FTC Settles Case Against Company for Purchasing Fake Online Reviews

FTC Settles Case Against Company for Purchasing Fake Online Reviews

The Federal Trade Commission (FTC) recently settled its first case against a company that paid for fake product reviews on Amazon.

The case against Cure Encapsulations, Inc., a weight-loss supplement company, was the FTC’s first challenge of paid product reviews, according to Law 360 (subscription may be required).  Per to the complaint, the company and its owner, Naftula Jacobowitz, paid a website called amazonverifiedreviews.com to post enough fake positive reviews to keep the brand’s rating above 4.3 stars. The complaint also alleged that the company made unsubstantiated claims about the efficacy of its weight-loss supplements. As part of the settlement, the company had to notify customers who had purchased its products about the FTC’s allegations, and identify for Amazon the reviews that were fake.

The director of the FTC’s Bureau of Consumer Protection commented in a press release that consumers “rely on reviews when they’re shopping online,” and companies that buy fake reviews to inflate their Amazon ratings hurt both consumers and competing companies that follow the rules. In fact, some experts estimate that one-third of online shoppers will refuse to buy a product that does not have positive reviews. And, a storefront with a high number of positive reviews enjoys more consumer traffic and, in turn, more sales.  . Significantly, “[j]ust going from zero review [sic] to one increases the rate at which online window-shoppers actually click the ‘buy’ button by 65%,” according to an article by USA Today.

As the importance of positive online reviews continues to rise, manufacturers need to take real steps to ensure that they have online marketplace-specific quality measures in place to protect against poor quality product in the marketplace channel and take active steps to quickly address any quality issues. This is especially so because brands – not sellers – most often take the blame vis-à-vis poor product reviews when consumers receive compromised products from unauthorized sellers operating outside of the brand’s marketplace quality controls.

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