Who: New York Attorney General
Where: New York
When: 23 September 2013
Law stated as at: 8 October 2013
On 23 September 2013 the New York Attorney General announced that 19 companies had agreed to cease writing fake online reviews for businesses on consumer-review websites and to pay more than $350,000 in penalties. This announcement followed a year-long investigation (dubbed Operation Clean Turf) in which the state regulators set up a fake yoghurt shop in Brooklyn as part of a sting to uncover companies posting false online reviews.
The Attorney General’s investigation revealed that various small businesses (including a charter bus operator, a teeth-whitening service, a laser hair-removal chain and an adult entertainment club) were commissioning fake consumer reviews, written in Bangladesh, Eastern Europe and the Philippines for between $1 and $10 per review, and flooding websites like Yelp and CitySearch.
Yoghurt shop disguise
When approached by regulators under the guise of yoghurt shop owners, regulators also found that numerous search engine optimization companies (“SEOs”) offered to write fake reviews and post them on consumer review websites. Regulators discovered that SEOs were frequently using advance IP spoofing techniques to conceal their identities, had set up hundreds of fake online profiles on sites to post the reviews, and advertised for fake reviewers on listing sites like Craigslist and Freelance.com.
The practice of preparing or disseminating a false or deceptive review that a reasonable customer would believe to be a neutral third party review is a form of false advertising commonly referred to as “astroturfing” (because it fakes grass-roots support), and is illegal under New York Law. This is not the first time that the practice of astroturfing has been challenged in New York; in July 2009 the then New York Attorney General fined a plastic surgery company over $300,000 in penalties and costs for posting fake reviews on internet message boards and websites.
Last UK enforcement action against astroturfing in 2010
In the UK, astroturfing contravenes the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”) which prohibits unfair commercial practices. However, only limited enforcement action has been taken against the practice to date.
The most recently publicised enforcement action in the UK in this area, and remains the OFT’s 2010 investigation into Handpicked Media’s use of bloggers to promote its clients without sufficient disclosures in place to make it clearly identifiable to consumers that the promotions had been paid for.
In this case the OFT held that Handpicked Media may have been operating in breach of the CPRs. No monetary penalty was imposed, but the OFT required undertakings from Handpicked Media not to continue or repeat the offending conduct.
In particular, Handpicked Media were prohibited from any future promotion that did not clearly identify, in a manner prominently displayed with the editorial content such that it would be unavoidable to the average consumer, that the promotion had been paid for, whether in cash or in kind.
Why this matters:
Whilst Operation Clean Turf focused on businesses operating in New York, it has put the practice of astroturfing firmly in the public eye.
It is well documented that online reviews can influence the buying decisions of consumers. In fact, the New York Attorney General found that 90% of consumers polled claimed to have been influenced by positive online reviews and 86% were influenced by negative reviews.
The implications of positive online reviews for businesses are therefore clear; the better its online profile, the bigger the company profits. However businesses should equally consider the reputational damage of being exposed as an “astroturfer”: consumer-facing businesses trade on their brand and reputation so being found to have faked consumer support could prove a fatal blow to consumer confidence and therefore business profits.
Alleged fake review by law firm
Similarly, the fact that consumers trust reviews posted on high visibility websites carrying reviews is crucial to the business model of these sites. Unsurprisingly these sites are making public moves to punish fraudulent reviewers: Yelp has recently started proceedings against a small San Diego Law Firm for allegedly posting fake reviews on its site, claiming $25,000 on the basis that “if Yelp users believed that Yelp reviews were written by business owners and employees about their own businesses, the value of Yelp reviews, and of Yelp itself, would be undermined”.
The lack of recent enforcement action against astroturfers in the UK may of course be due to the practice either not occurring here, not being one of concern to UK consumers or not being detected.
Whatever the reality, the practice is just as non-compliant here as it is in the other side of the pond.