Great American Fake-Off? FTC cases challenge bogus influencer metrics and fake reviews

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There isn’t a competition to find ways to use social media to mislead consumers. (At least we hope there isn’t.) But with apologies to fans of a certain British baking program, separate FTC actions just might qualify two companies as “Star Fakers” for fabricating followers and skewing reviews. The cases demonstrate why cooking up deceptive tactics could land your business on an episode of The Great American Fake-Off.

Devumi, LLC

For individuals and businesses looking for the recipe for social media influence, there are a few ingredients to avoid: fake followers, phony subscribers, and bogus likes. But according to the FTC, that’s what Devumi and CEO German Calas, Jr., sold to people trying to artificially inflate their presence on social media. The complaint cites instances of how Devumi helped actors, athletes, motivational speakers, law firm partners, investment professionals and others increase their influencer cred on Twitter. Total ‘em up and the defendants fulfilled over 58,000 purchases of fake Twitter followers.

The FTC also alleges Devumi sold bogus subscribers to the operators of YouTube channels and fake views for people who posted individual videos – for example, musicians who wanted to inflate the popularity of their songs. The complaint cites over 4,000 sales of fake YouTube subscribers and over 32,000 sales of fake YouTube views.

In addition, Devumi allegedly sold more than 800 orders of fake LinkedIn followers to marketing and PR firms, financial services and investment companies, and others in the business world. According to the FTC, Devumi’s services enabled buyers to deceptively boost their credibility with potential clients, investors, etc.

The FTC alleges that by selling fake indicators of social media influence, the defendants provided customers with the means and instrumentalities to commit deceptive acts or practices – which itself violates the FTC Act. The proposed settlement bans the Devumi defendants from selling or assisting others in selling social media influence. The order also prohibits them from misrepresenting (or assisting others to misrepresent) the social media influence of any person or entity or in any review or endorsement. Although Devumi is reportedly out of business, the order imposes a partially suspended $2.5 million judgment against CEO Calas – the amount he was allegedly paid by Devumi or its parent company. If it turns out he misrepresented his financial condition, the FTC can ask the court to impose the full amount.

Sunday Riley Modern Skincare

A second FTC action challenges tactics allegedly used by Houston-based Sunday Riley Modern Skincare, a company that sells skin cream and treatments at Sephora, a global chain of personal care and beauty stores. The company also sells through Sephora’s website, which allows consumers to post product reviews. According to the FTC, for a period of almost two years, managers and employees at Sunday Riley Skincare wrote reviews of their company’s branded products, using fake accounts they created to hide their identities.

The FTC says that after Sephora removed some phony employee-created reviews, Sunday Riley staffers suspected it was because Sephora recognized they were coming from IP addresses associated with Sunday Riley Skincare. Rather than pulling the plug on their undisclosed selfie reviews, Sunday Riley managers allegedly doubled down on the deception, getting what one manager described as “an Express VPN account [to] . . . allow us to hide our IP address and location when we write reviews.”

So was this the work of a rogue staffer or two? No. According to the FTC, the illegal practices went straight to the top. The complaint quotes an email that the company president – the eponymous Sunday Riley – sent to employees, directing them to “create three accounts on Sephora.com, registered as . . . different identities.” Riley’s email included step-by-step instructions for setting up fake personas, using a VPN to hide their identities. She also directed them to focus on certain products and that they should be “[a]lways leaving 5 stars.”

The lawsuit alleges Riley had a strategy for dealing with negative reviews, too. She told employees, “If you see a negative review – DISLIKE it.” Why? “After enough dislikes, it is removed. This directly translates into sales!!”

The complaint charges that Sunday Riley and her company violated the FTC Act by falsely representing that their fake reviews reflected the opinions of ordinary users of the products. The FTC says they also deceptively failed to disclose that the reviews were written by Ms. Riley or her employees. In addition to prohibiting them from misrepresenting the status of any endorser or reviewer, the proposed order requires them to clearly disclose any unexpected material connection between the company and anyone reviewing a product. Once the proposed order appears in the Federal Register, the FTC will accept public comments for thirty days.

What do the cases mean for other marketers?

  • Lawful business practices start at the top. Some FTC cases have addressed questionable conduct that went unmonitored or unchecked by management. But the Sunday Riley and Devumi complaints allege that the people at the helm were calling the illegal shots. That’s one reason – there are others – why FTC actions often name executives in their individual capacities.
  • Bake compliance into your in-house training. The Sunday Riley settlement requires the respondents to instruct employees and agents about their responsibility to clearly disclose in reviews any material connection to the product. That’s sensible advice for any company and savvy marketers won’t wait until law enforcers come to call before implementing it at their business.
  • Providing others with the means and instrumentalities for violating the law violates the FTC Act. “But we’re strictly B2B!” That’s not a defense when companies provide others with the means to deceive consumers. There’s a thriving marketplace of social media mavens who claim to have the secret ingredient for success on social networks. Here’s a message this developing industry “kneads” to hear: The truth-in-advertising provisions of the FTC Act apply to you, too. And what about the individuals and companies that bought fake followers in an effort to see a rise in their social media presence? It’s a half-baked idea that’s likely to fall flat.

Comments

It would be better to impose a substantial fine on Sunday Riley Skincare than to simply have them agree not to post fake reviews. Unfortunately the nice route does not send the best message. The best message is that violating the rules will result in a financial cost to the offending company. Please reconsider and impose a fine.

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