Much like the recent actions taken by the New York Attorney General, the Federal Trade Commission (“FTC”) has been cracking down on fake online review practices.  According to the FTC’s Product Endorsement and Testimonial Guidelines, it is a violation of the FTC Act where advertisers use testimonials if they are not accompanied by generalized information describing what consumers can hope to expect from use of the product or service. Moreover, the Product Endorsement and Testimonial Guidelines make clear that advertisers are prohibited from using endorsements from consumers if they have not actually used the product in question or make claims about the product without the advertiser having adequate proof of the truth of those assertions.  This week, the FTC settled a case against ADT LLC (“ADT”), one of the biggest providers of home security systems, for allegedly misrepresenting that paid endorsements provided by safety and technology experts were independent and impartial reviews.

ADT’s Fake Online Review Case Details

The FTC alleged that ADT engaged in commissioning numerous fake online reviews appearing on blogs and other online media, as well as others that ran on television and radio.  According to the FTC, ADT’s fake reviews were intentionally misrepresented to consumers as being independent third party reviews and failed to adequately disclose that the endorsements were paid for by ADT. Prior to settling the case, the FTC learned that ADT paid more than $300,000 to three (3) experts that endorsed its products.

According to the FTC’s Director of Consumer Protection, Jessica Rich, “[i]t’s hard for consumers to make good buying decisions when they think they’re getting independent expert advice as part of an impartial news segment and have no way of knowing they are actually watching a sales pitch.”

ADT Fake Online Review Settlement

According to the FTC’s website, the proposed settlement order, which will be finalized after being subject to public comment for thirty (30) days (until April 7th, 2014), imposes the following penalties upon ADT:

  • prohibits ADT from misrepresenting that any discussion or demonstration of a security or monitoring product or service is an independent review provided by an impartial expert;
  • requires ADT to clearly and prominently disclose, in connection with the advertising of a home security or monitoring product or service, a material connection, if one exists, between an endorser and the company; and
  • requires that ADT promptly remove reviews and endorsements that have been misrepresented as independently provided by an impartial expert or that fail to disclose a material connection between ADT and an endorser.

The proposed settlement with ADT is only a small part of the FTC’s massive crackdown on fake online reviews.