On January 22, 2020, Josephine Palumbo, the Deputy Commissioner of the Deceptive Marketing Practices Directorate at the Canadian Competition Bureau (the “Bureau”), spoke at the Canadian Institute’s 26th Annual Advertising and Marketing Law Conference.
During her remarks, titled Honest Advertising in the Digital Age, Ms. Palumbo identified the Bureau’s current enforcement priorities as they relate to advertising and marketing in the digital economy. Among other things, these priorities include (a) influencer marketing; (b) false online consumer reviews; (c) dishonest information about data privacy; and (d) dishonest price claims.
To help businesses better understand how the Competition Act (the “Act”) applies to their online advertising and marketing practices, we are publishing a series of four blogs discussing the enforcement priorities noted above. In particular, each of the blogs will describe the conduct in question, identify the provisions of the Act applicable to the conduct in question and provide some general guidance on what businesses can do to help ensure that their advertising and marketing practices comply with the Act. This is the second blog, which deals with false online consumer reviews.
Overview of False Online Reviews
Online reviews have become an increasingly important source of information to consumers when making purchasing decisions. In fact, according to recent studies, 82% of consumers read online reviews for local businesses and 91% of consumers say that positive reviews make them more likely to engage with a particular business. Ms. Palumbo, in her recent remarks, acknowledged the growing importance of online reviews:
Authentic consumer reviews on digital platforms benefit both consumers and businesses, providing unbiased product information to help consumers make informed decisions, and rewarding businesses that provide a superior product or service. This helps to promote healthy competition in the workplace.
The Bureau also recognizes the issues that can arise when companies post reviews that are not truthful, authentic or genuine – a practice that has come to be known as “astroturfing”. The Bureau’s Deceptive Marketing Practices Digest – Volume 1 describes astroturfing as the practice of creating commercial representations that masquerade as the authentic experiences and opinions of impartial consumers, such as fake consumer reviews and testimonials. According to Ms. Palumbo’s recent remarks, the Bureau has observed an “increase in organized efforts by companies to fraudulently boost their own ratings or lower the ratings of their competitors”.
Astroturfing can occur in a number of different ways. For example, companies may encourage or compensate their employees to post positive reviews without disclosing their connection with the product or service being advertised or provide incentives to customers to leave positive reviews. With respect to this latter point, recent studies have found that 67% of consumers have now been asked to provide a review for a local business – with 24% of these consumers being offered a discount, gift or cash in return. Companies may also engage “search engine optimization” firms who pay third parties to post positive reviews about a company or negative reviews about the companies’ competitors. Regardless of the practice used, astroturfing gives inferior businesses an unfair advantage and ultimately erodes consumer confidence in the authenticity of online reviews, at a cost to both consumers and businesses.
The Bureau has been active in its efforts to educate Canadian consumers about astroturfing. In its Don’t Buy Into Fake Online Endorsements publication, the Bureau sets out the following signs of astroturfing:
- A product or service has suddenly received great reviews;
- The reviewer only recently created a user profile and has been actively providing feedback on a handful of products over a short period of time;
- The reviewer’s tone is overly positive and makes it out to be “the best thing ever”; and
- On the contrary, a fake review from a competitor may discredit the product while suggesting another.
False online reviews may raise concerns under the general false or misleading representations provisions of the Act. In summary, these provisions prohibit a business from making a representation to the public, by any means whatever (including online), that is false or misleading in a material respective. Whether a representation is material depends on whether or not it will influence a customer’s buying decision. Given the recent studies about the weight consumers place on online reviews when making buying decisions, it is likely that false online reviews could be found to influence a customer’s buying decision.
Failing to comply with these provisions can have serious consequences, including administrative monetary penalties (“AMPs”), restitution and reputational harm – and in criminal cases, fines and/or jail time. AMPs for making false or misleading representations contrary to the civil provisions of the Act have ranged from $10,000 to $10 million.
Astroturfing as an Enforcement Priority
Enforcement against astroturfing has been – and continues to be – a priority for the Bureau. In October 2015, the Bureau announced that it had entered into a Consent Agreement with Bell Canada to resolve concerns that certain Bell employees were encouraged to post positive reviews and ratings on certain mobile apps. The Bureau concluded that these reviews and ratings created the general impression that they were made by independent, impartial consumers, rather than by Bell employees. The results of these reviews allegedly affected, for a time, the overall ratings for the mobile apps. In resolving the Bureau’s concerns, Bell agreed to enhance its corporate compliance program with a specific focus on prohibiting ratings and rankings by its employees and contractors, and also agreed to pay an AMP of $1.25 million.
Since 2015, the Bureau has released numerous publications warning businesses about astroturfing and, in her recent remarks, Ms. Palumbo once again emphasized that “the Bureau is vigilant on this front, because Canadians need to know they can trust online user reviews.” Businesses should also be aware that the Bureau actively encourages Canadian consumers to report fake online reviews to the Canadian Anti-Fraud Centre.
Best Practices for Businesses
While by no means exhaustive, the following best practices will help businesses avoid the use of astroturfing:
- Implement a corporate compliance program that includes a policy prohibiting the public posting of ratings, rankings or reviews of the company’s own products or services. Ensure employees are aware that non-compliance could result in disciplinary action up to and including termination of employment.
- Never encourage, compensate or reward employees for posting reviews about the company’s own products or services or for posting negative reviews about a competitor’s own products or services.
- Exercise caution when engaging third party “reputation enhancement firms”.
- When in doubt, consider whether a review creates the general impression that it represents the authentic experiences and opinions of an impartial consumer.
Finally, businesses should remember that competition laws do not stop at the border, particularly when it comes to the digital economy. The Bureau coordinates and collaborates with global antitrust agencies, including the Organisation for Economic Co-operation and Development, and other antitrust and competition agencies, including the U.S. Federal Trade Commission.