Following its call for evidence and subsequent investigations in 2015, the Competition and Markets Authority (the CMA) has this month published an open letter to marketing departments, agencies and their clients reminding them of the need to ensure that online reviews and endorsements are being used in line with consumer protection law.

The investigations followed its report which uncovered that online reviews and endorsements play a significant role in informing consumer buying habits with an estimated £23 billion pounds of consumer spending potentially being influenced. The report went on to highlight serious misgivings about the industry and in particular the following practices which represent a breach of consumer protection law:

  • Businesses creating fake positive online reviews about themselves or fake negative online reviews about their competitors
  • Businesses commissioning third parties to write fake online reviews
  • Businesses incentivising consumers to write positive reviews
  • Businesses paying to use editorial content to promote products/services without making clear that the content is sponsored.

Following further investigation, the CMA subsequently secured undertakings from two marketing companies, Starcom Mediavest and TAN Media, after they were found to have organised undisclosed endorsements in online articles and blogs on behalf of their short term loan provider client, Myjar. The companies have signed undertakings to confirm that they will ensure all future advertising and other marketing in articles and blogs that it administers is clearly labelled or identified so that it is distinguishable from the opinion of a journalist or blogger. In addition the CMA has warned 13 other marketing companies, 20 businesses and 33 publishers about the need to ensure that paid for content remained distinguishable from editorially controlled opinion pieces.

In two other separate investigations, the CMA announced that it had received assurances from five online review websites after they agreed to improve their practices and that it had taken enforcement action against a marketing firm that had been found to have published over 800 fake positive online reviews for 86 small businesses published across 26 different consumer review websites.

Under consumer protection law it is an offence to write or commission any kind of fake review or to not make clear if an endorsement is sponsored (ie paid for). Those that flout the rules could find themselves not only being investigated by the Advertising Standards Authority under its CAP Code and being named and shamed in a published upheld ruling, but also being investigated by the CMA, which has significant power to rein in business activities. The worst offenders risk being found in clear breach of consumer protection law, with the potential to incur significant penalties, including an unlimited fine and/or imprisonment.

What must businesses do in order to comply?

  1. Ensure any paid for endorsements are clearly labelled as being paid promotions
  2. Not write or commission fake online reviews
  3. Not offer incentives to consumers to write positive reviews
  4. Provide clear instructions to marketers and agencies to ensure transparency