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
Key Contacts
Back
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
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
How to Protect Your New Jersey Business When Going through a Divorce
The most effective ways to protect your business in a divorce are put in place before one begins: a prenuptial or postnuptial agreement, clean separation of business and personal finances, and divorce contingencies built into your operating or buy-sell agreements. If divorce is already underway, the priorities shift to establishing how the business is classified […]
Author: Jay McDaniel
10 Common Issues in Franchise Disputes
The most common franchise disputes involve breach of contract, franchise termination and non-renewal, intellectual property rights, territorial encroachment, royalty and fee payments, franchisor support obligations, and violations of state franchise laws such as the New Jersey Franchise Practices Act. Franchisors and franchisees can often resolve these conflicts by providing written notice detailing the dispute and […]
Author: Paul Grossman
Reputational Risk and Legal Exposure: Why New Jersey Businesses Must Manage Them Together
New Jersey businesses must manage legal and reputational risk together because modern disputes play out on two fronts at once: the legal proceeding itself and the court of public opinion, where customers, employees, investors, and business partners often reach conclusions long before a judge or jury has had the opportunity to evaluate the facts. Success […]
Author: Sean M. Pena
Eviction Is Not Always the End: Understanding Post-Possession Rent Claims in New Jersey and New York
No. An eviction does not automatically end a tenant’s obligation to pay rent. Post-eviction rent claims are common because recovering possession resolves who has the right to occupy the premises, but it does not extinguish the tenant’s contractual obligations under the lease. Whether unpaid or future rent remains owed depends on three factors: the lease’s […]
Author: Donald M. Pepe
Company Dissolved? Legal and Financial Consequences to Expect
A company is dissolved; legally, it ceases to exist. Accordingly, dissolution results in significant legal and financial consequences. It is a process that must be properly managed to avoid continuing liability. The Corporate Dissolution Process Corporate dissolution is the legal process of formally closing a corporation, paying its debts and distributing the remaining assets. Most […]
Author: Jay McDaniel
The Legal Implications of Signing a Triple Net Lease
A triple net lease is a commercial lease in which the tenant pays the property’s real estate taxes, insurance, and maintenance costs, known as the three nets, in addition to base rent. They are most often used in freestanding retail and office buildings and in large single-tenant industrial properties, with terms that typically run 10 […]
Author: Donald M. Pepe
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.