Joel N. Kreizman
Partner
732-568-8363 jkreizman@sh-law.comFirm Insights
Offering Incentives for Online Reviews Can Lead to Liability
Author: Joel N. Kreizman
Date: March 20, 2015
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Consumers increasingly look to online reviews when buying a product or service.
However, businesses looking to boost their online reviews with offers of compensation or other financial incentives could face legal action by the Federal Trade Commission (FTC).
In a recent enforcement action, the FTC charged a California shipping company with deceptive advertising after the company failed to disclose that it gave customers a $50 discount as long as they agreed to review AmeriFreight’s services. In addition, the company offered a $100 monthly prize for the review with the “most captivating subject line and best content.” In its defense, AmeriFreight maintained that customers were paid regardless of whether they posted negative or positive reviews.
The FTC was unpersuaded. As detailed in a recent FTC blog post:
In short, AmeriFreight encouraged customers to endorse the company with offers of discount payments and other incentives, and then advertised those positive reviews to lure prospective new customers to the company. The problem with this approach is that when it paid consumers to endorse the company, AmeriFreight was obligated to disclose those payments, but it didn’t. According to the FTC, this is deceptive.
According to the FTC, AmeriFreight ran afoul of the agency’s requirement that consumers have a right to know when there’s a material connection between an advertiser and an endorser. As stated in the FTC’s Endorsement Guidelines: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.”
AmeriFreight will not face any monetary sanctions for its violation. Rather, the FTC appears to be using the company to set an example. Under the terms of its settlement with AmeriFreight, the company is prohibited “from misrepresenting that any products or services are highly rated or top-ranked based on unbiased customers reviews or that their customer reviews are unbiased.” Going forward, the order also requires AmeriFreight to disclose material connections between its company and people who endorse its products or services.
- Practices: Corporate Transactions & Business
- Locations: Red Bank, NJ, Little Falls, NJ, New York City
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No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
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