Who: Federal Trade Commission (FTC)
Where: Georgia, United States
When: March 2015
Law as stated at: 21 April 2015
What happened:
Amerifreight, an automobile shipment broker, has agreed to a settlement with the Federal Trade Commission (“FTC”) for breach of section 5 of the Federal Trade Commission Act (which prohibits entities from engaging in unfair or deceptive acts or practices in interstate commerce) that will halt the company’s allegedly deceptive practice of publicising online customer reviews without disclosing that the reviewers received discounts and incentives.
Amerifreight provided consumers with a discount of $50 if they agreed to review the company’s services online and increased the cost by $50 if consumers did not agree to write a review. In addition, Amerifreight offered a $100 monthly prize for the review with the “most captivating subject line and best content.”
Amerifreight sent follow-up e-mails to customers reminding them that if they did not write a review then they would receive an additional bill. Whilst the e-mails do not explicitly require good reviews the tone is quite forceful. One follow-up e-mail, at Exhibit E in the FTC complaint, states:
“During the review process, you will have the opportunity to rate from poor to excellent. I hope my performance have been of such that you can give me an excellent rating, especially the OVERALL rating… Anything less will reflect badly on my monthly performance review. If the carrier that has shipped your vehicle did not deliver as promised, I would be grateful if you could rate them separately…”
Amerifreight advertised on its website that it had “more highly ranked ratings and reviews than any other company in the automotive transportation business.” Amerifreight’s website also stated: “You don’t have to believe us, our consumers say it all.” However, according to the FTC, Amerifreight did not disclose that it had provided incentives for some of those consumers to write the reviews.
According to FTC standards if “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” 16 C.F.R. § 255.5 (2014). It was the opinion of the FTC that Amerifreight had:
• Failed to disclose the material connection between the company and their consumer endorsers namely, that Amerifreight compensated consumers to post online reviews; and
• Deceptively represented that its favourable reviews were based on the unbiased reviews of customers.
Based on these allegations, the FTC charged Amerifreight with false advertising and engaging in deceptive practice. The case was settled without any financial penalty. Officially, in agreeing to the settlement, Amerifreight neither admitted nor denied the charges. According to the FTC, Amerifreight agreed to:
• not misrepresent that reviews are unbiased; and
• disclose material connections between endorsers and themselves.
Why this matters:
The FTC complaint affirms that where incentivised reviews appear on websites they must be accompanied by a disclosure of the incentive. “Companies must make it clear when they have paid their customers to write online reviews,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If they fail to do that – as Amerifreight did – then they’re deceiving consumers, plain and simple.”
Online reviews can have a big influence on consumer choices with increasing use of review sites to aid with purchasing decisions. The FTC’s complaint serves as a reminder to all businesses to ensure where reviews are written by interested parties, or by parties that have been provided with an incentive to write a review, it is clearly stated on their website.
