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US: FTC Penalty on fake reviews created

 |  February 28, 2019

One cannot have the good without the bad, and that holds especially true, it seems, with online product reviews — a vital, useful part of eCommerce that is reviled by consumers, marketplace sellers and merchants alike. Now comes news of a groundbreaking case involving fake reviews.

It comes from the U.S. Federal Trade Commission (FTC), which was pretty busy this week on issues related to digital commerce and payments. The FTC said it brought forward “its first case challenging a marketer’s use of fake paid reviews on an independent retail website.”

The case involves “Cure Encapsulations, Inc. and its owner, Naftula Jacobowitz,” whom the FTC said “resolved allegations that they made false and unsubstantiated claims for their garcinia cambogia weight-loss supplement, and that they paid a third-party website to write and post fake reviews on Amazon.com.”

FTC Penalty

The agency has imposed a $12.8 million judgement on the defendants in this fake online review case — though, if the company pays $50,000 to the agency, as well as “certain unpaid income tax obligations,” that full judgement amount will be suspended. The FTC has also moved to ban the “the defendants from making weight-loss, appetite-suppression, fat-blocking or disease-treatment claims for any dietary supplement, food or drug unless they have competent and reliable scientific evidence in the form of human clinical testing supporting the claims.”

The defendants must also “email notices to consumers who bought Quality Encapsulations Garcinia Cambogia capsules, detailing the FTC’s allegations regarding their efficacy claims. In addition, the order requires the defendants to notify Amazon, Inc. that they purchased Amazon reviews of their Quality Encapsulations Garcinia Cambogia capsules, and to identify to Amazon the purchased reviews.”

Review Fights

Talk to any online shopper, merchant or marketplace third-party seller. Odds are one can easily find tale of the damages brought by fake reviews, which can result in crooked listing and rankings, lost sales and bad products being purchased.

For its part, Amazon engaged in a long battle against fake reviews, and has sued some of the people behind them. “While small in number, these reviews can significantly undermine the trust that consumers and the vast majority of sellers and manufacturers place in Amazon, which in turn tarnishes Amazon’s brand,” Amazon said in a complaint it filed against those reviewers.

More recently, the eCommerce operator said, “Our approximation is that less than 1 percent of reviews are inauthentic” — at least, according to Sharon Chiarella, vice president of community shopping at Amazon. According to auditors like Fakespot and ReviewMeta, around half of the reviews for the most popular products on Amazon are of questionable origin (a category that can include reviews written for pay — another long-standing problem in eCommerce, but especially on Amazon, given its scope and influence.

Power of Reviews

Yet, consumers still tend to trust reviews, according to reports from reliable eCommerce operators — and even recent research from PYMNTS. According to the PYMNTS Checkout Conversion Index, “a product that has only one review is 65 percent more likely to be purchased than another product that doesn’t have any reviews. And one-third of eCommerce shoppers will not purchase an item online unless it has positive reviews from customers.” Also, more than “56 percent of online shoppers read reviews before making a purchase.”

Take another report from Shopify. It found that “84 percent of shoppers trust online reviews as much as personal recommendations.” In addition, “more than half of people will visit a company’s website after reading positive reviews.” The power of online reviews go beyond large, distantly located eCommerce operations, too. That’s because “74 percent of people say that positive reviews make them trust local businesses more.”

Fake product reviews on Amazon and other retail platforms are not the only recent issue at play when it comes to this area of eCommerce. A California Supreme Court decision from 2018, which essentially allowed a negative Yelp post to stand about a lawyer, could help determine how online reviews are treated in the future. The case could also influence how much responsibility third-party platforms have when consumers complain about goods and services.

In a four to three decision in July, the California Supreme Court ruled that Yelp was not responsible for a one-star review left on its site about San Francisco lawyer Dawn Hassell. The Hassell Law Group represented Ava Bird in a 2012 personal injury case for three months. Bird, using an alias, then wrote on Yelp that the firm was incompetent, and told readers to avoid doing business with it.

It’s hard to imagine eCommerce without reviews, and there is little doubt that the review landscape will keep undergoing changes, and that the battle against fake and bought reviews will continue.

Full Content: PYMNTS

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