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FTC Challenges Fake Paid-For Reviews on Amazon for The First Time

As we have discussed previously, the prevalence of Internet usage in everyday life has led to an e-commerce market whereby consumers are able to post online reviews of a vast range of products and services. For the most part, such reviews are made public without regard to the relevant expertise of the reviewers, and with little to no oversight as to the legitimacy of such reviews. You can see our prior articles on this topic here and here. Against this backdrop, the Federal Trade Commission (“FTC”) has brought a claim against a marketer for the deceptive use of fake, paid-for reviews on an independent retail website for the first time. The FTC’s enforcement efforts in this regard should signal to marketers that the FTC is taking such actions seriously.

Defendants, Cure Encapsulations, Inc. and its owner, Naftula Jacobowitz, advertised and sold weight-loss capsules, Quality Encapsulations Garcinia Cambogia, to consumers in the United States on Amazon. Advertisements for the capsules contained claims such as “All Natural Appetite Suppressant, carb blocker, Weight Loss Supplement.” The FTC alleged that the defendants paid a website, www.amazonverifiedreviews.com, to post positive Amazon reviews of the their Quality Encapsulations Garcinia Cambogia capsules.   

The complaint alleges that on October 8, 2014, Defendant Jacobowitz wrote to the www.amazonverifiedreviews.com site operator requesting “30 reviews 3 per day,” further requesting that the product remain a five star product on Amazon. Following this request, the website operator allegedly posted fabricated reviews.

The FTC alleges that the Defendants’ representations related to the weight loss benefits of the capsules are false and misleading, or were not substantiated at the time the representations were made. Moreover, the FTC alleges that the false reviews amount to false endorsement claims, asserting that such reviews “were not truthful reviews by actual purchasers of the product, but instead were fabricated by one or more third parties who were paid to generate reviews.”

The FTC has reached a settlement with the Defendants and the parties have filed a proposed court order resolving the FTC’s complaint. As part of the proposed settlement, the Defendants have agreed to be permanently restrained and enjoined from making or assisting other in making representations related to weight loss or any other health related claims, “unless the representation is non-misleading, and, at the time of making such representation, [the Defendants] possess and rely upon competent and reliable scientific evidence substantiating that the representation is true.” The Defendants also agreed that with regard to any tests or studies upon which they rely to substantiate such a claim, that they shall secure and preserve all related underlying data and documents. Moreover, the Defendants have agreed to be permanently restrained and enjoined from misrepresenting that any endorsement is a truthful endorsement by an actual user of the applicable product.

The parties also agreed to a monetary component to the settlement. The proposed court order contains a judgment in the amount of $12,845,724, with a requirement that the Defendants pay $50,000 to the FTC. After the Defendants pay their outstanding 2017 federal and state tax obligations, the remainder of the judgment shall be suspended subject to certain conditions.

Takeaway: Advertisers should be aware of their obligations in advertising their products online, including on independent retail websites. Retaining third party services to create and post “fake” reviews could attract the attention of the FTC, and may result in a complaint being filed against the advertiser. As made clear in the FTC’s recent settlement, such claims can result in substantial monetary consequences.

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