CUSTOMER REVIEWS: Staying on the Right Side of Legal

A key focus of e-commerce marketing focuses on customer reviews. Customer reviews might be the single most important factor considered by consumers when evaluating purchase options. Positive customer reviews can translate into big bucks. And negative customer reviews can seriously damage a business.

One of my client’s competitors created a page comparing customer reviews of the 10 top apps in its niche from the Apple Store and Google Play Store. The competitor is on top – and to a consumer – this is a compelling presentation.

What if positive reviews don’t start coming in, or don’t come in quickly enough? As the pressure to increase sales increases, the temptation to possibly manipulate the reviews also increases.

Customer Reviews2

It’s important to clearly understand what type of reviews are illegal and must be avoided. It’s not a game, it’s the law, and there can be real world consequences for failure to comply.

1. You cannot post fake reviews. 

This seems obvious. No? However, in the heat of fierce competition in an environment like Amazon, what is obvious, might be quickly rationalized away. A company selling a weight loss dietary supplement on Amazon (Cure Encapsulations) actually purchased positive reviews from a company, AmazonVerifiedReviews.com.  That’s right, AmazonVerifiedReviews.com actually manufactured and sold positive reviews. According to the FTC Complaint, AmazonVerifiedReviews.com offered Amazon sellers the ability to “Push your product towards the top!” using “verified” product reviews that will “help your product rank better in the internal search engine.” Well, there are no nuances here to speak about. The FTC filed a Complaint against Cure Encapsulations last February – and AmazonVerifiedReviews.com seems to have ceased to exist. This case represents the first FTC action against fake reviews. The FTC Order imposes a judgment of $12.8 million. 

In 2013, the New York Attorney General took action against 19 reputation management companies that were hired to create fake reviews on Yelp, Google Local, and CitySearch to boost the reputation of businesses. Such deception requires  a lot of effort like creating false accounts, hiring writers, etc. 

In 2015, Amazon sued more than 1,000 people for posting fake reviews. Believe it or not, Yelp has even filed suit against a law firm alleging that employees posed as clients and posted fake reviews. The problem is ubiquitous. 

There’s a darker side to this as well. Posting false negative reviews against a competitor – it’s just as illegal and more nefarious. 

Reviewers must be real customers who have purchased the product or service that is being reviewed. What about someone who purchases a product, posts a “made up” positive/negative review, and then asks for a refund. If the review is fake, then it’s just as illegal, even though the product was purchased. 

2. You cannot provide a material incentive for customers to place positive reviews, unless you disclose this fact conspicuously. 

Even though a review is from a legitimate customer, you cannot compensate them for the review, unless this fact is conspicuously disclosed. See the FTC guide on creating conspicuous disclosures. UrthBox sells subscriptions to receive monthly deliveries of snacks. For several years, UrthBox offered to give a free snack box to anyone posting a positive review on various websites. This approach amounts to deceptive advertising, because the public is not aware that the reviewers were compensated for the positive reviews. UrthBox settled this matter with the FTC in April. The illegal incentive can be anything of value, cash, a gift, a discount, a sample product, and upgrade, etc.

A company may ask its employees to post reviews. In order for this to be permitted, there must be a conspicuous acknowledgement that the reviewer is an employee. 

3 You cannot contractually prohibit a consumer from posting a negative review. 

You might be thinking that a good precautionary measure might be to put a paragraph in my user terms that prohibits customers from posting negative reviews – also known as a non-disparagement clause. Not so fast. While such a clause is legal in arms-length negotiated contracts, but under the Consumer Review Fairness Act, passed into law in 2016, this strategy would be illegal for a form consumer agreement.

Below is a sample clause that I use in Terms of Use documents that outlines proper procedures and requirements for customers to post reviews:

Company may accept, reject or remove reviews in its sole discretion. Company has absolutely no obligation to screen reviews or to delete reviews, even if anyone considers reviews objectionable or inaccurate. Those persons posting reviews should comply with the following criteria: (1) reviewers should have firsthand experience with the person/entity being reviewed; (2) reviews should not contain: offensive language, profanity, or abusive, racist, or hate language; discriminatory references based on religion, race, gender, national origin, age, marital status, sexual orientation or disability; or references to illegal activity; (3) reviewers should not be affiliated with competitors if posting negative reviews, (4) reviewers should not be affiliated with the website or product reviewed unless the review acknowledges the affiliation and is in response to a specific prior review; (5) reviewers should not make any conclusions as to the legality of conduct; and (6) reviewers may not post any false statements or organize a campaign encouraging others to post reviews, whether positive or negative. Reviews are not endorsed by Company, and do not represent the views of Company or of any affiliate or partner of Company. Company does not assume liability for any review or for any claims, liabilities or losses resulting from any review. By posting a review, the reviewer hereby grants to Company a perpetual, non-exclusive, worldwide, royalty-free, fully-paid, assignable and sublicensable license to Company to reproduce, modify, translate, transmit by any means, display, perform and/or distribute all content relating to reviews. 

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If you want to discuss this post or any other legal issue with the author,  contact him using the contact form below or via inquiries@galkinlaw.com or by calling (410) 484-2500. We'd like to hear from you!

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William Galkin manages GalkinLaw. Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions.

  
                                                                                                         
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