For the first time, the Federal Trade Commission is cracking down on a company for using fake reviews to sell products online.
The FTC announced a settlement with a New York-based company, Cure Encapsulations, over accusations it made false claims about a weight loss supplement and paid a third-party website to write and post fake reviews on Amazon.
"People rely on reviews when they’re shopping online," said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. "When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules."
The complaint alleges the company made false and unsubstantiated claims and marketed their product as an appetite-suppressing, fat-blocking, weight-loss pill.
The proposed court order settling the FTC’s complaint prohibits 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 supporting the claims.
As part of the settlement, the FTC is requiring the company to notify its customers and Amazon about the allegations, and the order includes a $12.8 million judgment which will be suspended upon payment of $50,000 to the FTC.
As described in the FTC’s complaint, the reviews the defendants bought were posted on Amazon.com and gave the product a five-star rating.
An Amazon spokesman sent the I-Team a statement regarding the FTC’s enforcement action:
We welcome the FTC’s work in this area. Amazon invests significant resources to protect the integrity of reviews in our store because we know customers value the insights and experiences shared by fellow shoppers. Even one inauthentic review is one too many. We have clear participation guidelines for both reviewers and selling partners and we suspend, ban, and take legal action on those who violate our policies.
Last year, a series of News4 I-Team investigations exposed some of the ways in which the fake review industry operates, all with the aim to fool customers. Individuals and companies offer to write positive reviews for a price, businesses offer refunds to remove negative reviews and phony reviews often use politician or celebrity photos without their knowledge.
The FTC told the I-Team it is illegal to post any reviews that are false, misleading or don't disclose a relationship between the reviewer and business. However, the agency had yet to enforce those rules.
FTC Associate Director Mary Engle oversees the agency's Division of Advertising Practices and says there are red flags customers should look for when reading online reviews.
"If you see a lot of reviews posted for a product at the same time, it's highly unlikely that that occurred naturally," Engle said. "Another possibility might be if someone is reviewing a local establishment and their address is far from there."
The company's attorney sent the I-Team a statement saying:
I would point out that with respect to the allegations that Cure Encapsulations purchased falsified reviews, the FTC’s complaint allegations are that Cure Encapsulations purchased these between approximately October 2014 and June 2015 from one entity, amazonverifiedreviews.com. The FTC does not allege that Cure Encapsulations purchased falsified reviews later than June 2015. This is to clarify any implication that might be drawn from the FTC’s press release that this alleged conduct took place up until much more recently, and perhaps was much more extensive, than the complaint alleges. In addition, the bulk of the allegations in the Complaint concern allegedly unsubstantiated weight loss efficacy claims for Cure Encapsulations’ Garcinia Cambogia dietary supplement. Some media outlets have overlooked this and reported incorrectly that the entire settlement amount cited by the Commission was all related to the allegedly fabricated reviews.
Some outlets also have incorrectly characterized the monetary settlement in this case as a “fine.” In fact, Cure Encapsulations has entered into a consent order with the FTC to settle this matter, and makes no admission of wrongdoing, as noted in paragraph 3 of the stipulated order available on the FTC’s website.