An enforcement action by the New York Attorney General’s Office and a lawsuit from the Federal Trade Commission (FTC) provide an important reminder about making adequate disclosures when using online reviews.
In New York, online attorney rating site Avvo reached a deal with AG Barbara D. Underwood that requires the company to revise its attorney rating system and improve its consumer disclosures. Previously, Avvo relied on attorneys to voluntarily provide the information used in their profiles (such as background or type of practice) that determined their rankings on a scale from 1 to 10, the AG explained.
As a result, attorneys who shared their information received higher ratings than those who elected not to participate and post information to the site, the AG alleged. Despite this, Avvo did not disclose to consumers the content and limit of its ratings system and instead claimed it was “unbiased.”
Pursuant to its agreement with the AG’s Office, Avvo’s site now tells users “clearly and conspicuously” that its ratings model relies on information attorneys add to their profiles and that the company does not independently collect all available information that could increase an attorney’s ratings.
Avvo will no longer refer to its ratings as “unbiased,” and the company promised to pay the state $50,000 to cover the costs of the AG’s investigation.
The FTC also had online reviews in its crosshairs as one of several problems with defendant Roca Lab’s advertising. In 2015, the agency filed suit against Roca Labs, its related corporate entities and two individuals for violations of Section 5 of the FTC Act. The agency alleged that Roca Labs made false and unsubstantiated weight loss claims, that it misrepresented that one of its promotional websites was an objective information website, and that it ignored its privacy promises by disclosing consumers’ personal health information in public court filings and to banks and payment processors.
Specific to online reviews, the defendants failed to disclose their financial ties to individuals who posted positive reviews about their products, the FTC said. The defendants solicited testimonials by offering to pay up to $1,000 to customers who met certain conditions (such as achieving a certain interim weight loss goal and demonstrating that loss in “before & after” pictures). Not only did the defendants not disclose that the people in the testimonials were paid, but they failed to reveal that employees were also directed to post positive reviews of the products on third-party blogs and websites.
In addition, the defendants sued and threatened to sue consumers who complained or shared their negative experiences online, and they enforced a nondisparagement or “gag clause” contained in their online terms and conditions that attempted to prohibit customers from publishing disparaging comments about the company or its products. The terms stated that the purchase price was “conditional” or “discounted” in exchange for the customer’s agreement to the gag clause, leaving the customer on the hook for the full price of the product ($1,580) and an additional $100,000 penalty if he or she breached the gag clause.
Last month, a federal judge in Florida granted summary judgment in the FTC’s favor on all counts. She agreed with the agency that the enforcement of the “gag clauses” to stop consumers from posting negative reviews was an unfair practice in violation of the FTC Act, and she entered a permanent injunction against the defendants.
“Because defendants admittedly suppressed negative information about the products and because … the absence of negative information could make a consumer more inclined to purchase Roca Labs products, the court finds that defendants’ practices have caused or were likely to cause substantial injury to consumers,” U.S. District Judge Mary Scriven wrote.
The court ordered supplemental briefing on the issue of the amount of the defendants’ $26.6 million in gross sales that should be awarded to the FTC for consumer redress.
To read the New York AG’s Office announcement of the Avvo settlement, click here.
To read the order in Federal Trade Commission v. Roca Labs, Inc., click here.
Why it matters: The two cases send a powerful message to advertisers that both state and federal regulators are keeping a close eye on reviews to ensure that necessary disclosures are being made. “My office will continue to protect New York consumers and ensure they get the transparency and accurate information they deserve,” New York AG Underwood said in a statement, while the FTC will pursue monetary penalties against Roca Labs based in part on its deceptively published online reviews.