Hunton Retail Law Resource

For many consumers, online reviews play a role in the decision to make any purchase. Before making dinner reservations, choosing a hotel, hiring a service provider or even buying a toaster, consumers often look to online reviews as an assessment of the product, service or experience they want to buy. In a market where a negative online review or rating from a dissatisfied customer can influence countless other potential buyers — not just people the dissatisfied customer knows in real life — companies have a strong incentive to maintain a positive reputation online. However, in a desire to separate themselves from the competition with strong reviews, some companies have taken the race for positive online reviews too far, and the Federal Trade Commission is watching.

What to Know

The FTC began cracking down on biased online reviews around five years ago, when the agency updated its advertising disclosure guidelines. In its Endorsement Guides, the FTC specifies that marketers should disclose any material connections between endorsers and the marketer that consumers would not expect. In the case of online reviews, marketers must disclose when a review is in response to a product provided for free or at a discount, and when the company is sponsoring reviews. According to the FTC, consumers have a right to expect that online reviews are independent and impartial, and must be told when that is not the case.

The FTC’s cases have focused on different aspects of allegedly deceptive review practices — reviewers undisclosed discounts and incentives, and even threatening litigation for posting negative reviews.

What to Do

Based on increased FTC attention over the last few years, it seems clear that the agency is serious about pursuing marketers that use biased endorsements. Clients who plan on incorporating customer reviews in their advertising should:

• As a best practice, ask your customers to provide reviews without promising them any material benefit in return. The aim is to develop a body of unbiased customer feedback.
• Do not punish customers for negative reviews.
• Should a material connection exist between you and a reviewer, always clearly and prominently disclose it — whether you have paid the customer, offered the customer a sample or a comp or provided any other incentive.
• Do not bury your disclosures. Clear and prominent means just that.

Read the full alert.