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
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: George McGowan
Why Every Business Should Conduct an Annual Insurance Coverage Review
Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)
Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan
How to Effectively Use Contracts to Manage Risk
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan
Understanding Portability for Estate and Gift Tax
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
Author: Marc J. Comer
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.