If you thought the Federal Trade Commission was bluffing when they said they wouldn’t tolerate false or misleading reviews, think again. The FTC just announced its first case involving a company’s failure to post negative reviews, and the settlement is indicative of what companies can and cannot do.
Fashion Nova’s website contains customer reviews rating its products on a five-star scale. Shoppers visiting the website viewed individual reviews for each product, as well as the average star rating the product received and a graph breaking down the number of reviews received for each product by star rating.
But, the FTC alleges, negative reviews were not displayed on the website and not reflected in overall star ratings. Allegedly, from 2015 to 2019, Fashion Nova automatically published four-and five-star reviews while not posting any of the hundreds of thousands of reviews that got below four stars. According to the FTC, suppressing negative reviews “deprives consumers of potentially useful information and artificially inflates the product’s average star rating” in violation of Section 5 of the FTC Act. The company agreed to pay $4.2 million to settle Federal Trade Commission allegations.
“Deceptive review practices cheat consumers, undercut honest businesses, and pollute online commerce,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection,in the FTC’s January 25, 2022 news release. “Fashion Nova is being held accountable for these practices, and other firms should take note.”
Under the proposed settlement, Fashion Nova is prohibited from making misrepresentations about customer reviews. In addition, the company must generally post all customer reviews, with the exception of reviews that are unrelated to the company’s products or customer service (which include shipping and returns) or contain obscene, sexually explicit, racist, or unlawful content, so long as the criteria is applied uniformly to all reviews. This is helpful guidance to keep in mind when filtering reviews or working with review platforms to manage reviews.
Fashion Nova has been in trouble with the FTC before. In April 2020, Fashion Nova agreed to pay $9.3 million to settle claims that the company failed to properly notify consumers and give them the opportunity to cancel orders when merchandise couldn’t be shipped in a timely fashion, and that the company illegally usd gift cards to compensate consumers for unshipped merchandise instead of giving customers refunds.
Review management services
Review suppression is not the only customer review sleight of hand on the FTC’s radar. The FTC also announced it is sending letters to 10 companies that offer review management services, warning them to not take improper steps to avoid collecting or publishing negative reviews.
The guidance in the FTC press release stated the following:
- “Treat reviews equally. Post all genuine reviews regardless of whether the opinion is positive or negative. In addition, if your company has review moderation policies, ensure the policy is implemented uniformly, regardless of the opinion expressed. Don’t treat negative reviews with more scrutiny.
- Solicit reviews neutrally. Soliciting reviews should be a genuine attempt to collect all honest opinions. Don’t ask for reviews only from those likely to leave positive ones or discourage submission of negative reviews.
- Outsource review management responsibly. Review and reputation management companies may offer promises of increasing your customer reviews and ratings. Make sure you understand what they are doing. You can be held responsible for what they do on your behalf.”
The FTC also issued two new publications with guidance for businesses about reviews, both drawing on principles from Section 5 of the FTC Act.
One is for websites and platforms that collect, moderate, and publish reviews (https://www.ftc.gov/tips-advice/business-center/guidance/featuring-online-customer-reviews-guide-platforms)
The other is for marketers who may solicit or pay for reviews of their own products and services (https://www.ftc.gov/tips-advice/business-center/guidance/soliciting-paying-online-reviews-guide-marketers).
Takeaway: Subscription and membership companies should follow the guidance above and ensure any third parties assisting you in garnering and/or publishing reviews are doing so as well.