Online retailers often permit (and encourage) consumers to review their products on-line. Reviews – whether done on the retailers website or on a third party website – serve a dual purpose of engaging consumers to interact with the retailer and providing a ready source of testimonials that can be used in future marketing.

Over the past several years the Federal Trade Commission (“FTC”), the primary federal regulator of consumer advertising, has warned that consumers can be deceived when a testimonial is written by a person that has a material connection to a retailer, and has advised that any “material connections” between the testimonialist and the retailer should be disclosed in the testimonial. The Commission has launched at least a half dozen investigations involving deceptive testimonials, which have led to settlements of up to $250,000.

Earlier this week, the FTC announced its largest testimonial related settlement to-date – $800,000. The settlement was entered into with Spokeo, an on-line company that compiles information from people’s social networking profiles. Among other things, the FTC alleged that the company committed a deceptive practice by directing employees to draft favorable comments about Spokeo which were posted on news and technology websites. According to the complaint, these comments were “reviewed and edited by Spokeo managers” and then “posted using account names, provided by Spokeo, that would give the readers of these comments the impression that they had been submitted by independent, ordinary consumers.”

Based upon the FTC’s enforcement action, in order to avoid liability retailers that permit, or encourage, their employees to write testimonials should:

  1. Create a social media policy that governs how employees can write about the company, or its products,
  2. Require employees to disclose in any testimonial that they are company employees,
  3. Provide model disclosure language to avoid an inference that an employee speaks for the company, and
  4. Monitor some, or all, posts about the company on third party websites.