The FTC knows that third-party review sites and the opinions of other customers carry a great deal of persuasive weight. But watch out: the FTC has filed yet another enforcement action reminding sellers that ratings which are the product of buying and selling between the “independent” review site and companies willing to pay for better play, or from employees acting on instructions to stuff the ballot box with five-star ratings are not objective and violate the FTC Guides Concerning the Use of Endorsements and Testimonials.
The most recent FTC action is against LendEDU who claimed its financial product ratings “are completely objective and not influenced by compensation in any way.” The FTC does not agree.
According to the FTC complaint, LendEDU, LendEDU boosted companies’ numerical ranking and position on rate tables based on payments to LendEDU. The complaint recounts examples of how the FTC says LendEDU finagled the ratings for pay. And, up until 2016 nothing was disclosed. In mid-2016 LendEDU added a fine-print sentence at the bottom of its website that stated the “site may be compensated through third party advertisers.” The FTC says those disclosures were placed where consumers were unlikely to see them.
In addition, many testimonials were written by employees or friends of employees without disclosing the material connection or were completely fabricated.
The proposed FTC settlement puts court-enforceable provisions in place to address LendEDU’s deceptive practices, requires clear disclosures in the future, and includes a financial remedy of $350,000.
Takeaway: If you claim that compensation doesn’t factor into your content that has to be a truthful statement. Keep in mind that there are at least three ways that posting customer reviews can violate the FTC Guides Concerning the Use of Endorsements and Testimonials: (1) if the reviews don’t reflect the actual experience of the reviewers; (2) if there is an undisclosed material connection between the reviewer and advertiser – for example, if the reviewer is an employee, friend, or family member; and (3) if the advertiser fabricates reviews. Review what you and your ad agencies are doing.