a New York spa related business that provides skin care treatments, hair treatments, massages, and ayurvedic products. According to Attorney General Schneiderman, Rani Spa contracted with Canadian businessman, James McNulty, who offered to post fictitious reviews on Yelp.com to improve Rani Spa’s reputation and bring in business. According to Attorney General Schneiderman McNulty also solicited “trusted Yelp users” to also post positive reviews of Rani Spa and used sophisticated tactics to improve the realism of the reviews and bypass Yelp’s spam review filters.
Under the terms of the settlement, Rani Spa must stop posting fake reviews and pay a penalty of $50,000 – $48,000 of which is suspended as long as Rani Spa remains in compliance with the settlement agreement.
Premier Retail Group
Premier Retail Group is a New York based chain of cosmetic and beauty supply stores. The Attorney General found that the company solicited reviewers on Craigslist to write positive reviews of the company’s products in exchange for free samples, product vouchers, and other compensation.
According to the investigation, there was nothing subtle about the effort, with one advertisement stating:
“Have a Strong Yelp account? Want to make money writing reviews?”
When an investigator replied to the offer, the Premier agent responded:
“If you are interested I will send you a link to our store to post a review. Once a review is posted you will reply to me with a link and I will send you $25 via Paypal. If the review is not filtered within the next 2 weeks I will send an additional $50.”
The settlement prohibits Premier from soliciting fraudulent reviews and requires the company to pay a $50,000 penalty, $30,000 of which is suspended as long as it complies with the other terms of the settlement agreement.
ESIOH Internet Marketing
ESIOH Internet Marketing is an internet marketing platform and software provider that offers social media marketing, search engine optimization, and website monitoring.
However, according to Attorney General Schneiderman, the company solicited freelance writers (again, through Craigslist – as well other sites) to write fake reviews of its clients. Each review went for $10 to $15 apiece.
Continuing with the common theme, the reviewers never actually used or experienced the good or service they reviewed and ESIOH did not require the reviewers to disclose that they were being paid.
Additionally, according to Attorney General Schneiderman, ESIOH dictated many of the details it wanted in the review. One instruction, for example, asked a reviewer to “write 50-100 word positive five star review about each business and then post that review on the company’s Google Places and Yelp page.” Under the terms of the settlement, ESIOH must stop posting/soliciting fraudulent reviews and pay a $15,000 penalty.
So you may want to double-check with your clients about what they and their third party agents are doing as far as encouraging social media reviews and endorsements. And, if you’re in New York, a dose of healthy skepticism might be in order when looking at reviews (or conversely, if you could use some spare cash and like writing, check out Craig’s list!)