A few months after putting the nation’s top advertisers on notice that consumer endorsements are high priority, the Federal Trade Commission (“FTC”) recently announced a settlement with online retail company Fashion Nova, LLC (“Fashion Nova”) for allegedly blocking negative reviews from being posted on its website, signaling to retailers that the FTC is cracking down on companies that inflate consumer reviews. In conjunction with the settlement, the FTC also released guidance regarding the collection and publication of online reviews directed to online retailers and review platforms and announced that it sent letters to 10 companies offering review management services.
The FTC’s settlement with fast fashion retailer Fashion Nova (which also recently settled with the FTC over violations of the Mail Order Rule), includes a $4.2 million payment and prohibits the company from suppressing consumer reviews. The Order requires the company to post all consumer reviews of products that it currently sells, with the exception of reviews that contain obscene, racist, sexually explicit, or unlawful content. It resolves accusations that the company used a third-party online review management company to automatically post four- or five-star reviews on the Fashion Nova website while holding back those with less than four stars. According to the Complaint, Fashion Nova then neglected to post hundreds of reviews with three or less stars from 2015 to 2019, inflating the average star ratings for products and depriving consumers of potentially useful information.
At the same time as the settlement, the FTC sent letters to 10 businesses offering review management services and putting them on notice that preventing or discouraging the submission of negative reviews, more heavily scrutinizing negative reviews, or failing to equally treat positive and negative reviews violates the FTC Act.
Additionally, on the same day it announced the Fashion Nova settlement, the FTC published a guidance document for online reviews, which establishes basic principles derived from the FTC Act that companies should follow when handling consumer reviews. For example, the guidance states that companies should not only ask for reviews from consumers they think will leave positive feedback or prevent or discourage people from writing negative reviews. Additionally, it expresses disapproval of incentivized reviews generally, but specifically warns against conditioning incentives on reviews being positive.
In its guidance directed to platforms that publish consumer reviews, the FTC guidance requires companies to maintain up-to-date processes for verifying reviews are genuine and not manipulated or deceptive. Companies should also have reasonable procedures in place to identify suspicious or fake reviews after publication, including a plan for acting when put on notice of consumer review concerns. It also prohibits companies from editing reviews to make a message seem more positive and from more strictly scrutinizing negative reviews.
Finally, the guidance reminds companies to “favor transparency” and publish all genuine reviews, including negative ones. Companies should not display reviews in a misleading way—for example, featuring positive reviews more prominently than negative ones.
As the Fashion Nova settlement and updated guidance makes clear, the FTC is cracking down on companies that could be seen as editing, suppressing or otherwise manipulating consumer reviews. Retailers should carefully review their review collection policies and practices to ensure that applicable terms and conditions and other relevant review moderation practices and agreements with review moderation platforms comply with the law.