Pay For Play Carefully With Online Reviews
FTC Regulation Requires Disclosure Of Sponsored Online Reviews
By Benjamin P. Michaelson
“This is the best product ever! BUY IT NOW!!!” That is a fictitious post, by a pretend author. This pretend author had a great day. He received a $1,500 laptop computer for free simply for posting that review on the Amazon product review page. Good for him, right? Who wouldn’t want a new laptop for the sole cost of 9 words. Is it true? Is it believable? Is it a valid endorsement? All good questions, but a the question we are focused on here is, did the author disclose their receipt of the free product? This is important because if they did not, the manufacturer is subject to liability (with the United States Federal Trade Commission (the “FTC”), among other possible persons).
The FTC is a federal watchdog that is taking an increased role in making sure that on-line reviews are not artificially skewed by the company providing the service or goods in question.
This is basically what happened to Lord & Taylor. Lord & Taylor has lots of fancy dresses (and they want to sell all of them). As part of a marketing campaign Lord & Taylor gave trend setting fashion stars free dresses to take pictures in, and post on-line. Certainly, they hoped that others would run out and buy the dresses, all of them. This was a pretty good deal for the fashion stars, get a dress for the sole cost of posting a picture. However, the price for Lord & Taylor was much, much, higher. Their price included FTC scrutiny and a consent order establishing a monitoring and review program for Lord & Taylor’s future endorsement campaigns – a heavy price to give away a dress. This heavy price was levied because the FTC is a federal watchdog that is taking an increased role in making sure that on-line reviews are not artificially skewed by the company providing the service or goods in question.
For many people, online reviews play a huge role in their purchase decisions for items such as soap, dinner, computers, houses, vacations and anything else. With that ability to sway public decision making, companies have a massive benefit in having a very strong public reputation online, but taking a desire for that benefit too far will get you in trouble. Five years ago the FTC updated its advertising disclosure guidelines, requiring that online reviews include disclosures when a review is in response to a free or discounted product or service, and when the company is sponsoring reviews. Congress wants to have its say too, so, in December 2015, the Senate passed the Consumer Review Freedom Act of 2015 forbidding posters of negative reviews online from being punished by the target of the review (this is already a law in California, but has not been passed into Federal law at this time).
Practically speaking: (1) don’t use compensated influencers or affiliates, or company employees, to promote products or services, and if you do make sure that the incentives and/or special relationship is disclosed in a manner that is easy to see; and (2) don’t threaten to sue someone or take other adverse action against them for posting negative reviews, find a more positive way to respond.