Consumers often first go to online review sites when they are thinking about buying a product or hiring a service provider. As a result, most businesses are concerned about managing their online reputation. But a recent FTC proposed settlement offers some lessons for businesses that seek to solicit online reviews with cash or other incentives.
AmeriFreight is an automobile shipment broker – it arranges for freight carriers to ship its customers’ cars. Any consumer looking online for car shipping services might stumble across thousands of reviews for AmeriFreight at sites ranging from those specializing in transport reviews to Google Reviews and Yelp. AmeriFreight touted these reviews at its website: “We have more highly ranked ratings and reviews than any other company in the Auto Transport Business.” AmeriFreight’s website also told potential customers that it was the best in the business, and “you don’t have to believe us, our customers say it all.”
What AmeriFreight’s customers didn’t say in their reviews, and what AmeriFreight failed to tell them to say, was that AmeriFreight gave them a $50 discount as long as they agreed to review AmeriFreight’s services. But wait, there’s more. AmeriFreight sweetened the deal by offering a $100 monthly prize for the review with the “most captivating subject line and best content.” AmeriFreight’s agreement with consumers reserved the company’s right to charge consumers who didn’t write reviews as promised.
In short, AmeriFreight encouraged customers to endorse the company with offers of discount payments and other incentives, and then advertised those positive reviews to lure prospective new customers to the company. The problem with this approach is that when it paid consumers to endorse the company, AmeriFreight was obligated to disclose those payments, but it didn’t. According to the FTC, this is deceptive.
So is it deceptive to encourage your customers to write reviews with cash discounts, coupons, or contests? Not necessarily. But businesses must be careful not to run afoul of a longstanding principle of FTC law: consumers have a right to know when there’s a material connection between an advertiser and an endorser.
Here’s how the Endorsement Guides put it: "When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed." Why? In AmeriFreight’s case, for example, prospective consumers of AmeriFreight’s services undoubtedly would view AmeriFreight’s reviews more critically if they knew that AmeriFreight gave consumers $50, and the chance to win $100, to write them.
According to the complaint, AmeriFreight’s claim that the company was a highly rated or top ranked auto shipment broker based on its customers’ unbiased reviews was false. In truth, AmeriFreight’s customers are biased – AmeriFreight paid them so it could generate a high volume of reviews, and incentivized them to write positive ones with additional monthly $100 giveaways. The complaint also charges that AmeriFreight represented that the online reviews are those of satisfied customers – but failed to mention it paid those customers to post reviews.
The proposed order against AmeriFreight and its owner and principal, Marius Lehmann, bans them from misrepresenting that any products or services are highly rated or top-ranked based on unbiased customers reviews or that their customer reviews are unbiased. The order also bans them from failing to disclose material connections between AmeriFreight and Lehmann and people who endorse their products or services.