On February 16, 2023, the Federal Trade Commission (FTC) announced an enforcement action against The Bountiful Company (Bountiful) for a practice the FTC dubbed “review hijacking.” Bountiful, a vitamin and supplement company, falsely represented that certain products received ratings and reviews that, in reality, belonged to other products sold by Bountiful. Bountiful is set to pay $600,000 under the agency’s proposed consent order.
This case marks the first action the FTC has taken against a company for review hijacking, one of several practices that the FTC had foreshadowed it would take aim at when it released an advanced notice of proposed rulemaking back in October 2022. In that release, it announced that it was considering a new rule to help protect consumers against deceptive and unfair review or endorsement practices, such as fake reviews, suppression of negative reviews or positive reviews that were bought and paid for. The FTC identified several practices involving the use of reviews or endorsements that it considered to be “clearly deceptive or unfair” in its announcement of the proposed rulemaking:
By identifying these practices as “clearly deceptive or unfair,” the FTC has essentially stated its interpretation that such acts violate the FTC Act. Section 5(a) of the FTC Act provides that “unfair or deceptive acts or practices in or affecting commerce . . . are . . . declared unlawful.” 15 U.S.C. § 45(a)(1). “Deceptive” practices are defined in the FTC’s Policy Statement on Deception as involving a material representation, omission or practice that is likely to mislead a consumer acting reasonably in the circumstances. An act or practice is “unfair” if it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” 15 U.S.C. § 45(n). Section 12 specifically prohibits false ads likely to induce the purchase of food, drugs, devices or cosmetics. 15 U.S.C. § 52. Accordingly, a company engaging in any of the above practices involving reviews or endorsements will be held to have violated Section 5(a) of the FTC Act, as well as Section 12 if the product at issue is a food, drug, device or cosmetic. Such violations can expose a company to stiff civil fines and other penalties.
This enforcement action marks a continuation in the FTC’s efforts “to crack down on purveyors of deceptive reviews and endorsements.” Before this, in August 2022, the FTC charged the rental listing platform Roomster and its owners with duping consumers seeking affordable housing by paying for fake reviews.
In some cases, using proper disclosures can resolve the potential risk of violating the FTC’s guidance, but this is not always the case. For example, if a brand pays for a review or endorsement and discloses that to the consumer in the form of a proper disclosure such as #Ad or #Sponsored could resolve the potential deceptive act or omission. However, in other cases, disclosure may not necessarily mitigate the risks. For example, even where a paid review is disclosed as being paid for by a brand, the disclosure would be ineffective in protecting the marketer against a claim based on an underlying false or misleading claim made in the review. In such a case, the marketer could still be responsible for the deceptive product claim if it amplifies such false or misleading claim in its own marketing.
Key Takeaways and Best Practices
Businesses operating online and displaying customer reviews or other endorsements must do so honestly and carefully to ensure consumers are not making purchasing decisions relying on a deceptive act or practice that impacts the credibility of the review. Accordingly, it is important for the marketing, business and legal teams to work together to develop a process to ensure compliant marketing practices with respect to the display of reviews or endorsements for products for sale online. It is also worth noting that such practices could increasingly become the target for consumer class actions under various state laws that have similar prohibitions against false or deceptive advertising, much like the FTC Act. Therefore, businesses that utilize or market customer reviews or other endorsements alongside their products on online marketplaces should heed not only the recent activity by the FTC, but also the threat of consumer class actions that mirror or follow the FTC’s own enforcement actions for the same conduct.
So what should businesses that display product reviews or endorsements online do to ensure that they do not draw the ire of the FTC or consumers? At a minimum, they should consider the following:
Please feel free to reach out to your Fenwick contact or the authors of this alert for further guidance.