The FTC Is Now Prosecuting Fake Amazon Reviews — Here’s What That Means For You
On Tuesday, February 26th, the Federal Trade Commission announced its first-ever charges against a company that paid to have fake reviews posted online promoting its product. The company in question, New York-based Cure Encapsulations, Inc., paid a third-party website to write and post positive reviews that appeared to come from people who bought Cure Encapsulations’s weight-loss supplement on Amazon.com.
Cure Encapsulations owner, Naftula Jacobowitz, asked Amazonverifiedreviews.com to, “Please make my product … stay a five star.” He then hired the company to post reviews falsely describing his company’s supplement garcinia cambogia as a “powerful appetite suppressant” that “literally blocks fat from forming,” says the FTC.
What The Settlement Means
Online reviews have become a very empowering consumer tool. And this move by the FTC is a statement that fake reviews will not be taken lightly. “People rely on reviews when they’re shopping online,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules.”
The FTC files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.
In the case of Cure Encapsulations, the company has already reached a settlement with the FTC in which the company has agreed to never again use misrepresenting endorsements, including reviews that falsely claim to come from an actual customer, or make claims about any product without substantiating those claims with “competent and reliable scientific evidence,” says the FTC.
The settlement also imposes a judgment of $12.8 million on Cure Encapsulations, which will be suspended upon payment of $50,000 to the Commission and the payment of certain unpaid income tax obligations. Of course, if Cure Encapsulations is later found to have misrepresented their financial condition to the FTC, the full amount of the judgment will immediately become due.
The FTC “does not comment about what future actions it may or may not take,” a spokesperson told CNBC. But this case sets the precedent that the federal government is now willing to bring charges against companies that pay for fake reviews making misleading claims.
Fake online reviews are nothing new, and have long been a problem on e-commerce sites like Amazon and Yelp. With roughly 86 percent of consumers regularly reading online reviews and using them to make purchase decisions, it is a matter of public interest that we assure what is posted online is authentic.
And for the most part, you can trust that it is. According to Amazon’s latest estimates, less than 1 percent of reviews on the site are fake. In fact, Amazon itself is so committed to consumer confidence, the online retailer has filed numerous lawsuits in recent years against brands who post misleading reviews, as well as against the third-party companies that sell the fake reviews in the first place. Cases like the FTC’s settlement with Cure Encapsulations are undoubtedly supporting their cause.
“I think it gives consumers more reason to place trust in what they see on these review sites,” says Paul Alan Levy, an attorney who works for the consumer-advocacy group Public Citizen. “The administrative agencies, like the FTC and state attorneys general, are in an excellent position to do investigations and figure out when there are false positive [reviews] out there, and it’s good that the FTC is doing that, because it creates a sort of pressure on avoiding false positive reviews.”
Levy goes on to say, “The wisdom of the crowd on review sites has value for consumers, [but] you should never take a single review as gospel, whether it be a five-star review or a one-star review.”
Bottom line: For the most part, you can trust the reviews you read online are authentic posts written by consumers with real-world experience with the product. And, as with anything, there are exceptions; take what you read with a grain of salt. But retailers like Amazon and agencies like the FTC are taking action to make sure trusting what you read in online reviews is something you can continue to do today, tomorrow, and into the future.
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