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FTC Clamps Down on False and Misleading Customer Reviews

By John DiGiacomo

The Federal Trade Commission has reached an agreement contained in an order that, if adopted, will stop the automobile shipment broker AmeriFreight from publishing biased customer reviews to mislead future customers.

The FTC’s complaint alleges that AmeriFreight purposefully deceives potential customers by providing positive reviews from past customers that were given a discount or paid to write their review. Title 15, Section 45 of the U.S. Code gives the FTC authority to bring actions against entities that “use[] unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.”[1] The same section allows the FTC to issue an injunctive order to stop the unfair practices, but must allow 30 days for a chance for the defendant party to be heard. The Code of Federal Regulations defines endorsements as “any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party.”[2] Misleading endorsements are actionable under 15 U.S.C. § 45.[3]

The complaint specifically describes the misleading endorsements. It alleges that AmeriFreight would provide $50 discounts for customers who wrote positive reviews, and would charge $50 extra for those who did not. Further, AmeriFreight would remind customers after delivery of their automobiles to write a review, and offered a $100 cash bonus to the best review of the month. Most egregiously, AmeriFreight would label its reviews as unbiased and would feature the reviews prominently on its website and in its other advertising material.

After receiving the complaint, AmeriFreight and the FTC agreed to a settlement that is encompassed in the proposed order. If adopted, the order will enjoin AmeriFreight from continuing its deceitful practices, and will force the company to keep records of its customer reviews—and provide them to the FTC if requested—for five years. This also includes the option for the FTC to inspect AmeriFreight’s operations. The order further requires that AmeriFreight deliver a copy of the order to all future directors and employees of the company for the next ten years. Finally, the order will dissolve 20 years after its adoption. A violation of the order allows the FTC to bring a suit in federal court against AmeriFreight.

This case marks the first time the FTC has brought an action against a company for misleading customers by misrepresenting online reviews. It stands as a warning to other companies that paying customers to write positive reviews without disclosing that payment to potential customers will not be tolerated.

[1] 15 U.S.C. § 45(a)(2).

[2] 16 C.F.R. § 255(b).

[3] Id. at § 255(a).

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