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
A Whistleblower Just Filed a Complaint Against Your Company: Here's What to Do Now
Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues? There is […]
Author: Sean M. Pena
Assignment for the Benefit of Creditors: An Alternative to Bankruptcy for Distressed Businesses
When a business reaches the point where it can no longer service its debts or otherwise resolve its liabilities, management is often faced with a difficult question: is a bankruptcy filing necessary or is there another way to perform an orderly liquidation or sale of the business assets? While Chapters 7 and 11 of the […]
Author: John D. Giampolo
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Author: George McGowan
Estate Planning for Digital Assets Under New Jersey Law
As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]
Author: Marc J. Comer
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
Author: George McGowan
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: Sean M. Pena
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.