This week, the Federal Trade Commission (“FTC”) announced that it had reached a settlement of charges against two brothers for deceptive advertising in connection with fabricated online reviews. Specifically, the FTC alleged that the brothers directed consumers to websites which they claimed were independent, without disclosing the fact that one of the brothers not only posted the product endorsements but also profited from the sale of the advertised trampolines.
What was the nature of the FTC allegations?
According to the FTC’s online review charges, the brothers owned and operated a series of websites on which they advertised and sold trampolines. Prominently displayed on each of the websites were logos for purported industry trade review organizations which, when clicked, redirected consumers to other websites that were owned and operated by the brothers. These review websites purported to provide prospective purchasers with objective trampoline-related information, including purported unbiased expert safety and performance reviews. According to the FTC, however, the review organizations and associated websites were not independent entities providing objective information, but rather were created and controlled by the brothers as part of an advertising campaign aimed at promoting the sale of the trampolines, which financially benefitted them. As a result, the FTC charged the brothers with various violations of the FTC Act, including deceptive failure to disclose material connections, and false claims in connection with both the review websites and the sales websites. As part of their settlement with the FTC, the brothers have agreed to restrictions on their future marketing practices, including agreement to disclose any connections between an endorsement and the company/person associated with the product, as well as the agreement not to make misleading representations concerning same.
Avoid Online Review-related Liability
Broadly speaking, the FTC’s guidelines for the use of endorsements and testimonials require that online marketers fully inform consumers of any and all financial interests that posters and testimonial-providers have in connection with the endorsements that they provide. While the use of online consumer reviews and testimonials can garner great benefits for businesses, it is important to be aware of the attendant pitfalls, which may put marketers at legal risk. Accordingly, businesses should speak with experienced advertising counsel before featuring online reviews in order to minimize the risk of legal action.